From Software to Value Investing

Ragu ChandrasekaranFrom Software to Value Investing

November 1, 2009
by Ragu Chandrasekaran

CGI Portfolio Manager Ragu Chandrasekaran tells a friend about his career change and discovery of real investing. 

bharatam,

I hope you find some of this useful information.

Here’s my experience in making a career change from software to value investing.

First, a bit of background. It was either early 2002 or late 2001. I was at my second start-up job in the Bay Area. For a variety of reasons, I really began to resent my job, although I had no idea what I wanted to do instead. I’d begun working only in late 2000, so I was in no position to quit my job. So, I had two problems at that point: I didn’t know what I wanted to do for a living and I couldn’t afford to quit the job I didn’t like.

So, instead of attempting to solve the problem of figuring out what it was that I truly wanted to do, I began to think about how I might be able to muster enough financial independence one day so that I could quit to do what I really wanted to do. Naturally, that meant investing my money sensibly. Since I didn’t know of any way to do that then, I began reading. I even read “Rich Dad, Poor Dad”. I know, but I’ll hide behind the always popular and mostly true excuse: You’ve got to start somewhere. However, one thing became clear during my reading: Compounding is the eighth wonder of the world.

Still, none of the reading really got me any further. I’d read investing articles on the usual suspects (Motley Fool, Yahoo Finance), but it was clear that I was learning nothing of substance. That didn’t stop me, however, from participating in the usual office conversations about investing. All I can say is that it wasn’t too hard to not look ignorant during those conversations, even though I knew that I knew nothing worth knowing about investing.

So, I meandered along for a while until I met a friend on a vacation to New York. I told him that I was interested in investing but was making no progress. He told me that if I was ever going to get serious about investing, I ought to read The Intelligent Investor by a guy named Ben Graham. I'd need multiple lifetimes to repay my friend for that recommendation.

I didn’t buy The Intelligent Investor as soon as my friend recommended it, however. I was going to India in a few months and delayed my purchase until then because it’d be cheaper for me to buy it in India. Suffice to say that I’d have got more than enough value for my money even if I’d paid for multiple copies of that book in the US. The book itself was excellent, a must read for anyone that wants to learn how to think about investing. Thanks to Graham, I was hooked on value investing.

While the book left a lasting impression on me, the foreword of the book was even more impressive. It ended with these words about Ben Graham:

Walter Lippmann spoke of men who plant trees that other men will sit under. Ben Graham was such a man.
(emphasis supplied)

The author of these words was a man whose name wasn’t immediately recognizable to me. Reading the foreword, and especially that closing sentence, made me want to learn more about him. The author of the foreword: Warren Buffett. Beginning with Buffett’s letters to Berkshire Hathaway (BRK.A and BRK.B) shareholders, I began to read any value investing literature that I could get my hands on. During the course of my reading, it dawned on me that value investing was what I truly wanted to do for the rest of my life.

I now knew what it was that I wanted to do. The question of what to do in order to facilitate the career switch still remained. A friend of mine, who is an equity analyst, suggested the obvious route: MBA. However, given the costs of an MBA in the US and what I perceived as a fairly dubious value-add for a potential value investor, I balked. A few months later, that same friend suggested that I consider the CFA charter. His rationale: An MBA will help with the contacts necessary to get a job. The CFA will teach you how to do it. I think he was exactly right about one and partially right about the other. So, I set off on the CFA program and wrote the Level 2 exam (second attempt, mind) in June 2008. We found out the result two weeks after we’d returned to India, in a dark and dinghy internet café in Thiruvanmiyur. I don’t know if it was my wife/myself who was more surprised that I passed.

Before returning to India, we'd decided that I could spend up to a year looking for positions in equity analysis in India. Once I felt that we were settled in our new home, I decided to start looking. The Lehman bankruptcy around that time and the accompanying economic free-fall didn’t help. I spoke with a former schoolmate, who is a portfolio manager, who told me that the chances of me finding a job with them at that point of time ranged somewhere between zero and none. Very reassuring. I got virtually the same answer from anyone I spoke to in the investment industry. Experienced folks were being let go, so I stood little chance. A friend, whose cousin works with a large mutual fund in India, told him that they wouldn’t even look at someone as a potential candidate unless that person had an MBA from a top school.

It was clear, even to me, that a couple of levels of the CFA wasn’t going to get me anywhere in India. I didn’t have an impressive resume to peddle, so there was no real way to get people to talk to me. It was around this time that I decided to start writing a blog on value investing. A place where I’d pen my thoughts on my investments and the rationale behind them, amongst other things.

Half a year and a few posts later, I spoke with Tom Jacobs, one of the founders of Complete Growth Investor, a US based small-cap value investment advisory service. A subscriber to their service had posted a link to my blog and he'd had a chance to read it. As I'd expected, it became clear that our investing philosophies matched, a key criterion for me when it came to employment. I was already a subscriber to their service at that point, so I’d had the chance to judge both their integrity and their ability. Both first-class. Joining CGI to work on their value portfolios was a no-brainer.

After a few months of working at CGI, I consider myself fortunate. Fortunate to be doing what I love doing alongside some of the best colleagues that one could hope for.

Best,
Ragu

Want to follow Ragu's path? Join CGI Growth & Value Focus, where Ragu manages the Defensive Value Portfolio and co-manages the Active Value Portfolio. Learn with him and see why he's taken this road rarely taken.