Our investment objective is to achieve superior long term, risk-adjusted capital appreciation for our clients. Our primary investment focus will be in equities but based on market conditions we may also invest in liquid/money market funds approved by SEBI.
We will follow a bottom-up strategy in picking stocks in our portfolio. Our objective will be to identify companies where we can be a part owner (vs. trader) for the long term and achieve above average returns.
While we will make diligent efforts to realise the objectives of our approach, it is important to note that there is no assurance or guarantee that the investment objective will be met. We do not offer guaranteed returns.
We believe that a strong competitive moat provides an opportunity for businesses to create long term shareholder value.
Such moats include brands, distribution, low cost of production, IP and high switching costs.
These businesses can be identified by their long term sales growth, margins and profitability across business cycles.
They are also typically associated with low working capital requirements and strong operating cash flow
Unlike developed markets, emerging markets such as India have majority of the listed companies controlled by Promoters, mostly with majority stake and occasionally even with low minority stake.
This includes family owned companies, subsidiaries of global MNC’s as well as public sector companies where central/state govt is the promoter.
As a minority shareholder, we will strictly avoid companies that have a record of mis-governance by the promoter group.
Such behaviour can be identified by reviewing past governance track record, related party transactions, capital allocation (including dividends/buybacks) and succession planning.
We attach utmost importance to the balance sheet strength of our portfolio companies.
This is to ensure that the companies are able to survive (and even thrive) during periods of broad economic downturns or sectoral cycles.
We prefer companies that are not over leveraged with debt (except in lending businesses), have low working capital requirements, high RoCE and are not prone to frequent equity dilution.
Our valuation is not purely multiple based (P/E, P/B etc) but also encompasses our view of the company’s future revenue growth, profitability, moat and longevity.
We will maintain valuation discipline by investing only at a discount to our derived intrinsic value of the company.
This may lead to periods where we might stay significantly in cash when markets, in our opinion, are over-valued.
This will also give us an opportunity to have cash in hand to invest during periods of distress in the markets.
While we are sector agnostic, we prefer to invest in sectors that have good long term growth opportunities.
We also prefer sectors that are not capital intensive (except BFSI) and generate strong cash flows.
We avoid investing in highly regulated sectors (except BFSI), sectors prone to frequent govt policy interventions and sectors that are commoditized and highly cyclical.
