Investment Philosophy

We follow two types of investment strategies, Trend Following and Special Situations Investing.

Majority of the time, the portfolio is composed of trending/growing companies and some cash. Whenever we encounter a special situation, we allocate some part of the same portfolio into it.

Core Portfolio (combo of good company + stock):

Fundamentally sound businesses

  • Companies which have earnings growth behind them and are expected to grow in future
  • Strong cash generation
  • Receivables should not grow more than earnings and debtor days shouldn’t be too high
  • Return ratios above cost of capital
  • Ethical management
  • Prefer low free float stocks
  • Among the leaders in its sector
  • Preferably buy regulation/disruption resistant sectors
  • High promoter pledging are an absolute no
  • Low debt on books
  • Good operational metrics

Stock price parameters

  • Figure out which sectors/stocks are in uptrend. Invest only in them. Preferably broader market should also be trending up.
  • High Price Ratios are not a no go area for us. We don’t get excited by just low price ratios.
  • Institutions/Promoter should be increasing their stake in the stock
  • Stock should be liquid enough for one’s investment size so that one can get out quickly on bad news
  • Regular profit booking depending on proprietary rules
  • We always book small losses before they turn into big losses.
  • Buy/Sell decisions based on deep understanding of stock demand/supply

Special Situations:

When it comes to special situation investments like buybacks, de-mergers, takeovers etc., we look at the following factors:

  • Company should have clean, ethical management and it should not be likely that the offer to shareholders get
  • Minimum return on offer should be in double digits
  • Time period of investment should be less than 5 months
  • Stocks where investments have hedging opportunities are preferred