Rakesh Jhunjhunwala: The king is dead, long live the king

The man is dead. A long live.

I met Rakesh Jhunjhunwala for the first time on August 17 2001.

The day was Friday. For a reason, I remember that day. I was a reporter at Business Standard. After the dotcom crash, markets were in a state of turmoil. The bond yield in India was lower than the earnings yield. I called on Jhunjhunwala's phone to work on the idea. He wasn't easy to get to know in those days. He said "Yes, Ma'am" in his distinctive style. He told me to come to his office. When did I ask? Now he said. I got to the first floor quickly.

The original dream merchant was a man named Shankar Sharma.

The room was partitioned into two parts by a piece of furniture. I passed a few desks with men looking tense as I entered. I waited by Jhunjhunwala's cubicle for a short time. The Big Bull chewed paan while he was on the phone. He didn't say hello to me. I didn't say anything at the corner. The phone conversation continued for another 10 minutes after he gestured to me to sit. He asked me a number of questions, including where I grew up, which school I attended, and what I wanted to do with my life. I continued to explain. He is screaming instructions to his boys at the trading terminals while he looks at his screen and ignores me.

He took a picture and gave it to me. He asked if he could read it. I will. He told me to read it correctly. I ran through the piece for a short time. The article was written by Warren Buffet for Fortune magazine. I will never forget the date because it was an email sent by his friend. Even though he gave me the screen, he was still enamored with it.

It's the most important lesson in investing. I don't think I appreciated the profoundness in that piece of writing. Guess what my first question was when I interviewed Warren Buffet? He thought about equity valuations in the low interest rate environment. If the rates were to sustain at such low levels, then equity valuations would be cheap, but that is not what he thought would happen. There was $100 billion of cash on hand. It is one thing to have low rates for a long, long time, and it is another thing to have a post-pandemic surge in the stock market. The debate about equity valuations is dependent on where the interest rate will be in the long term.

A master of speech.

I became a mini celebrity after meeting Jhunjhunwala. I would return to his office with mixed feelings after meeting him. He would always be looking at the screen while speaking, which made me uncomfortable. He asked rhetorical questions and then waited for his answer even if it took a long time. He could silence you if he raised his voice to a high pitch. I was too scared to speak in the beginning. I assumed that he would listen to the other side even though he was vociferous with his arguments. It was up to a person to speak up. It was necessary for you to be prepared. I went back to find the answers after listening to his rhetorical statements.

He would say that he worked for Rekha Jhunjhunwala when I asked him about stocks. He never talked about the details. He was astute in investing but never appreciated the amount of risk he took. His storied investment in Titan was made when the company was in considerable debt, despite the fact that his trading bets could have taken him down. He was able to take those bold calls and back his conviction. He was in his favor because of that audacity.

Which is the Big Bull's sacred formula?

He called risk the four-letter word in investing! Investing is risk taking, if anything, RJ maintained. “All risk taking is associated with two human emotions, that is fear and greed – greed of profits and fear of losses. The ability to strike the right balance between fear and greed is the most vital determinant of profitable risk taking,” he said in one of the interviews I had done. Then he went on to cite a memorable quote, “In markets, it sometimes feels like being undersexed in a harem and over-sexed in a desert”, and to elaborate on it: “Good investors should feel under-sexed when there is depression and over-sexed when there is irrational exuberance.”

He was aware of the worst-case scenarios when taking every risk. In a scenario in which most of the positive assumptions don't pan out, I look at the gap between the entry price and the price. He was aware of the things that could go wrong and was willing to take those hits as an investor.

Science is more than art.

Investing wasn't just about getting the math right. It was much more of a craft. Science and art make up the majority of the prediction of the earnings per share. Predicting PER is an art. The chemistry can only be learned by experience. It can't be taught but it has to be learned. He told me in the interview that understanding/predicting PEs is the most important factor to success in investing. Several of his long-term bets right from Karur Vysya Bank to Titan and Crisil multiplied not just because of their earnings growth but also because of a remarkable growth in earnings- multiple that contributed to the rapid compounding over time

Failure to distinguish between knowledge of a company's Fundamentals and Expectations implied by the stock price is the single biggest error in the investment business. The important aspect of risk in investing is the price at which you buy/sell shares, for it is ultimately the price or value at which you buy/sell shares which determines not only your profit/gains but also the important factor of the risk. The most hated companies are at a value to me. He said that it is more important than what you buy. He said that his favourite bets in the market are public sector banks.

As a person, he lived life king size but had a child-like appreciation for the smaller victories. I recall another anecdote from 2005. It was one of my team-mates' birthday at The Smart Investor, and the entire team landed up at Geoffrey's. It was RJ’s favourite watering hole for a long time. He was there almost every evening. And Geoffrey’s had set the channel default to CNBC to indulge him. There were five of us, and I heard someone call out my name loudly. It was RJ. He walked up to our table, and asked, “Ma’am, can I join you for a drink.” I said, “of course.” My team was ecstatic, we are boozing with the Amitabh Bachchan of stock markets. (Rakesh would detest my saying so – he detested people calling or comparing him to anyone else)

As he likes to say, you are nothing with your parents if you live with your father. He would make a loud call to the server and ask for the free Cheeslings. There is a free ka maal. He said that you should demand what is due to you.

There was more than three hours of entertainment. We talked about him in the office for a while after that. He chose the tab against my protest.

It's the biggest lesson of all time.

He was warm but had a volatile temperament. He was respectful and bold. He was honest and straightforward. He had an ear for reason, despite his loud voice and assertions. He was very kind. There is a person named Gregarious. It was a unanimous decision. Courageous, that's right. The man was his own person. He didn't want to be compared to anyone. The WarrenBuffett of India is the least of all things. He didn't like the name. Don't let anyone stop you from learning. Do what you like. It's up to you, be yourself.

One of the biggest lessons one can take away from his life is to do it your way and be yourself.

There is a look at the last few months of the ace investor.

His name is a Badge of Honor. Maybe it's time for others to have a name after it. He did this without compromising his dignity and that's why the adulation for him is so high. High fliers in stock markets have often turned out to be questionable at one point or the other. At a time when the stock market is doing well, he has become a role model for many Indians. All of us like to believe in our own great future and that's why his pitch that he is bullish on India is so important. He believed in the future of India. His spirit will live on even though the stock market is missing a big man.

RJ is gone, long live RJ.