Two distinctly different investment trends are very visible now. Legendary investors like Warren Buffett are moving away from what were their core beliefs. Buying tech and gold mining companies and selling financials indicates a paradigm shift in investment beliefs.
Globally, we see paradigms shifting and moving towards a defensive stance where the focus is on survivorship and consistency. Bigger businesses are getting even bigger. Investors are buying more of the big business pie to beat the uncertain times.
But, in India, we are chasing a very different set of businesses. The trade is driven by the potential to create scarcity in existing fancied companies, rather than bet on the ones not so much in favour. On one hand, we see scarcity creation in good, well-managed businesses, big and small. And, we see managed money increasingly focus on scarcity creation as a way of delivering performance. Clearly, the Indian bet is based on expensive stocks getting even costlier.
The expectation is that there will be no alternative. So within the existing comfort zone, we believe more people will have no option but to get drawn in.
Contrast this with what Buffett is doing. He is going out of a comfort zone in his quest for safety. And, he is betting big where his conviction is strong. As economic cycles change decisively, this trait of going out of the comfort zone has always been an outlier quality. And, the quality of playing within one’s comfort zone has gradually trended towards the ordinary.
Yet, India is wearing last season’s couture-like it will never go out of fashion. Funnily, the outrage against Buffett’s shift in stance seems more of helpless angst, than a reasoned opinion.