INDEX. Aequitas Investment

Transcription

1 1 st July 2018

2 INDEX Meaning of Aequitas Equity Advantage Why Aequitas? Process flow Risk Pitfalls we avoid Discipline Our Report Card Investment Philosophy - Multi-bagger Approach - Portfolio Construction - Company Attributes Our Stock picks Key personnel Best in class process Contact details Disclaimer

3 The word Equity originates from the Latin word Aequitas Aequitas Aequitas is the Latin goddess of Equity and Fairness. She is most often depicted holding a pair of scales to represent Fair Dealings and Equality. She is shown in a dignified pose, wearing a diadem and holding a sceptre or staff, and sometimes She is also given a cornucopia, the symbol of abundance and wealth. She represents true fairness, a different concept from justice for justice is under the law, and must follow it to the letter. Some have seen in her a Goddess of honest merchants and fair dealings in contracts, negotiations, and other merchantrelated endeavours: by this definition the cornucopia is seen as a symbol of the wealth to be gained through fair enterprise. Aequitas

4 Equity Advantage Assumption - A monthly SIP of Rs started in 1979 and increased every year by 10% till 2016 Monthly SIP in 2016 will be Rs and total investments over the period will be Rs mn The value of that portfolio today would have been Rs mn Equity investments may not always give positive returns. Past performance may or may not be sustained in future.

5 Low churn ratio & low transaction cost Why Aequitas? Tax efficient investing; lower taxes on long term holdings No distributors and intermediaries; grown through references Best risk adjusted returns Best 5 year performance

6 What Aequitas does differently!!! We don t work with Distributors. Never have, never will! We don t watch financial news channels! We don t use Bloomberg. It s an avoidable distraction! We have only one product. Only one yardstick to measure our performance! No marketing person. Our product should be good enough to sell by itself! Bespoke portfolios, no model portfolio. Models look good only on the ramp!

7 Process flow SCREENERS RESEARCH PORTFOLIO CONSTRUCTION - Sales growth, PAT growth, - Annual report stocks capacity utilisation - Quarterly results - Balance across sectors - Valuation dislocation - - Industry & company news - Catalyst for stock EV/Sales, PE ratio, - Management interviews re-rating EV/EBITDA - Third party research - Debt - Management meetings - Dividend track record - Press releases - Promoter ownership - Conference calls/ - Insider Buying Analyst meets - Industry Leadership - Credit rating - Long term track record ONGOING RESEARCH

8 RISK Risk is not a number, it is a concept or a notion. Risk equates to what Ben Graham called a permanent loss of capital. Modern finance measures risk on metrics like standard deviation, BETA, VAR etc. which we do not subscribe to. We measure risk on 3 parameters Valuation Risk Earnings Risk Balance Sheet Risk Risk of buying stocks dear without adequate margin of safety. Reasonable valuation is the cornerstone of all our investment decisions. Risk that current earnings could decline due to technological changes, economic changes or deterioration in management The risk of an overleveraged balance sheet which is ignored during good times as the weak balance sheet is ignored in favour of the cyclically high and un-sustainable earnings.

9 IPO s Leverage Fad or hot sectors Low promoter holding Corporate governance QIP s or secondary equity sales High institutional ownership Expensive valuations PITFALLS WE AVOID

10 DISCIPLINE - Avoid impulsive decisions - Don't focus much on market movements - Don't chase winners or hot stocks - Avoid trading and short term investments - We don't do derivatives

11 Our Report Card Aequitas Nifty Mid Cap Index Small Cap Index Avg Small & Mid Cap MF Chart depicts absolute performance since inception; Returns are adjusted for inflows/ outflows and are after expenses; 30 th June, 2018 Past performance is no guarantee of future results. Past performance may or may not be sustained in future.

12 Investment Philosophy

13 Multibagger Approach Doing things differently Above average growth Cheap valuation ensures potential re-rating GROWTH CONTRARIAN VALUE The company has to be a growth company with above Average growth potential for The next 3-5 years. Markets reward a higher PE multiple for growth companies X Contrarian approach does not mean doing the opposite of others, it means doing things differently. Buying in popular names will not give Multi-bagger returns X The valuation has to be reasonable. This is important because there has to be potential for re-rating. A combination of EPS growth and PE re-rating leads to Multi-bagger returns = M u L T I B A G G E R

14 Portfolio Construction Industry Prospects Quality Companies We invest in quality companies with a focus on small and mid-cap growth companies Most market participants focus on price; we focus on company fundamentals Concentrated Holding We aim to construct a portfolio of stocks across various sectors Long-term Outlook Invest with a 3-5 year horizon with a focus on low churn rate Catalyst Value can remain value for long time. We actively look for catalysts which will lead to stock rerating.

15 Company Attributes Industry Leaders Most of the companies in our portfolio are industry leaders with a strong sustainable competitive advantage Low Debt Companies need to have very low debt levels and some of the companies are in fact net cash positive Management Valuations Good dividend paying record, corporate governance practices & sound long term performance record is a must. The portfolio PE ratio is less than market PE ratios (adjusted for cyclicality in earnings). Creeping acquisition/ buybacks Cash flow Majority of our companies have done buy-back / creeping acquisition in the 12 months prior to our initial acquisition Our portfolio includes companies with strong and consistent cash flow generation

16 Our Stock Picks Avanti Feeds Finolex Cables Industry Leadership Low debt to Equity (<1 ) Institutional Ownership (<20%) Long term track record (>10 years) Promoter ownership (>50%) Valuation (<12 PE) Introduction of Vannemei Shrimps Catalyst Exceptional write off s

17 Our Stock Picks HEG Ltd. Garware Industry Leadership Low debt to Equity (<1 ) Institutional Ownership (<20%) Long term track record (>10 years) Promoter ownership (>50%) Valuation (<12 PE) Global GE capacity shutdown Catalyst Buyback

18 Our Stock Picks CCL Products Heritage Foods Industry Leadership Low debt to Equity (<1 ) Institutional Ownership (<20%) Long term track record (>10 years) Promoter ownership (>50%) Valuation (<12 PE) Commencement of Vietnam plant Catalyst Healthy dairy sector outlook

19 Our Stock Picks Maithan Alloys Motilal Oswal Industry Leadership Low debt to Equity (<1 ) Institutional Ownership (<20%) Long term track record (>10 years) Promoter ownership (>50%) Valuation (<12 PE) Subsidiary Turnaround Catalyst Direct Play on Stock Markets

20 Key Personnel SIDDHARTHA BHAIYA, MD and Fund manager Siddhartha a qualified Chartered Accountant is the driving force behind Aequitas & has over 16 years of experience into Equity research and Equity Fund Management. Siddhartha started his career as a Research Analyst with Sushil Finance and has worked with Strat cap Securities, Principal PNB AMC & Reliance Capital Asset Management (RCAM). Siddhartha was part of RCAM for more than 6 years & had graduated to become a Fund Manager. Siddhartha has experience across all market capitalizations and is a specialist in bottom up stock selection. NEERAV SHAH Director, Operations and Compliance Neerav is a qualified Chartered Accountant and has more than 12 years experience in the capital markets. Neerav has handled operations, back office, fund accounting & dealing functions at various points in his stint at Reliance and Birla AMC.

21 Best in class processes Working with leading service providers to ensure best in class services to clients Aequitas is a SEBI registered portfolio management firm Tie-up with HDFC Bank for banking services Tie-up with Top institutional brokers for broking services Tie-up with IL&FS for providing custodian and fund accounting services. Reporting Monthly Performance appraisal statement Monthly Portfolio appraisal statement Monthly transaction statement Monthly bank book Audited statements at end of financial year

22 Contact Details 704/705, 7th floor, Balrama Building, Plot no 3c, E block, Bandra Kurla Complex Mumbai siddhartha.bhaiya@aequitasindia.in neerav.shah@aequitasindia.in Siddhartha Bhaiya : Neerav Shah:

23 Investment features and fee structure Minimum Investments Residents INR 10 crs. Non Residents USD 1.5 mn Suitable time frame 3 years Mode of inflow Fees Performance sharing Cash inflow or stock transfer 2% of daily average AUM to be charged on a monthly basis 10% profit sharing with high water marking to be charged annually at the end of financial year

24 Disclaimer The views expressed herein are the personal views and constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the readers. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The Sponsor, Consultancy Private Limited (AICPL) or any of their respective directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, AICPL or any of their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. The Sponsor, AICPL, any of their respective directors, employees including the fund managers, affiliates, representatives including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies) / specific economic sectors mentioned herein. Risk factors: Investments in securities are subject to market risks. There are no assurances or guarantees that the objectives of any of the Products will be achieved. The investments may not be suited to all categories of investors. The value of the Portfolios can go up or down depending on various market factors. Past performance of the Portfolio Manager does not indicate the future performance of the Products or any other future Products of the Portfolio Manager. Investors are not being offered any guaranteed or indicative returns through any of the Products. The names of the Products do not in any manner indicate their prospects or returns. The performance of the Products may be adversely affected by the performance of individual companies, changes in the market conditions, micro and macro factors and forces affecting capital markets in particular like interest rate risk, credit risk, liquidity risk and reinvestment risk. The Portfolio Manager is not responsible or liable for any loss resulting from the operations of the Products/ Portfolios. Each portfolio will be exposed to various risks depending on the investment objective, investment strategy and the asset allocation. Non-Diversified Portfolio tends to be more volatile than diversified portfolio. AICPL is a SEBI registered Portfolio Manager. Please read the Disclosure Document before investing.