• Buy shares of your favorite bank now rather than putting the money in an FD in the same bank
• Invest wisely on fundamentally strong stocks
By Crystal Koelmeyer
High-net-worth individual and well-known share market investor Nimal Perera says that contrary to the common view, COVID-19 has presented a phenomenal, once-in-a-lifetime opportunity for anyone interested in capital markets, real estate, or any other type of acquisition, to make investments at a bargain and grow their wealth by 30-40%.
In this candid interview with theinvestor.lk Perera shares his insights about the present status of the capital market and the secrets behind his successful journey as an investor in the Colombo stock market.
Here are the excerpts:
(Q) You have made a name as an investor in stocks. What is the secret behind your success?
The secrets to my success are my high appetite for risk and my ability to listen to my instincts and trust my gut feeling.
I started my stock trading career in the early 1980s as a small investor and gradually increased my portfolio by investing a higher proportion of my personal income as my salary increased and by reinvesting all of my capital gains.
During this process, I have had my portfolio completely wiped out twice due to market crashes and margin calls. However, I persevered during these downfalls, maintained my risk appetite, and stuck to my passion. I must mention that I have used a margin facility along with my own capital during the entirety of my trading career, which gave me added buying power to do more stock trading in the market.
At the early stages of my trading career, I used to trade more on junk shares, which posed high risk and high reward. However, as I matured as an investor, I have changed my trading philosophy to invest mainly in fundamentally sound companies.
This does not, however, mean that I follow technical charts and analysts’ research reports. Instead, I use my own process to ascertain worthy investments, which involve assessing companies’ NAVs and dividend yields, feeling the pulse of the market by speaking to trustworthy and competent stockbrokers, and analyzing the liquidity of a particular company’s share.
I am also unafraid to try new things. One important milestone in my trading career was when I got onboard with online trading as soon as CSE introduced the facility. I am quite certain that today I am one of the biggest online traders at CSE who manages his own account online on a daily basis.
Also, at the beginning of my career, I limited my trading to only one stockbroker. However, over time, I have chosen to trade with any and all stockbrokers who offer me a deal of value. I believe this is important not just to maintain good relations with all stockbrokers, but also to listen to differing perspectives and feel the pulse of the market. Still, I do not rely solely on stockbrokers when deciding what and when to buy or sell any stock. Instead, their input is only one factor that I consider. The rest is my instinct and my gut feeling.
(Q) Post COVID-19 there seem to be very little investment options. Your comments?
I do not agree with this view. I think COVID-19 has presented a phenomenal, once-in-a-lifetime opportunity for anyone interested in capital markets, real estate, or any other type of acquisition to make investments at a bargain and grow their wealth by 30-40%.
Also, this is the perfect opportunity for companies to invest in digitizing their own businesses and for investors to pick companies that either have a strong digital presence already or are making an effort to improve their digital ecosystem. The current low-interest environment is an added incentive for people and businesses to borrow and invest in capital markets, acquire real estate, or go into new business ventures.
While it is important to look at companies through a new, post-COVID lens, I do not think people need to be overly pessimistic. Even after the uptick since the March crash, some fundamentally strong stocks still trade at 0.5x/0.6x BV. Therefore, for the patient long-term investor, above average returns are almost guaranteed if you invest now in this post-COVID environment. In fact, it is better to buy shares of your favorite bank now rather than put the equivalent amount of money in an FD in that same bank given the current market conditions.
(Q) Can one make money now by investing in the Colombo share market?
Yes, 100%. If you invest wisely on fundamentally strong stocks, you can make money in the Colombo share market at any time. In fact, if you invest in certain stocks right now that are historically well-known for giving high dividends, the dividend you would get in the future as a percentage of the current price at which you would buy the share now will give you a return better than current or future FD rates. And mind you, this would be on top of the potential capital gains!
(Q) What can Sri Lanka do to attract FDIs?
The biggest hurdles Sri Lanka has had in the recent past for FDIs have been government instability and policy inconsistency. This has changed with the election of the current regime. From here, the next big hurdles that make foreign investors nervous are Sri Lanka’s external debt burden and the volatility of the exchange rate. The present regime has guaranteed that they will not default on ISBs at any cost. And the various temporary import restrictions and other policy measures should maintain our exchange rate at a relatively stable level. I believe these factors should boost investor confidence in the near future.
However, while these hurdles are being overcome, the government should simultaneously focus strongly on creating a conducive environment for foreign investors by providing various tax concessions and, more importantly, ensuring a corruption-free investment process, which would otherwise make foreign investors feel disinclined to invest in Sri Lanka and walk away from the negotiation table.
The government must continue developing the infrastructure connecting ALL parts of Sri Lanka. Sri Lanka is naturally well-positioned and well-endowed to attract FDIs due to our crucial geographic location and our natural resources. To reap the fullest benefit of our geographical positioning, Sri Lanka MUST maintain strong, yet neutral relationships with China, India, Japan, and the United States.
(Q) You managed to rise from small beginnings. What contributed mostly to your success? What was the turning point in your life?
I believe the factors that contributed to my success the most were meeting the right people at the right time in my life and changing careers at the right time.
If I am to elaborate shortly, meeting Mr. Harischandra Samarasekera, who was my Accounting lecturer at the time, influenced me to join an audit firm. This gave me the exposure to start my career as an Accountant.
Following this, meeting Mr. Gihan De Silva at Sherman Sons fueled my passion for the Stock Market. Then, meeting Mr. Daya Muthukumarana, CEO of Pan Asia Banking Corporation (PABC) in the early-2000s influenced me to join PABC, changing my career from Accounting to Marketing. This event subsequently led to me becoming the chairman of the bank.
Meeting Minister S.B Dissanayake and his association helped me to develop my political network immensely. And finally, I need not even mention that meeting Mr. Dhammika Perera while I was working at Pan Asia Bank turned both my career and my life upside down and helped us both to create the miraculous partnership of the Sri Lankan business landscape in history.
Therefore, my advice to all young people is to network as widely as possible and be nice and helpful to everyone you meet along the way, as you never know who would change your life in ways you least expect.
Also, I changed careers at the right time. Contrary to the trend during my generation in which most people lived and died working for the same organization, I believed in changing my career when the right opportunities arose, which gave me an extraordinary boost. It is funny how this trend has now become the norm among the millennial generation.