From 1 billion to 58 billion! What's the secret of the Indian Buffett?

According to traders.

"I am a street fighter, fearless except for God, my wife, and the tax authorities." - Rakesh Jhunjhunwala

Known as the "Indian Buffett," the famous Indian billionaire trader Rakesh Jhunjhunwala is the 36th richest person in India in 2022 and ranks 438th on the global rich list. He has been interested in the stock market since childhood, starting with trading at 5000 rupees and growing his funds through stock trading to eventually make it to the global rich list.

However, he doesn't particularly like the title "Indian Buffett," considering himself far inferior to the American Warren Buffett. Despite this, both seem to have similar investment strategies of turning things into gold. Jhunjhunwala believes that Buffett, with a net worth of over a hundred billion, is far more impressive than him. In fact, their investment philosophies are almost identical, both focusing on "value investing."

Buffett is a representative figure of "value investing." For example, in 1973, the market value of The Washington Post was only $100 million. Analysts and the media estimated the intrinsic business value of The Washington Post to be $400-500 million. Buffett invested $10 million and has since made a profit of $2 billion.

Despite being a millionaire, Jhunjhunwala is very casual. He wears a Tata watch worth less than 100 rupees, never buys shoes over 200 rupees, but at the same time, he wears a huge 5-carat diamond ring and owns a luxurious vacation villa in the countryside. Some say that Jhunjhunwala's style is as contradictory as India itself.

Unfortunately, this Indian billionaire trader passed away in Mumbai on August 14, 2022, at the age of 62 due to illness, leaving behind a huge fortune of $5.8 billion (approximately 39.1 billion RMB).

Today, let's talk about the trading story of the Indian stock god Rakesh Jhunjhunwala and the valuable experience he left for investors.

Interested in stocks since childhood

Jhunjhunwala was born in Mumbai in 1960, his father being a tax official. Due to frequently hearing his father and his friends talk about the stock market since childhood, he became very curious about stocks. Once he asked his father, "Why do stock prices fluctuate every day?"

So, his father suggested he read newspapers to understand the news that could cause stock prices to fluctuate. Jhunjhunwala became interested in the stock market and aspired to work in a job related to the stock market.

However, his father advised him to complete his university studies first. He graduated from Sydenham College in 1985 and obtained a chartered accountant qualification. After that, he once again talked to his father about wanting to pursue a career in stock market investment. This time, his father allowed him to choose any profession but made it clear that he wouldn't give him any money or allow him to ask his friends for initial investment capital for stock trading

Entering the Stock World

One day in 1985, 25-year-old accountant Jignesh Vala walked into the Mumbai Stock Exchange on Dalal Street with 5,000 rupees borrowed secretly from his cousin (about 420 RMB), starting his first trade in life.

Perhaps he didn't realize that moment was the beginning of his legendary career. Over the next 20 years, the tide of time gradually brought Jignesh Vala to the center stage of history. His initial 5,000 rupees (about $100) turned into 5.8 billion dollars, and the Indian SENSEX index, which was at 150 points at that time, broke through the 70,000-point mark (as of February 26, 2024, the index stood at 72,886 points).

Soon, he received a client introduced by his brother, who provided him with a 250,000 rupee investment fund and promised to generate higher returns than fixed deposits with this fund.

A year after entering the market, Jignesh Vala made a big profit in the stock market, earning 500,000 rupees. At that time, he bought 5,000 shares of Tata Tea, an Indian comprehensive food and beverage company, at 43 rupees per share, and the stock price rose to 143 rupees within 3 months, resulting in a profit of more than triple when he sold the shares.

In the following years, he made substantial profits in many stock trades. Between 1986 and 1989, he had earned 2 to 2.5 million rupees. Another major investment was buying shares of iron ore mining company Sesa Goa at an initial price of 28 rupees, adding more at 35 rupees, and soon the stock price surged to 65 rupees.

Since the day he entered the stock market, Jignesh Vala seemed to be filled with optimism. His investment philosophy was in line with his idol Buffett's: "Buy the right stock and then hold it fanatically." He often warned retail investors who engaged in short-term trading and chased highs and lows, saying, "One day you will feel very hurt."

In fact, Jignesh Vala's more than 20 years of ups and downs in the stock market is a microcosm of India's transition from ancient times to modernization and eventually "shining brightly." During this period, there were opportunities, setbacks, and crises, far from smooth sailing.

Like all emerging markets, the Indian stock market in the 1980s was full of chaos, turmoil, and ups and downs. Jignesh Vala experienced the ordeal of exchange explosions, the thrill of stock market suspensions due to full trading halts, and investigations by regulatory authorities for market manipulation. However, after decades of trials and tribulations, he still stood as a hero at the forefront, standing out from the greedy and fearful crowds, becoming a "god" in this market.

Trading Philosophy of the Indian Stock God

Jignesh Vala is known as the "Indian Buffett," perhaps to some extent because he is also a value investor. When buying stocks, he focuses on a company's profit model, growth potential, and vitality, believing that the most important aspects of a company are its competitiveness, scale, and management quality.

However, he doesn't particularly like the title "Indian Buffett," considering himself far inferior to the "stock god" Warren Buffett. Although the two seem to have similar investment tricks of turning stones into gold, Jignesh Vala believes that Buffett, who is already worth over a hundred billion, is far more skilled than him. In fact, their investment philosophies are almost identical, both emphasizing "value investing." Rakesh Jhunjhunwala is currently managing a privately owned stock trading company named "RARE Enterprises," which is derived from the first two letters of his and his wife's name.

Rakesh Jhunjhunwala has a deep bond with his family. He married his wife Rekha in 1987 when he was 27 years old. Despite being married for many years, they did not have children until 2004 when they welcomed their first child through in vitro fertilization. In 2006, they had twin sons. While Rakesh Jhunjhunwala is passionate about stock market trading, he always makes sure to return home quickly after trading hours to spend time with his wife and children.

When it comes to his stock trading strategy, he admits to being both a trader and a long-term investor. He believes that short-term trading can only bring short-term gains, whereas long-term investments can yield lasting returns. His investment goal is to accumulate more capital for further investments.

Rakesh Jhunjhunwala prefers not to invest in large blue-chip companies but rather seeks out small and beautiful companies. He believes that the key to investing lies in whether a company has sustainable growth potential, as only continuously growing companies can provide substantial returns on investments.

Despite being a value investor, Rakesh Jhunjhunwala also utilizes technical analysis and believes that "the trend is your best friend," acting as both an investor and a trader.

He reveals that he uses various technical analyses to buy and sell stocks. While theoretically, he should sell stocks that are overvalued, his trading experience has taught him that stock valuations may continue to be overestimated or even rise further, requiring analysis to stick to his judgment.

Three Major Tips for High Returns on Investments

Looking at Rakesh Jhunjhunwala's classic investment cases, his success lies in two key points:

Firstly, focusing on the intrinsic value of a company (profit model, growth potential, and vitality);

Secondly, assessing how much growth opportunity a company has in the industry and the future demand space in the industry.

The two major keys to Rakesh Jhunjhunwala's successful investments may seem simple and understandable, but few people can actually achieve them. What they lack is sufficient patience and confidence, which are essential qualities for successful investors. Therefore, he provides three major tips for investors.

1. Do not try to time the market

When prices hit new lows every day, investors may hesitate: "What if buying now is a mistake? Should I wait a little longer, maybe the price will drop further?"

In this regard, investors often trap themselves by constantly seeking additional information to validate their ideas or waiting for lower prices. Rakesh Jhunjhunwala believes that if you have analyzed the intrinsic value and future prospects of a company and believe the stock price is cheap enough, you can go ahead and buy.

2. Do not focus too much on analyzing profits Most investors focus closely on a company's current sales and profits. They observe the company's quarterly performance and concentrate on the Return on Equity (ROE). Kim Jun-wara believes this is a short-sighted approach. He emphasizes, "The focus should be on the source of the company's profits. Investors need to understand the reasons for the company's mid-term and long-term profit growth, and grasp the opportunities that the company has in its own field."

3. To invest in a ten-bagger, you must first forget about it

Kim Jun-wara found that most people are eager to invest in ten-baggers, which leads them to overpriced popular stocks, resulting in losses for investors. He believes, "To find a ten-bagger, you must first stop being obsessed with it; start from the opposite direction, identify market errors, search for overlooked companies, and have the wisdom to invest contrarian. Finally, return to the most basic way of investing. If your research and analysis are correct, the companies you invest in have good growth prospects, and over time, the companies you invest in will achieve good returns."