Hello, is it piramal ? – Master Moves

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Had a interesting conversation with a friend today and guess what he was holding PEL for 30 % of his PF ! So the discussion was long

And after the call after he told me with his permission I tried to deconstruct and post about the Biases and how his perceptions changed ! And as munger quotes no one is so smart to learn everything from own mistakes although I don’t consider it as a mistake I tried to de biased many thinking fallacies .

Hypothetically Watching a India 🇮🇳 and 🇵🇰 Pakistan World Cup Match and in last 5 balls India needs 15 runs and somehow we lose in last ball with 3 runs to make ! So how will India go ? Crazy and sad for another week of cursing and memes and the history of India beaten in a world cup match (the odds of making bets on India changes , I’m not a sports bettor though 🤩😂 , Not yet )

So that’s exactly what’s Deprival super reaction tendency we perceive near misses of a victory as something that’s taken away from us . So that’s actually what’s happened with PEL investors .

Piramal investors all were very happy when the deal with shriram was announced and there were very bullish people who expected a wonderful return on the investment but in recent past that did not work out so well and PEL had to exit the stake with a single digit return .

Also Read on FinMedium:  Survive to Thrive- Part 2

So what was going on ?

As an investor I feel that a big victory or big money has been taken away from me (Deprival ) even though that’s not the case when you analyze the situation rationally .

1. Piramal is known for his strategic timings in his previous deals and as an investor there are things that are outside our control – This is one !

2. Even after Knowing about Piramal they were not able to digest the fact he could exit anytime if he is not comfortable with an investment ( The right thinks to do if he feels so , As most bet on Piramals judgement )

3. Scarcity – They now think there is something Returns or the (compounding machine ) taken away from them even though that’s not the case .

4. There may be better opportunities in future envisioned by management so if you’re distorted by this news you may tend to miss the next big move .

5. Only if they fully understood the management ( Piramal is known for major moves) and they should have placed their bets based on this too else Deprival tendency is they result of borrowed convictions

Also Read on FinMedium:  9 Fintech apps you should know about

6. Thinking in terms of 0% to 100 % makes trouble – People who are feeling a sense of lost returns could have thought of this event as 0 % that’s the problem Probabilistically speaking based on Piramals Previous bets they should have assigned a higher number ( Don’t think in 0 – 100 % that’s black and white thinking ) always its gray that I like as a decision maker !

As investors we need to have an Insight about the investment and foresight to use that insight this is the job of an investor . When you’re borrowing ideas and convictions from other people you may never hold onto any investments and results would be emotional hijack

So learnings from the event ?

1. Know why you’re making an investment . Is it a management bet ? A value unlocking bet ? Or is it a arbitrage opportunity and journal it so you can revisit and see your decisions ( I have a decision Journal and a Investment journal where I have written all my investments in last 7-8 years in detail)

2. Always think probabilistically – Embrace ambiguity and uncertainty as anything can happen . There’s a merit in thinking in Gray – and always there’s something in between ( Remember Osama Bin ladens capture in Abottobad was an educated probabilistic estimate )

Read : Thinking in bets as a starter

3. Try to establish Base rates on your investments

Also Read on FinMedium:  Data Update and Economic Value Added (EVA)

4. Don’t buy or sell based on borrowed convictions and What’s app groups discussions – It takes many months to research and wait for the right price to build up positions. Only than you can add up / Cut down based on your judgement.

5. Know the difference between noise and signal wait for the next big move that maybe investing into a asset of HFC or elsewhere .

6. Always be comfortable with dissent of opinions and ask What’s the other side of the issue ? And what do I want to be true ? #Debiasing questions

Disclaimer : I’m Registered SEBI Research analyst , we hold no positions in PEL , this is not a Recommendation. Only for educational purpose.

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Ragavendhra Perumall
Ragav is an ardent follower of Warren Buffet, a political enthusiast and a business person. He writes more on real-life instances combined with the mental models. Reading widely and interacting with people in various fields have helped him become an astute investor.
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