Searching A Precious Gem

Searching For A Precious Gem

At the high altitudes of Bhutan and Tibet, just before the rainy season starts, a fungus attacks the caterpillar larvae (an immature form of an adult insect) that live in the grassy soil. When the larvae eventually die, the stems of the fungus then propagate in their heads and grow by 2-3 inches in length.

 

Once they turn brown in color, they become thin and taste like a mushroom which can be eaten in a powdered form. Known as Yarshagumba, it’s a powerful herb which is primarily used by Chinese people to cure Cancer, Impotency, Fatigue, and Joint Pains.

 

Image: Yarshagumba Herb | Source: Pinterest

 

What makes Yarshagumba more valuable than Gold is the activity associated with its exploration. Extremely hard to find due to its scarcity, the local villagers wait patiently for its collecting season, leave their regular jobs during the spell and move to an altitude of 4,000-5,000 meters with enough food for a month-long odyssey. Since its projection of just 1-2 cm above the ground turns out to be a herculean task to discover it, they crawl on their hands and feet to search this treasured gem in the muddy fields that are spread across the Alpine Grasslands of The Himalayas. 

 

Searching for this gem is so precious that its infrequent availability can fetch more than $1,00,000 per kg depending upon its quality. So precious that its usage is extremely useful in curing cancer and restoring the impaired reproductive functions of a human body. 

 

Image: Villagers Looking for Yarshagumba | Source: Nepal Times

 

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Just like Yarshagumba, I believe that searching for a precious gem (a financially strong enterprise) is equally rewarding in the game of investing. A company with a proven track record of strong fundamentals may come under stress when macroeconomic factors are not supportive or investors move around in a mood of panic. The essence lies in the fact that one needs to keep looking for such ideas patiently and buy them when they are available at discount. 

 

All along, one may also happen to discover a company with a strong competitive advantage that only a few are aware of.

 

In 2003, after having tasted success in the initial years of his journey, astute investor Mr. Rakesh Jhunjhunwala was on a searching spree for his next idea. And that’s when he discovered Titan, a watch-to-jewellery maker that had a strong penetration among Indian households. His inclination towards Indian growth story coupled with Titan’s capability of building a strong business in the future made him buy its shares at a throwaway price of Rs.3 per share. 

 

As per Fortune India, the Titan of Mr. Rakesh Jhunjhunwala’s portfolio was worth Rs.7,000 Crore in March 2018. 

 

Image: Rakesh Jhunjhunwala’s Titan-ic Journey | Source: Fortune India

 

Same goes for Mr. Vijay Kedia who discovered Atul Auto in 2005 while searching for a precious gem. This 3-wheeler manufacturer compounded his money at an astonishing rate of 57% per annum. In the next 9 years, he made a whopping 5700% gains through his search.

 

Such Titan-ic and 3-Wheeler journeys justify that a precious search, when combined with patience, turns out to be extremely rewarding in the long-term.

 

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One must remember that what’s bad for the market is good for a long-term investor. At present, the Indian stock market is in the state of chaos due to many furious factors. But elements like IL&FS Mess, DHFL Debt Default, Weakness in Rupee, etc. are not going to stay forever. Sooner or later, these temporary setbacks will fade away like an ink on a paper. 

 

The circumstances like these are one of the promising occasions to search for the undervalued companies that are steady and healthy. Consequently, many fundamentally strong companies, that had turned extremely overvalued in 2017, are losing their magnified sheen and drawing near to attractive valuations. 

 

By leveraging such opportunities, one must look out for substantially well-managed corporations that have taken a backseat due to a short-lived hassle in the market. Once found, when combined with patience and a long-term approach, it can yield stellar returns in the years that are yet to come. 

 

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Related Podcast: Market Crash – Boon or Bane, recorded by my dear friend Amit Gadre

The cover image has been taken from Adzuna

 

 

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8 Comments

  • Abhinav Sood

    October 7, 2018

    Nice post..
    Awesome lines
    Such Titan-ic and 3-Wheeler journeys justify that a precious search, when combined with patience, turns out to be extremely rewarding in the long-term.

    Reply
    • Dhruv Girdhar

      October 7, 2018

      Thank You, Abhinav for your kind words.
      Glad that you loved reading it 🙂

      Reply
  • Prateek

    October 8, 2018

    5 minutes well spent on reading this “gem” of an article. The analogy used is simply awesome and creates a long lasting impact.
    Bookmarking it right away.
    Thank You

    Reply
  • Lakshmikanth

    October 8, 2018

    Fantastic article. Reinforced the correct path of creating wealth by investing in equity.

    Reply
  • Balvant

    October 8, 2018

    Dhruv how can we identify the gem? Fundamental analysis what parameters need to be considered please elaborate

    Reply
    • Dhruv Girdhar

      October 8, 2018

      Hi Balvant,
      A few of the parameters that you can look for are its debt level, growth in sales and operating profit margin. On top of that, check if the management is really working towards creating value.

      Reply

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