Basant Maheshwari PMS follows a well-defined investment philosophy centered on selecting companies with predictable earnings streams operating in sectors with strong tailwinds. The primary focus is on identifying emerging trends by investing in companies within expanding sectors, rather than those isolated in growth. The preference is for sector leaders, forming a concentrated portfolio of high-quality industry leaders.
A fundamental criterion for selection is the scalability of the business in terms of both value and volume growth. The objective is to ensure that the scale of operations can be significantly expanded beyond the current level. Investments are typically directed away from businesses with limited scalability.
The approach prioritizes companies with above-average earnings growth potential. Selecting winning stocks is deemed as vital as avoiding certain stocks. High Return on Equity (RoE) is sought after, as it signifies self-sustaining growth without recurrent capital dilutions. RoE also reflects operational efficiency or sector dynamics. Although high growth with free cash flow is preferred, it is not the sole determinant for investment decisions.
Dividends are regarded as a statement of intent rather than solely for the cash they provide. They signal that profits are genuine, as real cash is allocated to them. Past operating history is a crucial indicator of future prospects, unless there is a catalyst, such as new management, changing dynamics, or other factors suggesting a better future.
While these principles guide investment decisions, the process remains somewhat flexible and relies on intuition at times. The ultimate goal is to maintain predictability in the destination, even if the path occasionally diverges.