Let’s get to know about his family, early life, early investments, mistakes and most importantly his priceless investment philosophy in this Ramesh Damani biography.
Family and Early life:
Unlike many well known investors in India, Ramesh Damani was born in a well to do family. His father was already into stock market for over 20 to 30 years. Senior Damani was able to get a good income for his family. He was able to send his son for study in USA during that period.
Ramesh Damani received his undergraduate degree from H.R. College of Commerce & Economics and an MBA from California State University-Northridge. He never wanted to get involved in stock market but on the other side his father had some other idea.
Decision to get involved in stock market:
Ramesh Damani was the only son of senior Damani. So he always wanted to bring Ramesh back to India so that both can stay close to each other. He has tried many times but everytime he has failed to convince his son to invest in stock market. Finally he decided to take big risk to bring him back.
He sent 10,000 USD to Ramesh Damani and said ” Take this money and invest it. If you double the money then money is yours, but if you loose no question asked. Only condition is you have to invest in stock market”.
Ramesh Damani accepted the bet and invested the money in stock market. To his nightmare he lost the huge sum of money within 6 months of period. As promised by his father, no question was asked. Senior Damani was sad because his big bet failed.
Ramesh Damani was angry and he was frustrated. How could an MBA gradate from a prestigious college in USA loose money that too in a bull market? It hurt his ego and he decided to plunge into stock market.
Early life in stock market:
In 1989, armed with a Master’s degree from California State University at Northridge, Ramesh Damani became a member of the Bombay Stock Exchange. He had planned to make a living through broking. But what really excited him was identifying potentially successful businesses, and investing in them for the long term. Damani’s father had been successful in the market, but he always sold the moment a stock’s price went up. “He always created income for the family, but never wealth,” says Damani.
During 1989/90 a huge bull was going on known as Harshad Mehta bull market. He has made lot of money for his clients but he used to get only 1%. Some of his smart clients made up to 100% so he decided to invest for his own once bubble was burst.
First big bet and subsequent success:
His first big move in 1993 was when Infosys went public. Having briefly worked as a coder in the US, he knew Infosys would benefit from a huge labor arbitrage. He invested Rs 10 lakh in both Infosys and CMC. By 1999, his investment had grown hundredfold. In classic Warren Buffett and Charlie Munger style, he’d experienced the advantage of hanging on to a good business. “I learned that just because a stock doubles, it is not a reason to sell it.”
In 2002-03, before the last ‘bull run’ started, Damani was bullish on the liquor industry. “It was incredible; the entire liquor business in India was available for Rs 500-odd crore.” His investment paid off handsomely. He also identified two public sector companies, Bharat Electronic Ltd and Bharat Earth Movers Ltd, and got in early. And he regrets not buying enough.
Costly mistakes and lessons:
The first big mistake happened in the USA when he lost 10,000 USD. He was buying looking at rear view mirror means; he was looking at the previous bull market and buying stocks which have fallen. Mr Damani took that as a bargain. All fallen stocks do not necessarily give you bargain. That was an expensive lesson. His father understood losing money is a part of the stock investing.
Another regret: Not buying aggressively when the markets crashed in 2008. “I had anticipated the fall and was 30 percent in cash. By the time I started buying, though, the market had already run up,” he says. He hasn’t allowed too many regrets since.
As an analyst he has made a lot of mistakes and that lessons have helped him in the next 30 years. “There are no losses only lessons learned”.
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Here is the top investment philosophy outlined in this Ramesh Damani biography post.
Circle of Competence:
Look for sectors that you understand very well instead of investing in sectors by following other people. When Mr. Damani came back from the USA, he had a good understanding of tech sectors. So he invested heavily in tech companies and got rewarded handsomely.
Mr. Damani believes one can’t create great wealth following momentum and crowd. Superior investment come from thinking differently. Use your thinking and come up with different ideas.
Change in trend:
There always is the change in trends that give huge profit in the stock market. Earlier it was companies like Grasim, Bombay Dyeing etc that gave good returns. Then came technology stocks like TCS, Infosys etc. But stocks that will give huge return are from different sectors. Key is to identify early.
Factors to look for in finding multi-baggers:
a. Find the value of a company. It is the difference in market cap and kind of business that will add values. Infosys IPO had only 50 crores. Now it has become 3 lakh crore. Once you find the true value, it will be easy to bet on its future
b. Find the growth prospects of company and trigger for growth. For example, digitization is a key in the media industry.
Multibagger=Under valued company + huge growth potential.
5 Investment Rules by Mr. Ramesh Damani
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