Lessons in value investing

Sankaran Naren is known as a seasoned value investor in the Indian mutual fund industry.

Sankaran Naren

Executive Director & Chief Investment Officer,

ICICI Prudential AMC

In this exclusive and premium conversation with him, we ask him how he became a value investor, what value investing is, how to avoid value traps, how to develop a value-investing mindset, etc. His answers are not just insightful but also highly practical for any investor.

What motivated you to learn the principles of value investing and how did it mould your overall investment philosophy?

As a leading investment manager, at ICICI Prudential, we have a mix of all styles, including value investing. We believe value as a style works very well in the long run for investors. Any style which works well over the long term is also suited for systematic investing too through systematic investment plan (SIP). I have been associated with the value offering at ICICI Prudential since its inception and even now when it has grown to a large scheme.

Most early investors, including me, had setbacks between 1994 and 1998, which led us to read about Warren Buffett and Benjamin Graham. That is when we came to know about value investing. This led us to be cautious in 1999 during the technology, media and telecom (TMT) boom and helped us avoid a costly mistake. Again in 2001-02, value investing helped one stay rational, as one could identify that the market was extremely cheap.

The phase from 2007 to 2009 was a difficult one for value investors. I do not think any of us will ever forget that phase. Particularly with the Value Discovery Fund, 2007 was a terrible year followed by 2009, which was extremely good. The end result of this was from 2007 to 2009, the fund did very well. This again showed that value investing works in the long run because it could completely cover the underperformance of 2007.