How we think about investing
A set of beliefs about how markets work, how businesses compound value, and what it takes to generate multi-bagger returns over the long term.
Portfolio Management
The investment approach
Portfolio Manager aims to find undervalued, under-researched and under-owned companies to build a concentrated portfolio of growth companies. It aims to play on top-line growth and margin expansion. The approach is sector agnostic and market cap agnostic. Focus is always on risk — investment is all about managing risks well.
Investment Process
Portfolio Manager follows bottom-up analysis to pick stories. It uses multiple sources to identify growth stories of the future. Once identified, it runs through its investment framework. If it fits into the framework, rigorous research is done on the company and the management.
Buying Discipline
Buying price should be defensive enough to take care of multiple uncertain risks, whereas allocation should be optimum to provide better portfolio returns.
Investment Framework
Five pillars of every decision
Superior Business
- Defensive Cash Flow
- Strong Franchise Value / Market Leadership
- Structural Advantage
Quality Management & Integrity
- Efficient Capital Allocation
- Clear Distribution & Retention Policy
- Minority Shareholder Friendly
High Returns
- Sustainable ROCE
- High ROE with Prudent Debt Level
- Reinvestment Opportunity
Attractive Valuation
- Balance of Valuation Multiple vs Growth
- Margin of Safety
Superior Balance Sheet
- Prudent Leverage
- Good Margins with Conservative Accounting
- High Free Cash Flow
Core Beliefs
Our investment principles
Business Understanding is a Virtue
Patience doesn’t come by mere experience. It comes with conviction. Conviction comes with business understanding. You can only hold through a 40% drawdown if you truly understand why the business will be worth more in 5 years.
“Patience doesn’t come by mere experience in the market. It comes with Conviction, and conviction comes with business understanding.”
Small Cap is Luxury
Today’s large caps were yesterday’s small caps and today’s small caps will be tomorrow’s large caps. Small caps is more about “Growing Within the Market” rather than “Growing with the market.”
“Investing in Small Cap is Luxury.”
Don’t Anchor to Entry Price
Some average on the way up, some on the way down — if the business is good, it actually doesn’t matter. You can average both ways. What matters is the business trajectory, not your entry price.
“If the hypothesis is intact, ride it with Courage.”
Risk is in the Earnings, Not the Price
The notion of large cap equals safety is false. Risk is more relevant to nature of business than size. Risk should be seen as volatility in earnings rather than price.
“Risk is more relevant to Nature of Business than size of business.”
Cut the Weeds, Water the Flowers
Majority become long-term investors after the stock goes below their buying price. If it goes up, they become smart traders. Change the habit. Cut the weeds and water the flowers — else you will accumulate garbage in the portfolio.
The Three Levers of Wealth Creation
Multi-bagger returns come from three compounding forces simultaneously: Sales Growth expands the revenue base; Margin Expansion increases the profit share; P/E Expansion re-rates the business as the market recognises quality.
Aligned with our philosophy?
If these beliefs resonate, we’d like to speak with you about whether our PMS is the right fit for your capital.