A Courage Is What You Need

A Courage Is What You Need

On 1st September 1939, German dictator Hitler had invaded Poland and triggered the beginning of World War 2. By killing millions of Polish nationals, his devastating forces seized the entire territory and left millions of children orphan. But somehow, during the bombardment, around 500 Polish women and 140 children managed to escape the deadly circumstances.

 

To save them from the Germans, they were put on a ship by the Polish Army and the Captain was ordered to sail it to any country where they could get the shelter. A few days later, when the ship tried setting its base at the waterfront of European as well as Asian ports, none of them allowed the ship to come in.

 

The Captain continued sailing the ship through the Gulf of Aden (near Yemen) and reached Iran through the Gulf of Oman. Unfortunately, Iran refused to accommodate the refugees.

 

Without losing any hope, the Captain sailed the ship all through the Arabian Sea and reached the Port of Bombay. To his utter dismay, even the British Governor General of India Victor Alexander refused the ship to come in.

 

When The Prince of Jamnagar, Maharaja Digvijay Singh, got to know about the whole incident, he showed the courage and gave a green signal to the Captain to dock the ship at Rosi Port in his province. Ignoring the objections of Britishers, he courageously offered a shelter to all the refugees.

 

For the next few years till the War was over, not only he provided a safe haven to all the foreign nationals, but also ensured that each child would get free education in an Army School. 

 

Image: Maharaja Digvijay With Polish Refugees | Source: Intellibriefs

 

In the history of World War 2, this is one of the most glorious chapters of a courageous act which is not known to many. Showing respect for his brave gesture, many roads and streets in Poland have been named after Maharaja Digvijay Singh. Besides, a lot of welfare schemes have been launched in his name by The Govt. of Poland.

 

Indeed, a courage is what you need !!!

 

Image: A Road Signboard – “Good Maharaja” | Source: Ochota Streets

 

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Whenever a stock market crashes, a sense of fear starts erupting due to the pessimism in the market. This fear provokes the investors to lose their emotional control and induces panic. As a consequence, either they sell the holdings that are financially strong or prefer not to buy any. During this gloomy period, a courage is what you need to be an optimist to pick the healthy stocks when everybody else is losing his/her mind.

 

Known for buying forgotten stocks that are financially strong, Sankaran Naren is a poster-boy and star fund manager of ICICI Mutual Fund. And a courage is what made him invest in a textile-machinery manufacturer during a mini-crash in 1989. 

 

With a 5-year order book and a market value equivalent to the total cash available with the company, Coimbatore based Laxmi Machine Works (LMW) was available at a mouthwatering price of Rs.400. Even the ones who knew about the company really well turned a blind eye towards the huge pile of cash profits that it was generating every year. 

 

Naren wanted to put his entire funds with LMW. The guy at the desk of brokerage house refused to buy Naren’s argument. He had never seen anybody so courageous who was ready to bet on a single stock.

“Are you sure you want to do this?”, the guy asked. 

From whatever I have learned in IIM Calcutta, you can not lose money in this kind of a company“, replied Naren.

~An excerpt from the book How Fund Managers Are Making You Rich

 

From a price tag of Rs.400 in 1989, it reached a height of Rs.14,000 in the next 5 years. In a market where people had ignored a stable company with a healthy balance sheet, Naren accumulated it in his kitty and reaped the handsome benefits later on. After all, without courage, the prospects of getting rewarded are next to impossible. History speaks on its own.

 

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Surrounded in an environment where people love action, it turns out to be extremely difficult to exhibit a trait of inactivity. More often, the Fear of Missing Out (FOMO) compels us to buy when the market starts rising. During this phase, we tend to burn all the liquid money we have in buying what starts picking up the momentum. Subsequently, whenever the market declines, we are left with almost no cash and lose the opportunity to buy when stocks are available at discount.

 

In a surging market, a courage is what you need to sit tight on your cash position and wait patiently for the moment to deploy it when the market crashes.

 

As an example, Charlie Munger let the cash balance of Daily Journal (a newspaper corporation headed by him) build for 40 years as he had been waiting patiently for an opportunity like the 2008 Depression.

 

When investors were still panicking under the clout of 2008 Depression, he courageously offloaded the entire $20 Million cash balance of Daily Journal in buying banking stocks that were available dirt cheap. With his courageous act, he converted $20 Million in 2009 into $166 Million in 2015.

 

Image: Daily Journal Cash Balance | Source: Fool.com

 

 After all, a courage is what you need!!!

 

Related: A Courageous Bet of $20 Million by Charlie Munger

The cover image has been taken from Digital Synopsis

 

 

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2 Comments

  • Prakash

    October 14, 2018

    It’s good to keep reminding ourselves of the need to conquer our own weakness in times of weakness in markets! This post certainly resonates with this theme!

    Reply

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