Value Investing in India; Revisit JCP or How to Fail in Business


Bill Miller used to run Legg Mason’s Value Trust but then people learned he wasn’t a value investor and not to trust him –Port Stansberry

Value Investing in India

India’s market seems cheaper than the good ole USA’s S&P 500. The average stock in the US is trading at 25-times earnings. Americans have to look beyond the decks of the Titanic and view foreign shores.  I traveled for a half year in India but I am ignorant about investing there, but we can always learn.

Stansberry Radio

This week, Steve Sjuggerud and his good friend Rahul Saraogi, a managing director at Atyant Capital, join Stansberry Radio to share the unique situation in India right now.

AUDIO (A tad obnoxious, but bear with them)

Picture Rahul

Rahul is a hedge-fund manager based in Chennai, India. He has been investing in India as his career for 14 years. And he told us on the radio show that India is “looking better than I’ve seen it in my career.”

Rahul wasn’t so concerned about the specific way you invest… as long as you simply get some money in. “India itself is going to do really well,” he said. “You need to have a piece of India in your portfolio.”


Rahul is a managing director at Atyant Capital and manages the Atyant Capital India Fund. In the last 13 years he’s managed money exclusively in the Indian markets. His mission is to consistently identify the best 10-15 investment ideas from among the thousands of publicly-traded Indian corporations. Rahul’s value-based investment philosophy stands apart due to his belief in the paramount importance of corporate governance, specifically how management operates with its minority shareholders in mind.

Prior to Atyant, Rahul spent four years leading Meridian Investments, generating a 430% absolute return for the firm’s high net worth clients.

Rahul graduated from the Wharton School of the University of Pennsylvania with a degree in Economics. Outside of Atyant, he practices Vipassana, a 2,500 year-old meditation technique that helps people see things as they really are. Rahul lives and works in Chennai, India.

CSInvesting: Color me skeptical, but I will take a look.

If I had to invest with a manager in India (vs. an ETF. See above) I might seek out: Prof. Sanjay Bakshi to the left of Prof. Greenwald of Columbia University.


Prof. Sanjay Bakshi of

Revisiting Failure (JCP)

Improving as an investor is hard. You can make money while doing the wrong thing and vice-versa. I always write down the reasons for my investment thesis and then record the result when the position is exited. I will place a tickler in my calendar say eighteen months later to again review my past investment to see if there is more I can learn dispassionately. My last post on JCP, I bought near $20 on the assumption of buying below real estate value with little value for the retail operations, then sold near $15 after Johnson was fired. I was wrong.


Here is an update on the story behind the company’s struggles, How to Fail in Business While Really, Really Trying. Read:   A good read!  Investing teaches humility. My take-away turnarounds in a difficult business often don’t turn. The reputation of the business overcomes the management. 

8 responses to “Value Investing in India; Revisit JCP or How to Fail in Business

  1. AFAIK, foreigners need to apply for a QFI status with the Indian authority in order to invest in India shares. There are a handful of authorised agents (brokers, I believe) that can handle the process. But I have not yet found an agent that can do it for me in Australia.

    Another interesting thing is, it looks like HSBC (one of the authorised agents) has recently closed down their retail broker business in India. Maybe the market is too small for them?

    If anyone are in the knowing, please comment. I’m very interested in investing in India. Things look cheap.

  2. Re:JCP. The major part of investing, it seems to me, is thinking first : what do I NOT invest in? (Munger : invert, always invert). Guy Spier says retail is too difficult. Buffett says turnarounds rarely turn. Then why go there, when the odds are against you? Where should you go? Spinoffs, on average, beat the market. How about John Malone spinoffs? Do they beat the market by a large margin? If so, carefully analyse the next Malone spinoff. The odds will be in your favour. Think simply and use basic probabilities.

    Does anyone know the average return after 2 years for all of Malone`s spinoffs? Would be good to know.

    • Or another point by Buffett, look for 1 foot hurdles not 7 footers to jump over.

      • John,

        Specifically, I think the JCP mistake was in thinking real estate
        assets for any company can always be monetized. Sometimes they cannot (when layoffs would decimate a local community , for example).

        Re: 1 footers: A few years ago, Johnson & Johnson was trading at 12.5 P/E. Its 10 year average was about 22 P/E. So you have a 40% discount. This would perhaps constitute a 1 foot hurdle. Yet Pabrai would probably reject this idea. JNJ cannot double its share price in 2 to 3 years: it`s too big.That`s another thing to learn for small investors — if you focus on absolute returns, and are looking to double your money in 2 to 3 years, a mega cap 1 foot hurdle is a mistake. Better to go to small or mid caps. Again, thinking in probabilities.

  3. Yes, but if you look at Pabrai’s past portfolios like his financial companies they are laden with operational and financial risk. So you can see a 0 or five times your money. Pabrai’s accounts were down 80% in 2008/09. But he lost few clients. You have to figure in or adjust for total risk of loss.

    Pabrai simply buys leveraged companies when they are out of favor.

    • Hi John,
      You don`t buy into Pabrai`s `low risk, high uncertainty` spiel. You have a point on risk in some instances, I agree. For example, I don`t understand Bank of America and wouldn`t invest in it. Yet until fairly recently, it was Pabrai`s biggest position. But I wonder if he isn`t just copying Munger, who put 30% of Daily Journal Corp`s funds into it. Munger cannot think it`s that risky, I think, if the price were attractive enough.

      • Well there is a difference between high risk (total loss of capital) and high uncertainty. You just want to find lopsided bets that YOU can handle and recognize. I used to follow Pabrai’s losing investments like BIOS, Exide Batteries and buy them AFTER he had sold. Why? Pabrai does not understand (completely) what franchises are or brands. He confused Exide with a franchise/brand. People don’t buy a Bentley Car because it has Exide Battery! Thus I could buy at a discount to TANGIBLE replacement value. I like Pabrai.

        There is no humanly possible way to value Bank of America with all its divisions and derivative exposure etc., etc. Just too tough.

        Just go find ’em on your own.

  4. A reader writes:

    For what is worth, I will give you an idea about Rahul Saraogi as I have. Caveat: I haven’t dealt with him directly, but the impression I have about him is through association.

    In India, we have a name for people like him- its called ch****. In other words, a guy who is swashbuckling, jet-setting who shows off his success only because he intends to sell you something.

    In essence he is a salesman posing as an expert.

    Bottom-line: I dont like him.

    Whereas, regarding Sanjay Bakshi, I have met him interacted well with him and come across with nothing but respect for him. A kind of slight silent appreciation for his preferences, but nevertheless…

    Let me give you an idea-

    1. He teaches, just like Prof Greenwald. And he is an authority. If students reco-s are anything to go by, they worship him.

    And he is good. (CSInvesting: Of course, you would need to review his numbers for the entire time he has been investing to determine.)

    2. He invests, runs his own HF like Prof Greenwald. And he minted money.

    3. He lives a nice life. Far away from ostentatiousness, yet an appreciation of finer things in life. He loves to drive so he has got a nice BMW ( I am very bad with cars so don’t know the model or make). He has got membership in Lodhi Hotel (take a look up).

    4. He reads. And by god does he read!

    I believe anyone who reads cannot be unethical. I knew myself as a top 1% reader in my age cohort or 10-15 years above it. And he puts me to shame.

    I have realized I have not read anything, after seeing him.

    In contrast, Rahul Saraogi IMO (subject to change) doesn,t invoke that image in my mind- that of a passionate value investor. He invokes a sense of salesmanship about him, which I don’t like.

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