Investment Approach – We are a fundamentally driven long-term orientated fund, seeking high-quality businesses with distinctive competitive advantages that enable them to generate high economic returns and sustainably grow over a long period. We prefer businesses that use less leverage, generate free cash flows, have outstanding management culture and available at a reasonable risk-to-reward value. Our inclination is to build a concentrated and inactive portfolio, taking risk in a manner that is less than commensurate to long term returns.
We believe consumption centric B2C businesses are within our circle of competence. Over the years, our team (collective 40 years) has researched and dealt with listed and private businesses in 3 specific baskets – consumer staples, consumer discretionary and branded B2C businesses. Our knowledge base of understanding consumption related businesses, industry dynamics, competitive rivalry and managements enables us to reduce portfolio diversification and increase prospects of consistent returns. Plus the benefit of specialization is it eliminates surprises and results in performance in line with our investment decisions.
Consumption centric businesses are generally more secular growth character. Such businesses have consistently made positive returns in the medium to long term across business cycles. Thus such businesses then to have less volatility, better growth visibility and add more stability to the portfolio in terms of return profile.
Our passive investment strategy i.e. low churn means that investors will incur less incidence of short term capital gains taxes. Thus yielding better post tax returns.
Focus in a particular sub segment of the market (~39% of India’s market cap) which has time and again created wealth for investors due the structural and sound fundamental nature of businesses that operate within the consumption related space. Thus risk adjusted return should be better than a broad based strategy.
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