Coat Tailing Warren Buffett Style

Warren Buffett in his younger days followed a technique called coattailing

In this method, you usually follow an experienced investor into a stock.You assume that the experienced investor knows what he is doing and financial fireworks will commence shortly after the experienced investor enters the stock.

Are there such investors in the Indian equity scene that one can follow?

I believe there are.

Take for example, Dilipkumar Lakhi.

He is a very well known diamond exporter from Mumbai (see article). He is quite renowned for his shrewd stock picking prowess.He picked up Uflex very cheap in Dec 2009.(still owns around 4% assuming fully diluted)

Now he has picked up around 6.75 Lakh shares of Dhanbank around Rs.70.33 . (27/02/2012). Another related party Girdharilal Lekhi has picked up 5.4 Lakh shares around Rs.63.66 (23/02/2012)

Dhanbank faced a lot of turbulence recently due to the ouster of its CEO Amitabh Chaturvedi. Despite this ,the stock is up around 22% since then.Maybe Dilipbhai and the markets know something we don’t !!

 

10 Replies to “Coat Tailing Warren Buffett Style”

  1. Hearing Mr Lakhi’s name for first time. Chandrakant Sampat is one more stalwart whom I came across recently. (http://www.go2cio.com/articles/index.php?id=29)

    However, I’d like to know, short of their own disclosure (or in case of barons like RJ and Mr. Damani, the collective financial media hoohaa!), how can a non-connected individual far removed from their circles effectively coattail them?
    eg: I’m sure active investors in diamond industry might come to know of Mr. Lakhi’s picks within days, while talking-shop or industry gossip, but how can others get same news (even if with some delay)?
    I’m thinking of ppl like myself – salaried individual, making his own individual stock picks, trading thru online discount brokers, no RMs, no speaking to brokers over ph. no insider news – just forums, websites and following other investors online.
    What is the best technique for such ppl to keep updated of their moves?

  2. The best technique to follow such people is to monitor closely NSE and BSE filings/announcements/bulk deals

    Alternately, you can create a “Google Alert” for these investors…eventually their picks will show up

  3. Google alerts is fine and I use it to certain extent. But checking all NSE/BSE filings daily is a huge time-sink, such that I don’t think the effort:reward ratio justifies it. That’s also largely due to the way these filings are reported. Many a times a simple info ‘XYZ bought N shares of ABC’ is zipped, and the pdf is a handwritten landscape scan of some bored clerk (in accounts dept with a fan hovering at Parsi-library speed 2 over his head, I can almost imagine!), so after unzipping and opening of pdf you have to ‘rotate [anti]clkwise’ and spend ~5mins to scuff through it. We are not even talking of filtering the above kind of filing from the rest of noise filings, which is itself a huge task by itself.
    And all this will happen only when these stalwarts are either top20 holders or if they did bulk deal off mkt or something unusual isn’t it? Incase of regular mkt purchase, say thousands of shares purchased, weekly for a month, I don’t think there would be a disclosure at all. Am I right?
    I’ve tried using NSE’s twitter channel (@NSE_Announce) – hasn’t work for me. Also, in case of stk existing on both BSE/NSE, many a times I’ve seen discrepancy in reporting. Some filings are reported on BSE and I don’t see them on NSE.

    I need a more speedy, automated and assured system to get this info. Would be good to know how others track filings. Am I just doing it wrong? Would be great if you can share your method. Thx.

  4. Thanks. Chalo, let me try that one as well.
    Amidst all my Parsi-library imagination, this Qn was lost.
    Can you clarify this:
    “..And all this will happen only when these stalwarts are either top20 holders or if they did bulk deal off mkt or something unusual isn’t it? Incase of regular mkt purchase, say thousands of shares purchased, weekly for a month, I don’t think there would be a disclosure at all. Am I right?..”

  5. Purchases will show up only if its a bulk deal or a significant stake in the company.You wouldn’t want to track smaller purchases anyways as it would be an insignificant part of their portfolio.

  6. Exactly. So if someone does creeping acquisitons (on a daily basis it’s very small), but say over a month or two (pick yr N), it still becomes a significant percentage and yet they don’t have to declare it on daily basis. So all this jumping over hoops would still fail to catch such purchases; right?

    Or does it trigger some regulation once a threshold is crossed;
    Say once any individual cross X% of shareholding or/and belongs to top Y outsde investors, then there has to be a exchg filing. Want to know X, Y values here if there is such a thing?

  7. Thats where google alerts kicks in.Say person A keeps buying small amounts every day.It wont show up in the filings.The moment it crosses a threshold, it will show up in the shareholder disclosure every quarter (Public > 1%). This will/can be picked up by google alerts.Promoters have to disclose their purchases/sales anyway irrespective of amounts.

    I hope this helps.

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