Every Bull market gives rise to a set of Gurus who can do nothing wrong. They are aggressive in terms of stock selection and for a while anything they touch seems to become Gold. While before the advent of Social Media and 24 hour business channels, it was tough to amplify one’s message beyond one’s own circles, today, we have Gurus who are able to dominate both the Social Media and the Television networks enabling them to reach millions.
When I started off in this business, there were no business channels. The first channel that I remember devoted to the stock markets was called “Money TV”. It did not have any programs but instead more or less spent the whole time broadcasting stock prices. Think about having only data and no noise – it was a lovely period.
When we talk about the 1992 bubble and crash, we name it after Harshad Mehta. The Dot com bubble which was not unique to India was driven by Ketan Parekh though his name is not as associated as HM with the rise and fall.
The bull and bear markets post 2000 have no real guru’s with everyone using the generic names for the crash “Financial Crisis / Housing Crisis”, but that did not mean there weren’t any big guns who strongly believed that India was finally shining and it’s time had finally come.
Compared to India, America which has had a higher participation by retail has been enchanted by various Gurus over time. The only non guru guru to have survived are Warren Buffett and Charlie Munger combination with most others have fallen by the wayside. A list of some of the big names of the past can be read here (Link)
While the ultimate losers are the retail who follow these gurus, the gurus themselves use their moment under the Sun to make a tidy bundle. With public memory being short, it’s amazing to see previously failed forecasters coming back to the limelight once the conditions are good.
The only way to become a guru is to reject the old and embrace a new style that the guru has discovered. For instance in 2017, the rejection was with the traditional thought process of giving weight to management and its reputation and instead we were extolled to buy into companies with bad management. It worked for a while and the guru was able to amass a massive sum under his belt. While today he is no longer highlighted, I am pretty sure his day in the Sun will be back sooner than one assumes to be.
In 2019, a new guru emerged who discarded the fancy theories of not buying stocks at high valuations. Valuations don’t matter, he roared and for now he has been proven correct as a company with single digit growth trade at triple digit valuations. If Tesla can be valued at 1200 times its earnings, why should not the best of Coffee Cans be valued at high multiples.
This year has belonged to the new emerging club of Pharma Experts. While there have been value investors who started nibbling to pharma in the last few years, the last few months have belonged to twitter warriors who seem to have a better understanding of Pharma than the Pharma companies themselves.
Personally, I have nothing to complain about, Pharma has been the biggest driver of my own returns even though Pharma is nowhere close to my circle of competence. The fear though is that while I know I can make a quick exit, not everyone will be able to do so. We have seen this when the Dot com bubble crashed in 2000 as well as the crash of the Infrastructure / Real estate led boom in 2007/08.
While I don’t believe that gurus themselves are frauds, the fact lies that many have no fiduciary duty and many a time get carried away by the market sentiment attracting audiences who have no business to follow the gurus footsteps.
As much as we would wish, there is no easy path to success in markets. If you don’t have the time and ability to learn the skills required, you are better off investing in just a Index fund and hoping the country in the long run does a good job.
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