As I look back on Value Research's journey, there have been very few years as exciting as this one. I mean that, of course, in the sense of the ancient Chinese curse 'May you live in exciting times'.
As the whole world lives and dies from this modern curse that China has unleashed, the idea of living in exciting times doesn't seem very... exciting. We would all like to live in dull times, where only predictable things happen. Back in February, hardly any of us had ever expected to go around wearing masks at all times and now many of us fear that this will be a near permanent state of affairs. Looking at some of the parts of the world that were worst hit earliest, that does not seem to be true, but then again, who knows? These are not predictable times.
As for equity investments, they are not predictable at any point of time. However, all of us know very well that it's the very unpredictability of equities that makes them such a great investment. Does that statement surprise you? It should not. Risk and returns go together. No one pays any premium for asset types that have no risk. It's the variability of equities that make them worthwhile for investors because the variability means that some investments do very well and some do very badly. The whole pursuit of equities is to identify the former and avoid the latter. If Value Research launched a service to identify the best fixed deposits, would you pay for it every month? In any case, what would we write in it?
The first stock-market crash that I personally experienced was the one in 1991, the one that was triggered by the infamous Harshad Mehta affair. Starting from that time, through the next decades, it has become crystal clear to me that one key to making money in equities is to take advantage of bad times. The bad times could be stock-specific, sector-specific, or as wide as an entire economy and perhaps the world. When I say 'bad times', I don't necessarily mean a crisis. I just mean a time when you can buy stocks for less than their intrinsic worth. More or less, that is the sense of the word 'value' in investing and the very concept after which I named my business decades ago.
When you look at it like that, then it's quite clear that it makes sense to see this crisis as an opportunity. A lot of us have lost value in our investments over the last five months and are no doubt regretting making this or that investment or holding onto something that is dubious. However, that regret is nothing compared to the regret that we will feel in the future if we fail to keep a calm head now.
If bad times are an opportunity, then the next few months are one of the biggest opportunities that you may see in years and years of investing.
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