Introducing the Next Great Spoke Fund® Manager

Cale Smith

Can I get a drumroll, please?

I’m happy to announce that Gopal Gantayat of The Free Investors in New Jersey has officially launched his Spoke Fund®, the Mosaic Portfolio. By way of more formal intro, here’s a little Q&A.

Q: Tell us a little bit about your background and how you got started investing.

Gopal: I grew up in a middle class family in India and spent most of my childhood in very small and remote villages of India. So, with no distractions other than mountains around the house, I spent a lot of my time reading everything I could find. Later in life, I graduated as an electronics engineer and completed a post-graduate diploma in management. That’s where my fascination for business and finance started to clearly surface. I began my career as a investment research trainee in the late ’90s, but within months, due to the economic downturn, I transitioned to a career in business analysis and, around the same time, started to learn about investing and began to invest my family’s money in my spare time.

When it comes to investing, it has been my passion for more than a decade now. Intuitively I always believed in a buy-what-you-know-and-understand philosophy. At first, I thought investing in bond mutual funds was a good approach to investing because you just have to predict one variable – interest rates. I remember buying a bond mutual fund in India in the late 90s or early 2000 because the interest rates were expected to go up and I made a tiny profit on that very modest investment – or you could call it speculation. Soon I realized that it is not so easy to predict interest rate movements, and it is not a repeatable process to build wealth for long run.

So, around 2002-03, in order to be an informed investor in the equity market, I started reading more about valuation concepts and investing philosophies – from Warren Buffett’s 20-hole-punch-card-approach to Shelby Davis’s lifelong-investor approach to Peter Lynch’s buy-what-you-know approach. By 2005, I settled down into a bottom up analysis, long term oriented buy-to-hold type of investing approach. My MBA from NYU Stern School of Business certainly helped me in improving my financial modeling and valuation skills. The more I delved into the area of equity research, the more passionate I became about investing and equity analysis and wanted to make it my career. It seemed to be a good fit given my engineering and finance background. Along the way, I have been building my investment portfolio and working towards making myself a better investor. I hope to continue that for life.

Q: Why did you decide to start your own firm?

Gopal: Until a few years ago, I didn’t have a plan to start my own firm because I always thought it would be too expensive and I can’t afford it. But, with a growing family, it was getting difficult to spend the time I wanted to spend on doing investment analysis and valuation outside of my day job. Around 2007-08, I read a few start up and internet revolution related books and write ups (e.g., by Seth Godin, Tim Ferris etc). It was clear that technological changes are making it possible to break the mold of old business order and start new business models to better serve the customers. So, I started looking for a business model where I can do what I like, analyzing businesses and investing for long run, and help other investors along the way by using the power of the latest technological improvements.

Q: Why did you choose to launch a Spoke Fund®?

Gopal: As I mentioned above, I was looking for a business model where I can do what I like, analyzing businesses and investing for long run, and help other investors along the way by using the power of the latest technological improvements. I was seeing technology driven revolution happening in other industries, e.g., book publishing, entertainment, and media etc. In each of these industries, the old intermediaries were being rendered obsolete by more digitally connected customers and creators/producers. You can see some of that happening in the world of financial media and blogging. So, when I came across Cale’s explanation of Spoke Fund™ model somewhere on the internet, it was an instant epiphany for me. I was convinced from the first look that this is the investor friendly business model that I wanted to pursue. It seemed like the perfect antidote to the lack of full transparency and significant distance created between small/medium investors and their fund managers by the old intermediaries in financial service industry, e.g, mutual funds and large asset managers.

Q: Who are some of your influences as an investor?

Gopal: Undoubtedly, as an investor, Warren Buffett had the biggest influence on me. I try to follow the same discipline of buying great businesses at good price and hold them for a long time. Peter Lynch, Benjamin Graham, Howard Marks, Nassim Taleb, Joel Greenblatt, Jeremy Siegel, and the Gardner brothers at The Motley Fool are few other investors who had a significant influence on my investing philosophy.

Q. Are you seeing any particularly compelling companies out there right now?

Gopal: I have no idea how the market will move in next month or two. But, if someone is investing for next 5, 10 or 20 years to come, when we look back in future, I believe the current Euro-crisis driven market downturn will seem like a good buying opportunity. In retail space, I like Guess? (GES). They have substantial exposure to Europe, so, the stock has been beaten down recently. But I like the strength of the brand, management team, 2.8% dividend yield and the fact that the founders still own more than 25% of the company.

I also like the Chinese travel and hotel booking company Ctrip (CTRP) which is going through a difficult phase due to intense discounting and competition. But, over long run, I think the company has a lot of room to grow.

Dolby (DLB) is another company of interest. The proliferation of entertainment devices bodes well for the future of Dolby’s audio/video technology licensing business. They have been adapting well to changing audio technologies since the 70s. So, I think, they will do well in long run. I can go on and on!

[Disclosure: The Free Investors and its clients own shares of GES, CTRP and DLB.]

Q. Where can folks find out more info about you and your firm?

Gopal: Visit our firm website https://www.thefreeinvestors.com to find out more. On the website, you can subscribe to the blog to get regular updates and subscribe to our monthly newsletter. And I am @gopalgantayat on Twitter.

Congrats, Gopal!