Dot balls are okay.

In Cricket, especially test cricket, you must let go of some balls. Trying to score off of every ball is detrimental. Warren Buffett gave a baseball analogy. He said, when the ball is in his zone, he goes after it. When it isn’t, he is happy to let it go. Because unlike baseball, in investing there are no called strikes.

In my 8.5 years of investing, every year has been different. Some years, the returns have been fantastic and in some years I have even scored negative. However, through it all, I don’t have the urge to stay “fully invested”. I am okay to let money idle, just as I would be okay with dot balls.

But when there is an investible opportunity, I need to/ want to have cash. It’s like an idea that I have mentioned before: redundancy. If you want high availability, you need to have redundancy. We carry a spare tire because we don’t want to cut short the trip because of a flat tire. Isn’t the spare tire redundancy? What if you said: I want all my tires to be fully invested? Sure, you would be more efficient but you’d also miss out on many trips.

Sometime in the 1980s when Berkshire was still not the cash machine it is today, Warren Buffett borrowed money at some 6% and … let it idle. So not only was he paying an interest on that money, that money was not put to use. He likened investing to keeping the gun ready (with cash) while hunting slow moving elephant.

People keep asking Rajeev Thakkar why he is sitting on 26,000 Crs of cash? And the answer is the same as what Warren Buffett said: there are no opportunities right now. But, the situation can change very quickly and therefore you need to have cash to take advantage of the new opportunities.

—

Investing and Business are two sides of the same coin.

The market hates it when managements “sit on cash”. In every call, they ask: sir, why aren’t you deploying it? But good and seasoned managements know what Warren Buffett, Rajeev Thakkar and test cricket lovers know: dot balls are okay. It’s not a bug, it’s a feature. To build big scores in cricket and investing, you need patience to wait for the right opportunity.

Markets hate such companies. I love such companies. Market’s impatience gives me a slight edge.

Car Trade is one such example. The company was sitting on Rs 1000 Cr of cash for a long time and the markets hated it.

May 2022

October 2022

May 2023

(The funny thing is … all these questions were asked by my friend…LOL! )

But one fine day, it bought OLX, India’s No 1 classified business for some Rs 550 Crs. If they didn’t have the cash, could they have bought it?

RateGain is another example. The company raised money through a QIP and “sat on cash” for a while. The market got impatient and the stock went down. But last week they purchased a company bigger than them for 1.5 times sales. If they didn’t have the cash, could they have bought it?

—

When I was employed, I was always busy. Even if I wasn’t busy, I was told to look busy.

But busy is not productive.

Similarly, being fully invested is like making your money look busy rather than what truly counts: being productive. Big scores are built with patience. And hence, dot balls are not only okay, they are welcome.

Have a nice day!