Why are portfolio Managers like Zebras?
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Buffet, Lynch and other legends - Investing Strategies
Forum Discription: DIscuss about the strategies followed by the great investors. Share an idea which would have impressed the masters. Try and bring their International experience into the Indian Markets.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=240
Printed Date: 19/Apr/2025 at 9:23pm
Topic: Why are portfolio Managers like Zebras?
Posted By: basant
Subject: Why are portfolio Managers like Zebras?
Date Posted: 29/Aug/2006 at 10:40am
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Why are portfolio Managers like Zebras? Ralph Wangner’s learning is a unique blend of psychology and financials. He compared fund Managers to Zebras. He found no difference between the animal and the man. Here is how he expressed his views
The theory went further and Wangner argued that Fund Managers like Zebras are of two types, the aggressive and the defensive. The aggressive zebra stands outside the herd. Here the grass is fresh and green but the risk of being pounced upon by the lion is also the highest. Similarly the defensive zebra stands in the inner ring. Here the grass is trampled and rarely fresh During an attack the Lion takes the zebras on the outer ring thus leaving the half fed inner ring zebra to fight another day. Compare the grass to the returns that fund managers make. The outer ring fund manager refer to our friends like http://www.theequitydesk.com/samir_arora.asp - Samir Arora who would have bought an Infosys and a Satyam in 1997 while the inner ring refers to managers who would have preferred buying Reliance and ITC during those times The stock analogy can be extended further. Let us analyze a situation where a fund manager’s top five holdings are Reliance, http://www.theequitydesk.com/forum/forum_posts.asp?TID=27 - Infosys Technologies , http://www.theequitydesk.com/forum/forum_posts.asp?TID=221 - Bharti Airtel and http://www.theequitydesk.com/forum/forum_posts.asp?TID=91 - HLL and ITC as his top 5 holdings and all of them go down with the market. In this case his investors would complaint about the companies or the markets or the On the other hand if the another fund manager had bought into http://www.theequitydesk.com/forum/forum_posts.asp?TID=233 - Suzlon Energy, http://www.theequitydesk.com/forum/forum_posts.asp?TID=135 - Pantaloon Retail, http://www.theequitydesk.com/forum/forum_posts.asp?TID=224 - Financial technologies, Titan, and http://www.theequitydesk.com/forum/forum_posts.asp?TID=29 - TV 18 If the markets fell by 30% and these stocks went down by 40% we have no problems guessing whom investors would have blamed. Market timing: Wangner explains the similarity between market timers through the zebra – lion relationship. Sometimes the zebra (in order to have the green grass) gets too near to the sleeping lion thinking that when the lion awakes they would make a quick run away into the open land. The lion does awake but by that time the zebras are already near the exit but the sheer number of zebras makes exit impossible for all the animals and some get caught. Institutional and retail investors want to time the market and normally buy and sell shares but their own buying and their own selling tends to have an opposite effect on the price leading to volatility and price swings. In the process they get caught trying to switch between cash and stocks. Wangner does not end here he says that portfolio managers write economic forecasts that are wrong and boring. He would personally prefer writing a forecast that is interesting and wrong rather then wrong and boring. http://www.theequitydesk.com/forum/forum_posts.asp?TID=238 - A forecast that is interesting and equally correct has been put on this forum . ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Replies:
Posted By: BubbleVision
Date Posted: 30/Aug/2006 at 12:07pm
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Yes,
As they say "It takes courage to be a pig" or should i say Zebra...and those who have that courage are successful. ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: Ajith
Date Posted: 30/Aug/2006 at 9:33pm
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It is so easy to get into the herd mentality particularly on a messageboard .I experienced it in 2000 when for once I fell into this trap.Fortunately for me I had entered early and my holdings in tech stocks had appreciated 17 times.I used to enquire about quotes of GAIL and HDFC(40 and 600(pre bonus)) for a switch and that would have been truly contrarian which appealed to me but my frequent visits to the messageboard and arguing for the valuations of Infosys and Wipro was one of the reasons for my confused decisions at that time. That is why I am reluctant to arrive at a jolly consensus.I admire 2 voices (then strongly opposed by the majority)which suddenly came on that messageboard to just offload at the peaks. Sameer Arora is fiercely independant in his thinking. Suzlon achieved this market cap in such a short period. How many more such Suzlons will bloom over the next 6 years? |
Posted By: basant
Date Posted: 30/Aug/2006 at 9:49pm
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Samir did not sell at the top. In fact he regretted at not having got out at the peak but he had got in very very early. he bought 5% of Satyam in 1995 and that speaks for the man's vision. he also bought HDFC Bank so we cannot call him a mommentum player.
Many people can be right at the tops and the bottoms but I would repect the man who sold out at the top after having entered at the bottom.If I was bearish about Infotech in 1995 I would be 100 times bearish in 2000 and my opinion should not count the other hand if I had got in early and became bearish in 2000 after having sold off the multibaggers then this opinion DOES count. Can you share the name of these two gentlemen?Did they became bearish after making money or otherwise.
The trick to getting a SUzlon is "New business". You cannot get a Suzlon in Steel or cement or anythiung that is conventional and already there. Old is gold would not work here. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Ajith
Date Posted: 30/Aug/2006 at 10:54pm
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I think rather than be constrained by the idea that new businesses is the area to look at ,one must star of with some strong emerging trend-let me start with a startling and tremendous trend that I read about today-the number of millionaires in India is growing at a rate that is 3 times higher than China.I am also certain that stupendous buying power is emerging even at the upper and middleclass levels and cars are going to be in unexpectedly strong demand but that is three fourths discounted in the price of Maruthi so which other companies will really takeoff?Who benefits?Who will capitalize on this?There are answers that are fairly obvious but one must go beneath the surface to pick tomorrows big winners.For that observation(as you mentioned about seeing) hard work plus contacts is needed.Also if there is anyone
among todays fund managers as good as Sameer Arora(we will know after a few years )we can track that fund.I personally like some of the picks of Reliance,Sundaram and Fidelity.
Sameer Arora was continuously justifying the valuations and then it becomes difficult to be objective about valuations in order to sell.I have taken the decision (past 2 years)to just not constantly discuss the pros and cons of my holdings with friends and relatives .Otherwise you are constantly justifying the valuations and you lose objectivity.It really is difficult to take right selling decisions.
The 2 gentlemen are unknown.This was a messageboard with one central character who was extremely knowledgable and continuously justifying tech valuations along with several others.But 2 voices came at the peak saying prices are going to crash-very cool ,and questioning valuations.
As you say I will look at new businesses but with a wary eye on fundas,emerging competion and valuations-as always.
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Posted By: Vivek Sukhani
Date Posted: 30/Aug/2006 at 11:03pm
| Mr. Basant it simply depends upon the horizon which you are considering. I think no stock be it Infosys or ITC or HLL or be it Pentaloon or whatever for that matter, is good beyond a point.... and no stock is bad be it a petty small cap at a price less than a particular price.I liked Balrampur Chini a lot @ 52 but sold it off at 152... I am a die hard fan of GE Shipping but I wont mind selling it if I get my target. Mr. basant, the skill lies in correct exits, rather than holding on to gains.there's a thing called maximisation but then there's another thing called optimisation. Instaead of waiting for a stock to double in 6 years , its better to get into stock where you discover more value...you have got to be enterprising rather than become defensive. |
Posted By: basant
Date Posted: 30/Aug/2006 at 11:13pm
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I am impressed by the thought
"I have taken the decision (past 2 years)to just not constantly discuss the pros and cons of my holdings with friends and relatives "
- Is it because they tend to confuse you and could panic you into selling That might happen if you have unusual names and are sitting on profits. the hardest temptation to avoid is not to sell an unusual name on which you are sitting on a very large profit.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 30/Aug/2006 at 11:16pm
| I buy pessimism and sell optimism.If I am getting a petaloon at 1600 and a tata power at 525, I dont know I will simply make a switch. If I am getting an ONGC for a 1220 and a tata power, I will simply jump to ONGC.You have got to sit with your purses ready and your DPs ready to make a kill.And I have always found it more prudent to limit my downside before looking at my upside as an investment strategy.Thats why I will never have a Titan which are friends only of good times. Thats why I will never have a Shree renuka Sugars or Bajaj Hindustan. I dont want to lose 40 p.c. in a span of 3 days, gentleman. I know I sound very contemptuous but then I dont like buying without knowing my downside. |
Posted By: Ajith
Date Posted: 30/Aug/2006 at 11:23pm
| I think it is to retain objectivity and not having to justify yourself or getting carried away-to take decisions appropriately. |
Posted By: BubbleVision
Date Posted: 31/Aug/2006 at 2:58pm
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Hi Friends,
Check out these lions in a zebra country here
http://in.rediff.com/money/2006/aug/31forbes.htm - http://in.rediff.com/money/2006/aug/31forbes.htm
Ajith,
Thanks for that words of wizdom.. as Mr BasantJi has already pointed out. ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: basant
Date Posted: 21/Mar/2007 at 12:25pm
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I am reading this topic again and would recommend all those investors to read this and keep it at the back of their mind the next time they attempt to view a MF portfolio!
See if a MF has to buy Reliance, ONGC, Ranbaxy and Tata Power the w hy should I give my money to it. The point that I am giving my money to a MF is because I expect them to look for undiscovered ideas not tread on the path that is already taken.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 21/Mar/2007 at 12:46pm
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Full-time professionals in other fields, let's say dentists, bring a lot to the layman. But in aggregate, people get nothing for their money from professional money managers.--- Warren Buffett ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 21/Mar/2007 at 12:53pm
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At TED we always benefit from that expertise whether it is engineering, banking, technology, media & entertainment, currency, global events plus in addition to this our members bring a lot of common sense which is the most uncommon thing in this part of the world.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: monu_duggad
Date Posted: 21/Mar/2007 at 3:13pm
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I completely agree...we give money to mf to discover uncharted paths...not buy sensex/nifty stocks ....
Basantji : Can u explain wht exactly absloute return guys means ?...iknow its used for hedge funds....but wht do they do when they look for absolute returns ------------- If you think you can,You Can |
Posted By: basant
Date Posted: 21/Mar/2007 at 3:33pm
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Absolute means broadly to have a positive NAV irrespective of whether the sensex or Nifty goes up or not. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: BubbleVision
Date Posted: 21/Mar/2007 at 3:35pm
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Monu... Old wine in new bottle.. Its another fancy name given to the "returns".
However the Absolute Returns funds are more daring. They Day Trade to generate absolute returns and use high leverage! They trade both sides of the market ... Long or Short! ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: basant
Date Posted: 21/Mar/2007 at 4:42pm
They are also the most risky because they are always fighting with the market. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 21/Mar/2007 at 6:22pm
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Someone once told me: "These Asset Managers are actually ASS-ATE Damagers"
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: manish_okhade
Date Posted: 10/Mar/2009 at 4:35pm
Its a good point, i looked at many MF portfolio but all of them invriable holding of large caps (excluding small cap/mid cap MF). HSBC Unique Opp Fund has claimed that they will buy companies which are out of favour and trading at discounted value but this schemes performance looks very dismal since past two yrs.
I wonder whether MF houses understand the fact that they are playing with other people's money.
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Posted By: Hitesh Shah
Date Posted: 10/Mar/2009 at 5:19pm
They know that very well and celebrate it after hours! ------------- |
Posted By: rapidriser
Date Posted: 10/Mar/2009 at 8:15pm
Ha! Ha! Well said.
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Posted By: MissingLink
Date Posted: 04/Jun/2009 at 4:44pm
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I was not sure where to put this so posting it here...
Read only today that E Mathew passed away on 31st May http://www.moneycontrol.com/india/news/business/mathew-easow-passes-away/399730 ------------- Missing a train is only painful if you run after it! Not Matching the idea of success others expect from you is only painful if thats what you are seeking. -- Nassim Nicholas Taleb |
Posted By: chimak10
Date Posted: 04/Jun/2009 at 4:50pm
| Deleted |
Posted By: Hitesh Shah
Date Posted: 04/Jun/2009 at 5:29pm
What happens to Equitymaster's 21k then?  ------------- |
Posted By: samirarora
Date Posted: 04/Jun/2009 at 6:42pm
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I will never buy a mutual fund... i am happier making my own mistakes.
Besides.. except probabaly a few, their NAVs go up when market goes up, their NAVs go down when market goes down... kind of defeats the purpose of having fund managers, as even they dont know anything, but draw huge salaries, from funds which are investors hard earned money.
If i really had to go the safest way, i would just divide my money into nifty 50 (probabaly leave 5-10 that i didnt like) and play SIP with them, or just buy in one go...
best wishes,
samir. ------------- |
Posted By: MissingLink
Date Posted: 04/Jun/2009 at 10:43am
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From 5 minute wrap ============================ Now this is something that will easily qualify as the biggest naming coup in the history of Indian financial markets in recent times. As per Bloomberg, Helios Capital, a Singapore based hedge fund plans to start an India focused fund and has decided to name the fund 'The Slumdog Millionaire' fund! If this isn't amusing enough, the firm is intending to raise US$ 50 m for an India long only fund called 'Jai Ho' fund. It should be noted that 'Jai Ho' is the title of the Oscar winning song from the movie Slumdog Millionaire, which set the Oscars on fire earlier this year by scooping up eight awards. Interest in Indian stock markets, which are already up 54% since the start of 2009, is on the rise and Helios Capital has really come up with an innovative way to capitalize on the same. The name will surely make it stand apart from its rivals. Will this also translates into a stand out performance? Only time will tell. "We want to find slumdogs from the Indian equity markets who have the potential of becoming millionaires", is how the founder of the fund chose to put it across. That potential though will come from some under-researched and ignored small cap stocks, a job that we have done with a fair degree of success for our subscribers. ============================ ------------- Missing a train is only painful if you run after it! Not Matching the idea of success others expect from you is only painful if thats what you are seeking. -- Nassim Nicholas Taleb |