investment philosophy
Investment Philosophy
The investment philosophy is woven around confidence in a company’s future prospects, its growth potential, the integrity of its management team and the robustness of its revenue model, and not around market momentum or current ‘hot picks’ doing the rounds of the stock market. If companies’ fundamentals and valuations continue to be attractive, the Investment Manager intends holding the investments for the longer term helping to maintain lower transaction costs.
Investment Strategy
The Investment Manager will seek to identify companies with strong business fundamentals, top quality management and superior growth prospects which exhibit one or more of the following characteristics:
- Companies which have mis-priced securities;
- Companies which are expected to sustain high growth;
- Companies expected to create and deliver long term value due to innovation and the development of intellectual property;
- Companies which are sectoral leaders and enjoy leadership in their respective segments;
- Companies which are strong asset plays; and
- Companies which are expected to witness operational and financial improvement due to a positive swing in their business cycle.
Buy & Sell Discipline
For selecting particular stocks as well as determining the potential value of such stocks, the investment team is guided by assessments of the following:
- The financial strength of the companies, as indicated by financial parameters;
- Reputation of the management and track record;
- Companies that are considered to be relatively less prone to recessions or cycles,
- Either because of the nature of their businesses, or
- Superior strategies followed by their management;
- Companies which have pursued a strategy to build strong brands for their products or services and those which are considered to have potential to be capable of building strong brands;
- Strength of franchises; and
- Market liquidity of the stock.
The sell decisions in the Portfolio are based on the following criteria:
- There is a change in fundamentals that significantly changes the valuation estimates for the company;
- When stock reaches its target price, it is reviewed and a decision taken accordingly to liquidate the position or to update the target price; and
- Sale volumes on a single day are influenced by the liquidity and impact cost for the stock.
Portfolio Limitations
- Invest in equity or equity link securities of companies listed on Bombay Stock Exchange or National Stock Exchange only
- Invest 60% to 100% of the portfolio in companies with a market capitalisation of greater than Rs. 45 Billion (approximately A$1.0 Billion) at the time of investment
- No investments in companies with a market capitalisation of less than Rs. 4 Billion (approximately A$150 Million) at the time of investment
- No more than 20% of the portfolio in any one industry
- No more than 10% of the portfolio in any one company
- No more than 10% of a company’s issued stock
- Use of derivative instruments on a non-leveraged basis only
- No short-selling
- No leveraging the portfolio
Foreign Currency Hedging
While it is not the Company’s current policy to hedge cash-flows and investments denominated in Indian Rupees, the Directors reserve the right to re-evaluate this policy in the event of substantial changes from the prevailing exchange rates and economic conditions.