Value & Special SituationsIndia

Sankaran Naren

Contrarian value and asset allocation - buy discomfort, rotate on valuation.

Sankaran Naren is a leading Indian fund manager, respected for his long service and calm, careful way of investing. He is famous for being a contrarian - buying things that are cheap and hated by the crowd, and selling things that are dear and loved. He is also known for asset allocation: moving money between different kinds of investments, like shares and safer things, depending on which has become cheap or expensive. His two signature habits are buying discomfort - accepting that the best buys feel bad at the time - and great patience.

The method

He waits for the crowd to make something cheap out of fear or boredom, checks that the business or sector underneath is still sound, and then buys it while it feels uncomfortable and unpopular. Over the years he shifts money towards whatever asset class and sector has become cheap on valuation, and away from whatever has become dear, rotating slowly rather than chasing fashion. He keeps emotion out by deciding calmly in advance, following his own rules through the storm, and waiting for value to be noticed.

The record

He is a respected, long-serving Indian fund manager with a well-known name in the industry. His contrarian and asset-allocation style has been followed and studied for many years. But past results are never a promise of future ones, and even the most admired managers have periods when they look wrong.

Where they were wrong

Contrarian buys can be very early and look wrong for a long time - sometimes years - before they come right, if they come right at all. Cheap things can get cheaper, and a low price is only a bargain if the business or sector underneath is genuinely good rather than dying. Shifting between asset classes and sectors can be mistimed, leaving you out of a rising market or early into a falling one. All of it demands unusual patience and discipline.

Studies

5
  1. Study 01Contrarian value: buy the cheap and hatedWalk towards the gloom the crowd is fleeing, but only for good things sold cheap - and be ready to wait.Read this study →
  2. Study 02Buy discomfort: the best buys feel badIf a buy feels wonderful you are probably overpaying; the real bargains almost always feel bad to grab.Read this study →
  3. Study 03Asset allocation: never all in one bagDont put every rupee in one type of thing; keep a mix, and gently tip your weight towards whatever has grown cheap.Read this study →
  4. Study 04Valuation-driven rotation: follow value, not fashionDrift towards the deserted, cheap corner of the ground and away from the packed, dear one - slowly, and with patience.Read this study →
  5. Study 05Behavioural discipline: calm rules beat the crowdDecide calmly, write it down, and follow it patiently - so the shouting crowd, and your own fear, cannot make the choice for you.Read this study →

Our own plain-English reading of a publicly documented investor’s method, in our own words. It describes structural, public-record facts and the investor’s own stated mistakes; it makes no judgement on any living company and is not a recommendation to buy or avoid anything. Figures marked [illustrative] are constructed to demonstrate a method. Educational only; the author is not SEBI-registered and nothing here is investment advice.