Expert: Amit Goel – Why the ‘Hertz’ of Brazil is compounding at 10% | Fidelity

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to end. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How are you? [00:00:30][15.1]

Alec: [00:00:30] I'm very good. Bryce very excited for this episode. We love the fact that investing is a truly global opportunity these days. You don't just have to invest in your home country. And we are joined by an expert investor from Singapore who's an expert in global emerging markets. So I'm excited to bust out of our Australian borders today and speak about the opportunities around the world. [00:00:52][21.8]

Bryce: [00:00:53] That's it. Break that home country bias. It is our absolute pleasure to welcome Amit Goel to the studio. Amit, welcome. [00:00:58][5.3]

Amit Goel: [00:00:58] Hi Bryce. Good morning. Good morning. Great to be here and lovely talking to you guys. [00:01:03][4.4]

Bryce: [00:01:03] So Amit is the lead portfolio manager, Fidelity Global Emerging Markets Fund and portfolio manager for the Fidelity India Fund. So plenty of ground to cover today and really looking forward to understanding more about emerging markets. So before we get stuck in, we always love to hear the story of our guests. First investment. There might be some lessons and some key takeaways. So are you able to share with us the story of your first investment? [00:01:30][26.7]

Amit Goel: [00:01:31] Yes, I think I think it's a very interesting story. And let me talk about it. So I joined Fidelity almost 17 years back. I have a medicine background. I did my undergrad in pharmaceuticals. I did my MBA throughout my undergrad, as well as my postgrad. Investing in investing always want to be an entrepreneur. And you know, when you want to be an entrepreneur, it's about allocating capital to an idea, but also operationalise that idea. And so when I realised that I'm very good at allocating capital, I'm not good at operationalising businesses. So so I think that took me to investing, which I think is a, is a very to promo form of entrepreneurship because here you are choosing an idea, a business, but you are also choosing people to run that business. So I think I think it's in my mind, it's so very true for almost entrepreneurship. When I started working, I think I came across this company in India called Page Industries. It is a monster franchise of a brand called A Jockey, which is largely a men's innerwear brand, very simple product. All of us use it. We understand it. And India was a very fragmented, innovative market. You have many brands at many price points, largely very value conscious market. At that point of time, it still is. And you have this brand which sells for a dollar a piece, but very unique, differentiated, aspirational brand for masses. And you don't accept product, which you can't even claim to wear that I'm wearing this brand, you can shop and and you still have a brand which sells for a dollar and aspirational for the masses. It was a small company, a single digit marketshare in Indian market. They were very good at branding. They're very good at distribution. $100 million sales ten, 12 years back, $500 million market cap, very beautifully managed. And it always looked to be expensive in a sense. Their market is trading at 15 times based, what the stock is trading at 30 times based learning. But it was still a drop in the ocean at that point of time. So so we bought it. We bought the company in I was an analyst, we bought the company as well. And it turned out that the company just kept on compounding, compounding, compounding, shifting here. Now, that company has grown its market cap by 50 times. I mean, it was ₹1,000 stock in 2009 when I first looked at it. It is 50,000 now. Yeah. And the business do lithium same it's very simple is the product we use on a daily basis. It was sold for $1. At that point of time it sold for $2. Now the market share was 47%. The market share is 15% now and keeps on going and compounding it 15, 20% every year. I think the learning here is that investing can be as simple as possible, that we as consumers use hundreds of products and services on a daily basis. I think our best investing can be some of these products and services which we use as consumer, and we can understand the value and aspiration and the brand power behind those some of those businesses. The second learning from that was that, you know, the stock went up very, very fast, like it became a ten bagger in two, three years time. And then it started looking very expensive. And you started looking for new ideas to allocate capital even to businesses, which you don't understand that very well. And you you sell this idea and and buy something else, which you don't understand. So so I mean, we sold it in three years time after being five seven bagger, but it has been another ten bagger after that. And and that that kind of tells you, again, you started with with quoting Warren Buffett that that we are we are kind of putting our flowers and watering our weeds. So so so I think it goes back to the basic principle of investing in my mind that keep things very simple. Invest behind businesses, which you understand, and just try to see what they can do in five years time, ten years time, 15 years time. It's not always easy. But I think if you if you invest behind simple products, simple services, it becomes easier than then thinking about some complex things in investing. Hmm. [00:05:51][260.0]

Alec: [00:05:51] I love that there's some great lessons there. I've also pulled up Page Industries charts. It's up 18,000% since 2007. So great investment for your first investment. I guess omit the from that first investment to where you are now leading a couple of funds at Fidelity. Have you developed a personal investing philosophy? [00:06:11][20.2]

Amit Goel: [00:06:12] It said over and over again by everyone. And it's not something you need, which I'm saying that investing is a very long journey. It's a marathon only career where you can actually become better every day with age. I mean, if you are if if you are, if you're working in a factory, I mean, as you get older, your efficiency decreases. If you are a sportsperson and as you get older, your efficiency decreases. This is one profession where every year you can become better, that your job, whether you are working for yourself, whether you are working for your clients. So I think I think that's the goal that you become better investor over a period of time. And is, as I said, with this first investment that I talked about, it is all about keeping it simple as much as possible and keeping it simple. It's not very easy. I mean, I think you learnt by mistakes as you go along. Keep your focus, narrow down your focus. I mean, it's a very wide area. There's no right or wrong way of making money. You have to understand your way of making money and you keep on defining that. So to me, it's a journey. It's a journey where I was looking at very wide areas. I keep on focussing, narrow down my universe, me specialist on what you do and just keep on defining your process. Make it very simple so that you can you can make it understand anyone on the street that this is how I invest look so, so in my investment philosophy, I just keep on looking at simple businesses that I understand. Great businesses just just understand why these businesses are great. What do they do? Is it is it sustainable? Is their brand power sustainable? Is their technology powered sustainable? Do we understand that product or services and just keep it very simple, keep on learning more and more about your businesses and that gives you conviction to own them for a longer duration. Just don't make it make it very complex. [00:08:01][108.2]

Bryce: [00:08:01] So your lead portfolio manager for the Fidelity Global Emerging Markets Fund. So how does Fidelity define emerging markets? And I guess the follow on then is what is so interesting about the emerging market space for you? [00:08:17][15.6]

Amit Goel: [00:08:17] It's very interesting question because in my view there is no homogeneous asset class called emerging markets. You can think of emerging market, you know, as a seller with different shades of green, orange and red. You have very different countries from if you think on a map from South Korea to Chile mean diagonally very different countries at very different stage of evolution demographically, economically, socially, politically. They are small countries like South Korea with 30 or 40 million people with GDP per capita of 40, $50,000. You have very populous countries like like India with the 1.3 billion people, GDP per capita of $500. You have countries outside Asia, Brazil, South Africa, which are very resource heavy countries. They have massive resources but very volatile economies. And then you have China, which is everybody question whether it is emerging or not emerging. So so I think it's a very, very heterogeneous asset class. What is what you see on a global basis, for example, U.S., which is a very large part of developed market universe, which tends to be a more homogeneous asset class, large consumer base, which, which, which are which are very homogenous in nature. So I would say the beauty of emerging market is that you have this mix of very different countries to choose from and at any point in time you can just choose the right segment within those industries where consumers are growing, their penetrations are growing, their businesses are becoming more scalable, businesses are becoming more competitive. So to me, it's a perfect hunting ground to buy great businesses in great pockets of opportunities within emerging markets. So it's not often what is a homogeneous asset class. It is is an asset class where you can really shine if you choose the right company in the right areas. [00:10:13][115.9]

Alec: [00:10:14] Yeah. It. It is just such a big label for so much of the world, more than half the world that I imagine the difficulty sometimes is just trying to narrow your focus down. You mentioned China that emit is China an emerging market in Fidelity's view? [00:10:31][17.4]

Amit Goel: [00:10:32] It is an emerging market because while China has grown to be the second largest economy in the world, it's now the second largest consumption economy after us in the world. China is 50, 60, 17% of every product manufactured in the world. In most of the cases, they are 50, 60% users of every commodity in the world. So so they are they are very large from that perspective. But it's a very populous country. And it's not only within China, it's not a homogeneous country. So so they are 1.3 billion people at different stages of evolution. So, yes, North China is as wealthy as anyone else in the world. So so there will be out of that 1.3 billion people, there will be 30, 40 million people who are very rich, who can be who can compete with any rich developed economy in the world. But then there is a base of people who are who are still developing. And it's a very large base. So, so so there are 1 billion people who are earning less than $10,000 GDP per capita disposable income. There are 2 million people in China who are earning more than $10,000 GDP, $10,000 disposable income every year. That number is going to grow from 280 million to 6, 700 million in ten years time. So that is still developing. So I think China still has, in my view, 10 to 15 years off of that growth. But they are where consumer will evolve, their aspirations will live, all their purchasing power will evolve. And then this question becomes more sensible, whether we still think China becomes a developing or a developed market. And obviously, who knows? I mean, except when it dies, period. I mean, you all know about geopolitics and what's happening. But I think there's still a large part of China that is still growing at a very good rate to a to a level where you can call them development. [00:12:26][114.0]

Bryce: [00:12:26] I mean, there's there's a lot of noise in emerging markets at the moment with the outflows that we're seeing from emerging market funds. And I guess that begs the question around the longer term opportunities that are created when investing in emerging markets. It's a it's a part of the market that I think for a lot of people in our community as well, it's as always, a pretty strongly divided opinion around stay clear of them or, you know, they're amazing for longer term opportunities. So what is creating the long term opportunities in emerging markets versus obviously some of the the more established? And what are some of the drivers of these opportunities for for investors? [00:13:06][39.1]

Amit Goel: [00:13:07] No, I think it's a question which which comes up in most of my client conversations that with all the promise of emerging market, better growth in India, better growth in China, other parts, it seems that emerging market keeps sort of lagging developed market. So why should we look at emerging market as an asset class when you buy anything, any business, any asset class? There are two fundamental drivers, actually three fundamental drivers of why you buy that asset class first and then you see what is the growth of this asset class over the medium to long term? Can it grow 5% organic growth 10%? Can it go 15%? Whatever we can see here. We have seen the last ten, 20 years and we can surely with see with some conviction in the next ten, 20 years that emerging market as economies will keep on growing faster than developed market. I mean, you have China, which is slowing down from a high single digit growth rate to maybe five now. And I think five is still a challenging task for them. Even if they grow three four, they will grow faster than developed market. China is almost one third of emerging market universe. Then you have countries like India, Indonesia, which are large countries that are going at mid-single-digit. So I think at a totality, you can surely see that emerging market can grow at my sense, 4% in the next ten years in real terms. But see development can growing maybe two. So you still have emerging market and a faster GDP growth versus developed market in real terms. But the other two important aspects which when you buy any asset or shares that are you buying in the right price because if you buy a faster growing asset but at the wrong price, you could still not make money out of it. And the third very important point in my mind, which is that do you really have businesses within emerging markets that benefit from this economic growth of emerging market, which always promises to be higher than developed market? I think the third point, which I mentioned is a very important aspect when you look at emerging markets in the next eight years. If you look at the last ten, 20 years, a lot of these. Growth in emerging market was actually captured by by a lot of developed market companies. I mean, if you if you ask me which is the biggest social media company in India, it is Facebook and WhatsApp, which is the biggest software company in India. It's Microsoft, which is the biggest. And what is the main company in India? It is Google, which is the biggest e-commerce company in India is Amazon. So so a large part of that incremental growth in a lot of emerging markets that goes through for India, that goes through for other parts of emerging market, especially outside Asia, where a lot of this growth, especially in the digital space, was actually captured by global companies and not local companies in China was a very different situation with which had these home-grown companies like Alibaba, Tencent, but then they also now got impacted by what we saw on the regulation, the aspect within within China. If I sit next 5 to 10 years, I see emergence of very competitive local and domestic companies in emerging markets, which are very competitive on a domestic basis, but also becoming globally competitive to capture global market share. And I'll give you a few examples. Like within China, within India, I see emergence of very strong consumer companies in the digital space. You have a lot of 30, 40 digital companies which are growing very large in India, which are capturing Indian digital space. You know, Indian consumer companies which are becoming large in areas like consumer electronics, etc., keep on gaining market share in these large growing markets. Similarly in China, sportswear, consumer staples, Trinity Electric vehicles, alternate energy value chain. You have emergence of these domestic companies, which I think will capture more and more value out of the growth of these these large economies. Then on a technology landscape, I think for the first time in last 20, 30 years, you will have start to see global market leaders in semi-conductor space out of Asia. Taiwan Semiconductor, Samsung Electronics, S.K. Hynix, a lot of other companies in Taiwan. So my sense is that now you have a you have a better set of businesses to choose from, which can benefit from this high emerging market growth and taking global market share as well. And the third very important point in time is that whatever has happened in the last ten, 12 years, emerging markets have become as cheap as ever. So they are trading at the highest discount to developed market, more than an absolute basis, as well as on a relative basis. So all these three points higher growth, better price to buy it, but I think most importantly, better set of companies to choose from, I think makes me optimistic on a medium to long term basis on an emerging market. And again, it's a very, very wise to choose from a very fragmented asset class. So as an equity manager, again, it's a very important asset class for us. [00:18:08][301.4]

Alec: [00:18:08] Yeah. On that point of I guess different and perhaps better companies, we often talk about emerging market indexes and the composition of the index has changed massively over the last ten or 15 years. You know, mid 2000, it was really resource dominated companies and now it's, you know, technology and consumer brands are sort of sitting at the top of that index. Maybe I know you've touched on it briefly there, but maybe can you tell us a little bit about that evolution and how the emerging market index today is different to the emerging market index 15 years ago? [00:18:44][35.1]

Amit Goel: [00:18:44] Yes, I mean, that's exactly my point was when I when they talked about a better set of companies to choose from. So if you look at 20 years back, the index was very resource heavy. So you will have large energy companies which were largely government owned conglomerates. You have large resource companies. On top of it, you will have large telecom companies like like like China Mobile and other telecom companies outside outside Asia. And you will have large banks as well, which were very large financial businesses, large banks in China, large banks in Brazil, etc.. So all these companies were the top ten, top 20 companies in the next. And as you rightly said, that has changed. So you have more technology, more consumer, more Internet and some of the resources companies as well. So I think it's become a more diversified, a better kind of reflecting index. And that goes that's just to the point which which I mentioned to you earlier that that it is not just just I think the composition of these ten, 12 companies in the top ten, 12 companies. But if you look at the top hundred companies, you will see a similar change in distribution of of businesses. So it becomes a more diversified index. And I think from a competitiveness point of view, it's just become a better set of companies to choose from. And that's exactly the point, which I'm saying that which makes me more optimistic as an asset class. I mean, in our fund, we don't. We are very benchmark agnostic, so store. So we don't buy companies because they think in benchmark, we buy companies because we like them to understand them and we think that they are presented to us at the right price to to benefit our clients. So so it's a very fragmented asset class. As I said, we have a lot of equity money. So so a lot of stocks are very small in benchmark or doesn't shoot in benchmark. But but again, as you rightly said, the competition has changed for the better. [00:20:40][116.3]

Bryce: [00:20:41] So I met, as we've sort of alluded to here, not all emerging markets are created the same. And so I guess your whole job is to come up with a framework of identifying which markets are worth pursuing and going after. So what do you look for? What are some of the characteristics and qualities of an emerging market that I guess then allows you to figure out, well, I'm going to put these in our universe. And the follow on from that would be what are some of the emerging markets that are particularly interesting you at the moment and are exciting for for fidelity. [00:21:17][36.1]

Amit Goel: [00:21:18] And they said it's a very heterogeneous asset class. Different countries at different point in time of evolution. Even within countries, you have different pockets of opportunities. I mean, in our view, we we never go top down. We have a view on a particular country, whether it looks good to us or look worse to us, obviously. But when you look at any stock in any particular country you are you always think about the macro macroeconomic environment in that country and try to kind of get that get that. Included in your stock level thesis, we assess you looking for long duration, sustainable pockets of opportunities within emerging markets. And I would speak about a couple of them as we look look through. I think the first and the foremost point when we look at companies and the most important point for us to buy any companies is to have a view on quality of people behind businesses. So I think corporate governance and quality of management team, integrity of management team becomes very important, more so in the emerging market where in a lot of cases you see majority shareholder, it is the manager of the business. So there's no segregation of management and ownership in a lot of emerging market business still. So you want to make sure that you buy businesses where you can trust the management team for the next five, ten years. You can buy a great business, but if you are not aligned with the right kind of people, you might not be able to crystallise that value in, especially in emerging markets. So I think for us, getting aligned with the right kind of people, people who we can trust with the right corporate governance structure is very important to buy any business. Second important point, I talk about this, these pockets of opportunities. I think I talk to you about Chinese consumer market. I mean, we are we are all reading and listening about what's happening in China with property market geopolitical issues. But I still see China consumer market to keep on going for next ten, 15 years as some of the middle end consumers move to middle and high end. I mean, as I said, do 50 to 80 million consumers were earning more than $10,000 disposable income every year. That number is going to double in the next ten years. So it becomes as large as US consumer basket in ten years time. We're talking about $15 trillion of consumption happening in China. A lot of it is so important that you need to understand this consumer. What are their aspirations? What are they going to do? Where are they going to spend? Incrementally, I think that forms the basis of choosing some of very good consumer related names and then again goes back to which company is the right company to choose within their sector. So so we own some, some very good consumer businesses which we believe can can grow at very strong double digit for next ten years. And that's, I think, a very good pocket of opportunity come to India again, a very large country where I think growth can be one of the highest in emerging market for next ten, 15 years. Consumers sitting at very low price points, average consumption basket is very small. So these consumers, as they will, they will start to use new things which they have never was in their life. I'll give you an example. Consumer electronics, which you and I use on a daily basis, air conditioners, refrigerators, kitchen appliances like range hood, microwave oven tech sector. All of these consumer electronic penetration is tiny because consumer was still earning only $2,000 per capita disposable income. And as it goes from $2,000 to five and ten, in the next 10 to 20 years, you will see the penetration across some of these categories increasing massively. I mean, the penetration of air conditioning in India with with such a kind of hot and of temperatures and climate is 5%. India sold 7 million air conditioner last year. There are 300 million households in India. There are two. And they. 2 million households, which are middle class and only saw 7 million in conditions last year. China saw 100 million new conditions last year. So, I mean, just these numbers are mind boggling. So can you really find good domestic businesses which can capture this growth? So again, you have to be looking at this sector. You have to look at the right company, the management team. And if you can marry both of these factors, I think that kind of gives us a lot of long duration, sustainable opportunities. So I think these these two areas, which makes me makes me kind of feel kind of very optimistic. And the third area, which we are we are very positive on is the global competitiveness of semiconductor companies in Asia. I mean, there are companies in especially in Taiwan or some in Korea which are truly becoming globally competitive. I mean, they're there now technology leadership of companies like Taiwan Semiconductor in the memory chip space, industrial computing space in I.T services space. I think the technology leadership, the skill leadership of some of the Asian companies are now better than ever in their history. They have been improving, but last five years the competitiveness has just gone to another scale of becoming global leaders. [00:26:30][311.9]

Alec: [00:26:30] I mean, let's let's turn to some individual company names within some of those opportunities said. So in China and India, as you said, you were really interested in consumer businesses, particularly Indian air conditioning. We will be asking what the opportunity in Indian air conditioning is. And then in the, I guess, Asian semiconductor space, let's start with consumer companies. Are there any particular stocks, any particular companies that you have on your watch list that are particularly exciting within that thematic? [00:27:02][32.1]

Amit Goel: [00:27:03] Yeah, let me speak about this company. It's called Heavens. It's one of the biggest business you will come across an emerging market. A very strong compounder over the last ten, 15 years. It's a company with one of the largest domestic consumer electronic business in India. About $2 billion is in that $2 billion sales. They sell everything, basically. They started being a cable and wire company. So so the cables that that goes into our houses, behind the walls that we don't see. And then they moved into selling lighting products, selling fence. So they have got 15% market share in all the fans in the country. Then they move into consumer electronics. And last year they started selling water heaters, air purifiers, water coolers. And now they are moving into whitegoods. So they're starting to selling air conditioners, refrigerators, washing machines. And it's a company which has been building this business for decades. Very strong management team, organic growth. Focus on creating brand. I happened to visit one of their factories last week in India. It is one of the most modern air conditioning plant I've seen anywhere. I mean, I've been to the air conditioning plants in China, which are which are, as I said, throwing millions of air conditioners every year. One plant where I think this plant was very competitive prior to any leading plant, this plant manufactures 1 million air conditioners every year. So I think in this market where, you know that this market is going to become ten, 20 times in the future, I mean, we can we can debate the duration of this growth. It can be ten years. It can be 12 years. It can be 15 years. But we know the end point. So you really need companies which you think have the right structure in place to capture this growth. So I believe this company is absolutely the right company from a management bandwidth, from a corporate governance structure, from focus on brand distribution and manufacturing capabilities to capture that growth. And, you know, it's the very best thing. You are you out of this question because you have a template also. Same thing is happening in China in last 20 years where the market was very fragmented. A lot of global players were present. And then some of these domestic companies, I mean, there are two companies in China which kept on taking market share from global companies as they keep on faltering in their focus because they are global companies. They keep on faltering in their focus in a particular market. And I think that's the case will happen in India. India has presence of all the global companies LG, Samsung, Daikin, Hitachi, Whirlpool, all the global majors, whether you talk about European, American, South Korean, Japanese, and I see them faltering one by one and ceding share to a company which is which is very good in domestic market. So so I think, again, this is a business which I believe has compounded a very strong double digit and can keep on compounding to a very strong double digit in future given given given the structure of the market and the capabilities of the company. [00:30:07][183.7]

Bryce: [00:30:07] I love that it would be a missed opportunity if we didn't try and squeeze one more company out of you. I mean, so do you have another? Company that is exciting. You doesn't necessarily have to be India, but from an emerging market point of view. [00:30:18][10.8]

Amit Goel: [00:30:18] Let me take you out of Asia, because I've spoken a lot about about China, India, technology. Let me talk about this company, which I think a lot of Australians can also relate to. It's called localism. It's one of the largest car rental business in the world. I'm sure you know about Howard DAVIES. I was in Australia three years back and I rented a car at the airport from Howard to drive it throughout Australia. So I'm sure everybody knows about it. So you can see the highlands of Brazil and actually Hart sold their Brazilian business to this company a few years back because they couldn't compete with it. So this is a company which has 300,000 cars in their fleet in Brazil, where they buy 13% of cars sold in Brazil every year. So they buy this company buys one out of every eight cars sold in Brazil every year. And the business model is very simple. They buy a car that I need for two years and sell it at the same place because they're such a largest buyer of cars in that country. They buy every car at a 25% discount directly from OEM. They run it for two years and they sell it at a price, which is same as the purchase price, very close to it. And then they're selling prices on which 10% more than the selling price, which is ongoing in the market, even for used cars, because they have a very strong debt to use car business with with their stores. And it said that if you took it in. So it's a business which is so competitive because they are so large, scalable, efficient, they buy cost 20% cheaper and they sell sell cost 10% more expensive. So that's a very sustainable competitive advantage they have. And Brazil is a very typical market where car ownership is very expensive because your cost of capital is very high. I mean, in developed market, you get car leasing at the very low rates to 3%. Even in places like India, China, you get it, five, seven, 8%. In Brazil, you have to pay 15 to 20% to lease a car every year. So so this company, being a corporation, can have at least 10% lower cost of capital. What is an individual who will who will buy a car and lease it? So massive competitive advantage and they keep on gaining market share in a country which has not done anything for the last ten years, the real GDP has not gone anywhere. The car market has not gone anywhere. This company has compounded at a rate of 10%. So I think it's a very competitive business. I mean, they are they're the largest player in their market. The second largest player is now 25% of their size, massive competitive advantage. And again, I mean, this is one company, very good management team, very operationally, corporate governance, very strong. So I think, again, this is this is one of the most unique business I see around as well. [00:33:14][175.6]

Alec: [00:33:15] Fascinating. This is why I love investing and learning about new companies as there's a company out there in Brazil that's buying 13% of all cars. And you just you just never know what's happening around the world. Anyway, that's why we love speaking to fund managers, and I'm sure we could speak for hours about all of the companies in your portfolio, but we are getting close to running out of time. We should ask one question about managing risk, because in emerging markets, there's there's more volatility. And so as an investor that's interested in investing in emerging markets, we have to be mindful of that. How do you think about managing volatility in your portfolio and how do you sort of put in place some downside protection? [00:33:58][43.2]

Amit Goel: [00:33:58] Yeah, I think managing risk is one of the most important part of the process. Whenever we think about giving returns to our clients, we always think in terms of risk adjusted returns and not just accounts. So given the volatility you talked about, I think it's very important to manage risk. To me, the most important aspect of managing risk is to process, to know your business better, as simple as that. I mean, this is this is the basic of investing that don't invest top down, don't invest because somebody told you to invest. And this is a good business. So, so, so just keep on understanding your business is buy a good business is bad, but just don't buy it because somebody told you it's a good business to go and try to understand it. And that gives you a lot of holding power in any business. I mean, that actually gives you your ability to benefit from volatility. I mean, if I understand the business, I think it's a great business, long duration and the couple of business that I talked about here and by any chance, given the volatility in the market, these businesses are presenting to you even at a better price than what you think it should predict, that's an opportunity to embrace volatility and get benefit of it. But you will never be able to. Do that unless you understand that business and have the conviction to buy it when things are going wrong. The first and foremost. Go back to basics principle of investing that only invest after understanding the business you are investing in. So I think that's first basic principle. I think the second at a portfolio level, which which I think is very central to our strategy and process, is to make sure that we don't take excessive risk in single stock. I talked about some of these great businesses and as you get closer to them, you get biased with them. And there are still so many things in some of these businesses that you will never know and you don't know. I mean, you are sitting in your office, you meet them, one supporter, you go and visit them. A lot of things are out of your control, out of management control. You don't know about it. There are always specific risks which can come from anywhere. And I think managing money for the last ten years has taught me that this risk can come out of nowhere and you can never manage those risk. The only way to manage that risk is not to make your house on 1 to 3 names. You should try to drive your performance through your process and philosophy. And that process in philosophy is to buy businesses that you understand, buy them at the right price, keep on understanding them better. But then to reduce a single stock specific risk, we tend to make sure that by dividend consecutive portfolio, we don't run very concentrated positions. So so in our portfolio, we try to keep our portfolio as diversified as possible at a stock level. All the risk are right from stocks, but they are very diversified at a stock level. So if you are owning 30 names, you are trying to own them at 13 to 3 so that no one stock can make or break your portfolio. Just two basic principles which which we follow in our strategy. Try to understand your businesses so that you can embrace volatility and just try to make sure that you don't get biased with businesses and don't try to take excessive single stock risk. And that you want to do in your life, that you want to do in your personal portfolio and your client portfolios. [00:37:18][199.8]

Bryce: [00:37:19] Love that. Well, I mean, we are just about out of time. But a quick reminder for the Equity Mates community that we are not experts here, we're not financial professionals and we aren't licenced. So we're just learning here like you. And nothing on this podcast should be taken as advice. It doesn't know any of your personal circumstances, but he himself is a licenced. So we've got three final questions. So I'll kick it off. Do you have any must read books that you would recommend to the Equity Mates community, investing or otherwise? [00:37:50][30.8]

Amit Goel: [00:37:51] Yeah, so I think I will never, never see Must-Read Books, but I think I think great to read books. I mean, let me let me talk about probably quickly about three books which, which I found very useful and they came from different facets of universe. First, I think what I like to read is, is history, which is factual. So history of countries, history of companies, history gives us great learnings and lessons. So, so that's next. I'm always trying to kind of read books on, on, on history. The second, which I'm very passionate about science, so, so biology, chemistry, read about kind of space exploration, etc.. So I think these are the two kind of topics which, which I spend more time on reading three books that I want to talk about very quickly. So there is this book called The Seas of Warren Buffett by Lawrence Cunningham, and he has written a few books on Warren Buffett. Warren Buffett I think this is a very simple book on investing to me. I think every young investor should just go and read it. What this book does is to simplify all the principles that Warren Buffett has been practising over the last five decades. Everybody reads his shareholder letters in his annual reports. So so this book kind of simplifies this, his investing style and his views on investing in different chapters. So in one chapter, he's talking about markets and investing, Magellan acquisitions, corporate governance, accounting, tax issues and they have kind of experts from his is shareholder letters. But I think it's a very simple book on investing every new investor just go and read it and again really really really valuable data and keep on because these simple things are difficult to get into your mind. So I think that's one book. The other book, which is very topical, I think, given all the geopolitics, is a book called Why Nation Feels. It's a great book which tells you about the history of political history of the world, and it tells you why some nations has become more prosperous versus others. And it kind of goes back to the basic principle that that it is all about institutions, institutions, institutions, and why a certain political system doesn't allow independent institutions. What is others and why these independent. Institutions in many countries are so important for the long term prosperity of any countries, and it talks about all the different geographies Africa, South America's, U.S., Europe, what happened in Asia, China. So it's a great history political history book. And the third book, which is slightly different in perspective, takes you to more kind of science. Kind of focus is on the gene. It's a book by a very famous kind of microbiologist called Siddhartha mukherjee. And this book was very instrumental in my thought process as well. This book talks about how life came on to earth, how the serendipity went off, some chemicals getting together, created out of the first gene and how life evolved. And it talks about the whole hundred 50 research on the genome in the world and how this complex software in our body kind of is responsible for everything that happens on Earth. And and and what are the new incremental research happening in this area and how this is so important? And, you know, it's not scientific at all. It's so simple. Read that, that you can easily connect with it. So so I think these are the three books which which I think are very simple to read. I talk to you about different facets of of life and investing. And I really enjoyed them. [00:41:41][229.8]

Alec: [00:41:42] But I love that. I love the spread of topics there as well. Some some great books that I'm definitely going to add to my reading list. The second question we like to finish with is forget the valuation today or you know, how the what they look like is an investing opportunity just purely on the company, what it does and who runs it. What's the best company you've ever come across? [00:42:05][23.3]

Amit Goel: [00:42:06] I think the two companies that they talk to you about and I will add one more company in this list. This is a company from China. It's called Foshan Hyphen. This is soy sauce, very simple product, which everyone knows, understand. It's a private business, a company selling soy sauce, which sells for 50, not only $2 a bottle. Everyone uses it in their house, in their kitchen. It's sold in China. It's a company with market cap of, I think, $50 billion. Now, I happened to spend a few hours in their factory and understand what soy sauce is and what does it mean for the Chinese consumer, why they buy it, how they use it. And this company was so instrumental in creating a branding product as commoditized soy sauce and why they can keep on selling and increasing the price forever, and how the incentive structure we are already employs are completely aligned to minority shareholders. And one of the greatest business days you that simple product you use it every day simple to understand the right corporate governance structure, the right focus. I mean, all these things are so important and I mean, I mean, goes back to the basic principle and I, I tell it to every young investor and I think to myself as well, that we don't need to make investing complex. I mean, there are so many things Apple, Google, Amazon, these are the companies which we have been using for the last 15 years in our daily lives every day. We don't need to make things complex. We know the value of these products and services. They might be expensive at some point of time. They might be cheap, but these are the things we understand. And so maybe we don't need to look outside this space. So again, I mean, for Shanghai, going back to your question is again, one of the greatest businesses that I've seen. [00:43:58][112.1]

Alec: [00:43:58] I don't I love that. I love how we've spoken about the biggest Brazilian car buyer, the biggest the world's biggest soy sauce maker, one of India's biggest underwear and innerwear makers. It's there's a lot of opportunity out there in things that are all around us, but we have run out of time and we always like to end with the same final question. If you think back to your younger self, starting out as an investor, making that first investment in page industries, what advice would you give to your younger self? [00:44:29][30.8]

Amit Goel: [00:44:30] I mean, the only advice I'd give to my younger self is frustrating. Don't do any things we've done out of your case, and that's a downside benefit. And I think the second advice is, is just keep things simple. I mean, I firmly believe that in this world, there's no point being a jack of all trades. Keep things simple, focus, observe things around you. Don't complicate things. Investing is a very long duration, 30, 40, 50 year process. It's not a five year process. So so so you can simplify it and you can make a lot of money out of it. So, so, so just observe things around you. Don't just sell things because you think these are. Fancy or are your major money? If you buy great businesses, just stick with them and don't sell them just because they look expensive and they have already gone up. So I think a lot of mistakes we do is to sell out of stocks just because they're expensive 1 to 6, 12 months basis. I think I think those those were the mistakes. And you can and you only learn from experience from these things. So I think just to simplify and focus is a very simple advice. [00:45:44][74.3]

Bryce: [00:45:45] Awesome. Thank you so much. I mean, it was an absolute pleasure chatting with you. And also thank you for to fidelity for sponsoring this episode. It's part of the market, the emerging markets, that is one that we often get a lot of questions about. So hearing it straight from the experts is always beneficial for the community. So thank you so much. We got some really interesting companies to go away and have a look at. So we appreciate your time today. Thank you. [00:46:10][25.2]

Amit Goel: [00:46:10] Appreciate it. Thanks, Bryce. Thanks, Alec. And it was lovely talking to you. [00:46:10][0.0]

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