Kavan Choksi on UAE’s IPO Launch

Despite popular belief, Kavan Choksi asserts that successful investment decisions do not necessarily require a high IQ. Rather, a logical framework for making judgments is required, and the ability to restrain emotions from corroding that framework.

Regarding capital deployment, Kavan Choksi advises that the margin of safety is the most crucial factor to consider. Investors are witnessing the chickens come home to roost in the current environment, where equities markets are being hammered as interest rates rise. There has been a sell-off in everything from technology to crypto, with more pain as return expectations are re-calibrated.

Many investors make poor decisions due to the market's manic depressive behavior, especially when they succumb to group-think beliefs of 'flipping.' In this respect, investors' worst enemies are themselves, as they cannot remove themselves from the market's emotional roller-coaster and inevitably succumb to its negative influences.

Regarding capital allocation, keep in mind these three simple rules. Never put your money into a firm that isn't profitable. With its concentration on disruption, Kavan Choksi suggests technology has given investors hope of picking winners, but the devastation of companies left behind in each economic cycle is disregarded. Second, each investment must yield a profit. It translates to a dividend yield on the stock market. That yield in the rental cash flow accrues to the investor, just like in real estate markets.

Year-Round Businesses

When rental or dividend yields fall, assets become overvalued and send warning signals. The third principle is the margin of safety for when economic conditions deteriorate. Organizations and assets exhibiting endurance in cash generation ability during this period will outperform in the long run. Investors who do not understand these three ideas will be the symbolic pawns in the market's game.

From the freehold phenomenon in 2002 to the current disinvestment program, the UAE government has been proactive in deciding the next wave of asset development, ensuring dividend yields by financially stable enterprises integrated into the economy's fabric. The government has taken on the role of a business-driven investor, maturing assets and making decision-making easier for retail and institutional investors. From DEWA to FertiGlobe, Borouge, and Tecom, these businesses have consistently compounded capital throughout the ups and downs of the business cycle. The listed companies have a margin of safety that makes such investments impossible to ignore, perfectly matching the rising cost of capital.

Lessons from the Boom-Bust Cycle

As history shows, investors following these basic rules have outlasted the market and made money above the inflation rate, dating back to the South Sea Bubble. And, regardless of investment fads, they have multiplied their wealth through reinvestments. It is likely the most important investing lesson that dates back to the South Sea bubble. What happened in 1720 was a natural experiment surrounded by supposition.

Ignorance is to blame for the negative repercussions that occurred. Investors at the time could be forgiven for failing to predict a brand-new type of disaster. Since then, we've seen waves of boom-bust cycles, with investors who failed to master the three basic investment concepts destroying their fortune each time. The UAE government has again provided a chance based on these fundamental values, shares Kavan Choksi.