Our investment criteria can be boiled down to one thing: Value.
It’s no secret that India is one of the fastest growing markets in the world, and that means change will be more frequent. Even within this context, we can still apply the principles of long term value investing by adhering to a portfolio construction methodology based on “Active Monitoring but not Incessant Churning.” The result is that our portfolio turnover is typically 20%, suggesting a 5 year average holding period.
We limit our universe to liquid stocks, which we define as those having an average trading volume of US $1 million or above in the preceding 12 months. Among that set, our investible universe is comprised of companies with strong fundamentals, mostly large to medium market cap companies. Typically, such companies can be found in the broader BSE 200 Index.
On this set we apply our process of bottom-up intensive fundamental analysis: our analysts travel throughout India (and worldwide) to gain a deeper understanding of their coverage. The team meets weekly to discuss stocks under consideration, with each stock assigned a Primary and Secondary Analyst. Portfolio ideas are reviewed every 180 days, and consensus is required for investment. Importantly, must trust the management and founders..
We make no sector calls and we are benchmark agnostic. We make stock calls that lead to certain sector weights. With that said, Risk Control is an integral part of our portfolio management process. We endeavor to keep our clients’ portfolios adequately diversified, both in terms of the sectors included in those portfolios as well as the level of concentration in any specific security. We don’t want each idea getting too diluted, however, so we impose a minimum weight at cost for any new investment as well.
The result is a portfolio generally consisting of 25-40 stocks, and cash. We know our valuation limits and we stick to them. This results in our carrying higher cash levels when general valuations are high, and vice versa. It all boils down to disciplined investment management, which generates results for you.
Further detailed information can be obtained by downloading our SEC Form ADV 2A here.