• Our portfolios are constructed with a bottom-up approach. We do not start with the benchmark and then decide what can go in or not. It is common to have large weightage in companies and/or sectors where our conviction is high.
• Stocks and Sectors should have a high margin-of-safety at the time of buying. We are not wedded to any particular investment style (VALUE/GROWTH) and we invest where we see a good opportunity.
• We stay away from companies that have large debt in their balance sheets. In case we do own a company that has a high debt-to-equity ratio, in that case there is a clear roadmap for debt-reduction. We also do not use derivatives (No Futures and Options) while managing the portfolio.
• Absence of famous investors or large institutional investors is not a deterrent while buying a stock, rather we see it as an opportunity. The regulatory framework in India does not permit institutional investors to invest large capital beyond the top 250 largest companies (market-cap wise). This does not allow them a wider choice of stocks to choose from. Hence, there are several sectors that have negligible weightage in the indices, and many Industry leaders are not investible by institutions. This results in many well run businesses, leaders in their respective sectors, getting poor valuation. We, however, do not shy away from investing in large market-cap companies if the opportunity arises.
• Illiquidity-risk in the equity markets leads to Illiquidity-discount in a bear market and huge Illiquidity-premium in a bull market. We do invest part of our portfolio in illiquid stocks – provided the valuations are attractive at the time of buying.
• We tend not to deploy money in a hurry and may sit on cash until the price is right to buy.