We are pleased to include below an exclusive interview Shai Dardashti conducted with global value investor Amit Wadhwaney last year. It is a wide-ranging conversation on global investing, and I have no doubt you will enjoy Amit’s timeless wisdom and insights.
On a personal note, Amit has been an incredible supporter of the global intelligent investing community over the years, and I thank him for the selfless way in which he has shared his perspectives and ideas.
Amit explains why the time to make money is not when you sell a stock, but when you buy it:
A few highlights from the exclusive conversation:
…opportunities come and you respond. I tell my colleagues, younger colleagues especially, “Stay hungry. You don’t know where your next meal is coming from…”
Indian railroads are the world’s largest employer; it’s a gigantic railroad system, legacy of the Brits. Massive underinvestment. It’s a very important part of the underperforming infrastructure, so fixing the railroads would be big. This would have to be a multi-year fix; it involves, among other things, politically horrible things like raising fares, which are microscopic and bear no resemblance to the cost to provide the service.
A big mistake actually turned out to be a fraud. It was a good sized mistake. What I would consider a mistake is not being too early, or being defrauded, though being defrauded is a sore spot. Let me tell you about being defrauded, it still rankles us. It’s a UK-based company about to be taken over I think, by Virgin Media. It’s going to be consumed by John Malone, actually. It was Cable & Wireless, post the TMT bubble imploding.
Sometimes balance sheets are configured for a certain kind of environment. Take, for example, resource companies that have been riding a boom for a number of years on the back of a Chinese boom and Chinese appetite for resources. Many of those companies borrowed to build their businesses. What happens if something changes in terms of your biggest customer’s demand? It changes the economics of the business entirely, which in extremis might cause one of your mines, for example, to become non-economic. That mine may have to be mothballed or shut down. Suddenly, your cash flow starts to implode, and you have all this debt. That’s an example of a balance sheet morphing over time.
Over the years, consolidating industries have been very good to us. Buying into depressed, cyclical industries with few barriers to consolidation. An industry that comes to mind is oil services. It has been fabulous for that. M&A has been active in that industry over the years. Other depressed industries include building products, where you see consolidation happening and it’s been very successful.
The key issue is, in terms of what macro factors could hurt a company, not just in terms of one-period profitability, but what might threaten its viability as a business.
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