Thank you for this Ankur Sir. I still continue to make this mistake of timing the market because
when the market overall is overvalued it impacts the stock prices of the businesses that you own (collateral damage) and if you are not a buy and hold investors, the wind going against the market, impact the stock prices of the businesses that you own.
So, as a individual capital allocator, remaining invested in a business, trading way above the intrinsic value, can be seen as a opportunity loss if some other asset class or business yields higher value for you.
Example: Havells, Astral, HUL are all quality businesses but remaining invested in them would have resulted in opportunity loss of capital. I know this is all hindsight bias and analysis but yet..Having understand that it's fundamentals(earnings) + liquidity+ sentiment (reratin) that drives the return for investors, a view on where the capital is moving often becom important.
If I'm not wrong, charlie and Buffet cash call is indirectly a macro call on markets where you do not find the capital accretive businesses at your desired valuations.
I frequently has this question of timing in mind because of the small capital base and if as a businessman you hold a inventory of a stock which is not getting cleared for say next 5 years, I'm a capital destroyer.
Buffett has clearly stated that he and Charlie don't think about the market. They think about individual businesses, their values and the prices they are selling at. If the value-price gap doesn't offer a good margin of safety, they don't buy and prefer to hold cash. To extend this statement into an indirect assumption that they have a macro call on the market valuation will be stepping away from the center of Buffett's statement. If we believe that it is indeed a macro call on the market then our next step would be to look at selling some existing holdings because the market valuations are high. Some bravehearts may go to the next step that if the market valuations are high, probably they are too high and hence a good time to short the market. So, you see an indirect assumption can quickly spiral down to unintended consequences. Hence, I would like to stay closer to Buffett's original statement that he doesn't think about the market but thinks only about individual businesses and their value-price gap.
On holding or selling businesses if they are trading above their intrinsic values is an individual call depending on the quality of the business, runway available to it, risks around that business, position size, presence of better opportunities etc. So, it is a relative decision. Every case has to be thought through on an individual basis ignoring the overall market level. Thinking about the market level is more likely to confuse than help in my opinion. We need to think about the right investment philosophy that suits our individual persona. So, personally I don't take market level into my thinking while making investments decisions and it suits my temperament.
And lastly I fail to see how a small portfolio/ large portfolio weighs in choosing the right investment philosophy. If something is right, it's right whether the capital is less or more.
Thank you for this Ankur Sir. I still continue to make this mistake of timing the market because
when the market overall is overvalued it impacts the stock prices of the businesses that you own (collateral damage) and if you are not a buy and hold investors, the wind going against the market, impact the stock prices of the businesses that you own.
So, as a individual capital allocator, remaining invested in a business, trading way above the intrinsic value, can be seen as a opportunity loss if some other asset class or business yields higher value for you.
Example: Havells, Astral, HUL are all quality businesses but remaining invested in them would have resulted in opportunity loss of capital. I know this is all hindsight bias and analysis but yet..Having understand that it's fundamentals(earnings) + liquidity+ sentiment (reratin) that drives the return for investors, a view on where the capital is moving often becom important.
If I'm not wrong, charlie and Buffet cash call is indirectly a macro call on markets where you do not find the capital accretive businesses at your desired valuations.
I frequently has this question of timing in mind because of the small capital base and if as a businessman you hold a inventory of a stock which is not getting cleared for say next 5 years, I'm a capital destroyer.
Thoughts?
Hi Naresh,
Buffett has clearly stated that he and Charlie don't think about the market. They think about individual businesses, their values and the prices they are selling at. If the value-price gap doesn't offer a good margin of safety, they don't buy and prefer to hold cash. To extend this statement into an indirect assumption that they have a macro call on the market valuation will be stepping away from the center of Buffett's statement. If we believe that it is indeed a macro call on the market then our next step would be to look at selling some existing holdings because the market valuations are high. Some bravehearts may go to the next step that if the market valuations are high, probably they are too high and hence a good time to short the market. So, you see an indirect assumption can quickly spiral down to unintended consequences. Hence, I would like to stay closer to Buffett's original statement that he doesn't think about the market but thinks only about individual businesses and their value-price gap.
On holding or selling businesses if they are trading above their intrinsic values is an individual call depending on the quality of the business, runway available to it, risks around that business, position size, presence of better opportunities etc. So, it is a relative decision. Every case has to be thought through on an individual basis ignoring the overall market level. Thinking about the market level is more likely to confuse than help in my opinion. We need to think about the right investment philosophy that suits our individual persona. So, personally I don't take market level into my thinking while making investments decisions and it suits my temperament.
And lastly I fail to see how a small portfolio/ large portfolio weighs in choosing the right investment philosophy. If something is right, it's right whether the capital is less or more.
Regards,
Ankur
Namaskar Ankur Sir!
This absolutely clarifies every doubt.
You three leg stool analogy also worked brilliantly for me when there was so much pessimism in March 2026.
Thanks a lot!