Category: Excerpts

Source: Manoj Nagpal

(Disclosure:I am market making in the shares of Tata Technologies)

Over the next four years, Tata Technologies plans to acquire a number of secondary and tertiary defense suppliers as part of a corporate plan to grow revenues from $500 million today to around $1 billion by 2020.

In a wide-ranging interview at the Farnborough Air Show last month, Tata Technologies CEO Warren Harris made it clear that his company is actively seeking companies it can buy up in order to grow its global footprint, specifically among those secondary and tertiary firms that make up the US defense supply chain.

Relationships between US defense primes and their suppliers “require a lot of trust,” Harris told Defense News July 14. “It’s very difficult to fast-track your way into a relationship that is predicated on a lot of trust. So we’re trying to buy into marquee relationships through targeted acquisitions.”-from Defense News

Finding an edge really only comes from a right frame of mind and years of continuous study. But when you find those insights along the road of study, you need to have the guts and courage to back up the truck and ignore the opinions of everyone else. To be a better investor, you have to stand on your own. You just can’t copy other people’s insights. Sooner or later, the position turns against you. If you don’t have any insights into the business, when it goes from $100 to $50 you aren’t going to know if it will back to $100 or $200.

So this is really difficult, but on the other hand, the rewards are huge. Warren says that if you only come up with 10 good investments in your 40 year career, you will be extraordinarily rich. That’s really what it is. This shows how different value investing is than any other subject.

So how do you really understand and gain that great insight? Pick one business. Any business. And truly understand it. I tell my interns to work through this exercise – imagine a distant relative passes away and you find out that you have inherited 100% of a business they owned. What are you going to do about it? That is the mentality to take when looking at any business. I strongly encourage you to start and understand 1 business, inside out. That is better than any training possible. It does not have to be a great business, it could be any business. You need to be able to get a feel for how you would do as a 100% owner. If you can do that, you will have a tremendous leg up against the competition. Most people don’t take that first concept correctly and it is quite sad. People view it as a piece of paper and just trade because it is easy to trade. But if it was a business you inherited, you would not be trading. You would really seek out knowledge on how it should be run, how it works. If you start with that, you will eventually know how much that business is worth.-said Li Lu