Inside the mind of a Freelancer is a section where we interview top Indian freelancers and deconstruct their thoughts to help you take the plunge, make better decisions and live a better life.
I got to know about Shreenidhi Padithaya through a close friend of mine, Rajkumar. Shreenidhi & Rajkumar met each other during their MBA at the Great Lakes Institute of Management.
I fondly recall Rajkumar talking about this wonder kid who is making tons of money on the stock market and is also extremely willing to help other people out.
So I was pretty sure of getting this interview done from him as I knew that he is always open to sharing his knowledge if it could benefit others.
In a world that is hyper competitive, people like Shreenidhi are hidden gems. And here’s his story and his wisdom.
Note: This is one of the toughest interviews I have done so far. So don’t be hard on yourself if you don’t understand the concepts/ideas completely. Even I didn’t. The idea is to throw some light of the opportunities available. Happy Gigging!
1. About yourself, background, and the work that you do
I did my B.E in Electrical and Electronics in Bangalore and got into TCS where I worked as a Systems Engineer for 2.5 years during which I got to know that coding isn’t my cup of tea.
I was passionate about stocks right from my engineering days, but I never knew how people evaluated stocks before considering it as a potential investment option.
So, I started researching on the internet to build my knowledge on the subject which didn’t help much apart from knowing the basics. That’s when I decided to do an MBA in Finance. It helped me understand a lot about the business valuation part.
Recently, I took a break from my current job(the one I got after my MBA) to complete my CFA Level 1 and Level 2. CFA will help me get into an equity research and valuation role which has been my dream for some time now as it could help me to carry on with what I am passionate about. I have already given a couple of interviews and awaiting results.
2. Tell us how you started off initially. Where did the initial investment come from? Also, can you give us an idea on the earnings you make from stocks?
My dad used to be an investor who held stocks from IPO. He used to own stocks like NTPC, TCS, ONGC etc and I used to help him with the updating and reporting the stock prices by checking the Economic Times. The daily stock price movements and changes made me curious and made me develop an interest to know more about what causes these price variations, who is involved, how does trading happen etc. I started off by deciding to rebalance/remodify dad’s portfolio and that’s how I got started with investing.
Initially, I wasn’t evaluating the business potential of stocks. All I was doing was to check volumes and the number of days stocks close on green when volumes were high. I even once made my dad buy Gitanjali Gems in the early 100s just by looking at the crowd at those stores. Luckily, it clicked and I went on sell it at 550s in 2–3 years. The money that I got from Gitanjali got diversified into many other stocks like Cera, Avanti Feeds, La Opala RG, Granules etc. Luckily, all these clicked and reported good earnings consistently. The money which was X in 2009 got multiplied to 22X as on date.
3. How much time do you spend on trading every day? How can make money in the stock market?
I usually don’t trade every day. I generally trade only during results season. I shortlist companies that are likely to report good earnings and buy them 5 days ahead of its results so as to get the advantage of a pre-results rally and sell them post results.
The strategy can be risky when you don’t keep a stop-loss on your buys as the stocks with bad results can get hammered and beaten down severely by market forces. I usually keep a stop-loss on the stocks that I buy and go long till results are declared.
Trading can be risky especially when you try to do it without a stop loss. Stop-loss helps you to cut your losses if in case your trade doesn’t go well.
What is the meaning of stop loss in stock market? It is an order placed with a broker to buy or sell once the stock reaches a certain price. A stop-loss is designed to limit an investor’s loss on a security position. Setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%. – Investopedia
Trading(buying and selling on the same day) doesn’t give you money as you can lose big whatever you have earned if it goes wrong. Long-term investing is the best way to make a good amount of money. Select well-managed companies that have a good historical record, good management and wait for them to perform. The strategy is to pick them when they are cheap and to hold it until the stock performs well. When you choose good companies, you can enjoy the growth as well as P/E rerating which will create a good amount of upside in the stocks as long as they keep performing. That’s where wealth is created.
What is re-rating?Re-rating in the stock markets simply means that investors are willing to pay a higher price for shares, usually in anticipation of higher earnings in the future. What re-rating of shares does is that it expands the P-E ratio. Here is an example. If shares of company A are trading at Rs.100 per share with earning per share at Rs.10, it also means a P-E of 10. But if the share price shoots up to, say, Rs.200 and the earnings per share also goes up to Rs.15, the new P-E will be 13.3, which is higher than the 10 in the previous period. If the market is willing to pay a higher price compared with earnings for the shares of company A, it will be termed as re-rating of shares by the market. — Livemint
4. What was the biggest low in your trading career?
When I made money in trading(buying and selling on the same day), I took some huge risks. I tried buying stocks on brokers margin for 5 trading days before clearing. Markets corrected and stocks fell a lot from my purchase price which resulted in margin call where I had to deposit extra money by selling the shares that I had purchased for long-term investing. That’s when I decided never to buy stocks on margin and never to trade just for the sake of it.
5. In future, do you plan to trade full-time?
No..No plans of full-time trading/investing as of now. You cannot try to become a full-time investor just when you have made money in the last 6–7 years. When markets fall, which they keep doing once in 8–9 years usually, you will lose a good amount of value from your portfolio. Nobody can time the market to perfection and it is not easy to get away when markets start cracking. So it is always advisable to have a full-time job.
All that markets can do is to provide you with some extra income which can be a big one when you properly evaluate the company that you purchase and have a good amount of conviction on them. So, as of now, I am looking to get into the job and profile of my passion which deals with exploring unidentified stocks and researching more of them.
6. What would you say to the ones who are looking to get into trading? Any word of advice?
Avoid trading just for the sake of trading. Look more at long-term investing. Pick companies that have superior fundamentals yet are undervalued in markets. Develop good amount of conviction by reading Annual reports, Investor presentations of the companies that you are tracking. And bet big when you have conviction and when you have entered before the rest of the crowd. Wait patiently for it to get discovered. Keep taking out profits and reinvest as and when you get better entry points during market corrections.
7. Also, any book/blog/websites recommendations to learn more about trading
2 blogs that I actively follow and track are Valuepickr and Dr. Vijay Maliks blog. These two have a rich source of information about how to evaluate a company, how to select them and what are the precautions that are necessary before evaluating stocks. Valuepickr even has a group of stock pickers who pick up a company, do deep analysis, give out pointers and teach the investment approach.
If you have further questions for Shreenidhi, leave it in the comments below.
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