Marcellus Consistent Compounders Portfolio ( CCP PMS )


Key Portfolio Attributes

Mr. Saurabh Mukherjea
Mr. Rakshit Ranjan

Inception Date: 1 Dec 2018

Number of Stocks: 14-15

Founder & CIO: Mr Saurabh Mukherjea

Saurabh Mukherjea has studied MSc in Economics (with distinction in Macro & Microeconomics) BSc in Economics (with First Class Honours) From The London School of Economics. Saurabh is a CFA charter holder and a SEBI registered investment advisor. Saurabh has written four bestselling books – Coffee Can Investing, The unusual billionaire, Gurus of Chaos, and The Victory Project.

Fund Manager Name: Mr Rakshit Ranjan

Fund Manager Experience: Total Exp – 13 Years Founding Member – Marcellus in Dec 2018

Fund Manager Qualification: B.Tech from IIT (Delhi) and is a CFA charter holder

Investment Objective

The Objective of Marcellus Consistent Compounders PMS is to invest in a concentrated portfolio of heavily moated businesses, that can drive healthy earnings growth over long periods of time.

Portfolio Strategy

MARCELLUS’ Consistent Compounders PMS is a quality portfolio that identifies firms with high pricing power that helps sustain a wide gap between returns on capital employed and cost of equity. The portfolio aims to hold such heavily moated and sustainably competitive companies for 8-10 years on an average where healthy returns are generated with volatility like that of a government bond.

The experienced investment team at Marcellus Investment Managers through in-depth primary research, uses quantitative frameworks which use a combination of forensic accounting and capital allocation assessment and shortlist companies with superior track record of capital allocation, that generate free cash flows. The idea is to hold these companies for long periods of time with little or no churn

The Portfolio Construction at Marcellus Investment Managers involves a two-stage process:

• Filter based approach to create an investible universe of 30-35 stocks

• In-depth bottom-up research of such companies in the universe to assess sustainable competitive moats to build a portfolio of 10-20 stocks that deliver healthy compounded earnings growth over long periods of time.

Investment Philosophy of Marcellus CCP

Corporate Governance:- The foremost step to building an investment portfolio is to identify and staying away from  companies which are not clean in terms of accounting . This is the universe of companies that is studied for investing.

Consistent Compounders:- Being clean in accounting doesn’t mean that company has a potential to compound investors’ wealth. So, how do you find such companies that are not only clean, but also compound wealth. Amongst world’s large economies, India is the only economy where one can find in sector after sector, either one or at most two companies accounting for maximum profit share of that sector”

MANY EXAMPLES:-

• Paints – Asian Paints and Berger Paints
• Cigarettes – ITC
• Baby Milk Power – Nestle
• Cooking oil – Marico’s Saffola & Adani’s Wilmar Brand
• Adhesives – Pidilite’s Fevicol brand
• Trucks – Ashok Leyland and Tata Motors

Likewise there are approx. 25 such companies which are not only clean, but that dominate the essential product market with each player being a leader in its product category. For a large country like India, a company dominating product category for 20-30 years, means, company would be generating large cash flow, so much that company can be called ‘a money making machine’. For these companies decade after decade, average annualized return on capital employed (ROCE = Profits/Total Capital Employed ), ranges between 30% – 100% p a.

You won’t find so high ROCE numbers in companies of large economies. Take examples of Toyota, Daimler Chrysler, JP Morgan, Morgan Stanley, Walmart, Accenture, Royale Dutch Shell, think of all key global companies you can think of, and you will find at max ROC of 15%.

Frequently Asked Questions

INTERESTING & INSIGHTFUL QUESTION THAT IS FREQUENTLY ASKED BY MARCELLUS CCP INVESTORS?

If you and i can see these companies generating so high return on capital employed, why can’t other competitors in their respective industries come chasing to take a share from them. like we have seen reliance jio taking away vodafone and bharti’s profits.

 

Is this risk not there in the marcellus underlying companies like hdfc bank, pidilite, asian paints, dr lal path labs, tcs, nestle, titan, abbott etc ??

Answer : firstly, marcellus ccp companies have created strong entry barriers for their competitors through their brand equity and through the business execution strategies followed repeatedly. this make it extremely difficult for competition to hurt market share or margins for these businesses. secondly, these companies over years have created competitive moats, which are difficult to break easily. these companies actually approached the most challenging aspect in the respective sector; rather than resolving the challenge in a simple, straight forward manner, these companies have thrown disruptions on the construct of the sector and have actually made challenge harder for everybody to operate in. solution to the problem being the strong forte of these companies, provide them strong ‘business moat’, which is not easy to replicate for others.

 

If a concentrated equity portfolio of 12-15 such companies with very high roce, is created, it can potentially deliver returns significantly higher than nifty with underlying volatility half of nifty. so, if you want to compound wealth without getting sleepless nights, look for such consistent compounders. since, earnings and return on capital of these companies is so huge and consistent, these companies enjoy high p/e and should continue to do so.

A well-researched, and concentrated portfolio of these companies is “a low risk route to stupendous wealth creation” marcellus investment managers follows this approach and offers a low cost, a low risk portfolio of clean, well run companies that deal in essential products and enjoy monopoly in their product category. this is reason marcellus pms product is named as consistent compounders portfolio.

Marcellus ccp pms comes with all flexibilities like zero entry load, zero exit load, zero fixed fee, and only one paise of custody fee.

We at pms aif world recognise marcellus ccp pms as one of the right investment products for consistent wealth creation by informed investors.




Performance Table #


Trailing Returns (%) 1m return 3m return 6m return 1y return 2y return 3y return 5y return 10y return Since inception return
Portfolio-0.2%-2.5%-6.2%14.7%25.9%22.7%--21.5%
Nifty 50-2.1%-1.4%-3.2%16.9%31.7%13.3%--14.2%



QRC Report Card *




VIEW DETAILED QUALITY, RISK, CONSISTENCY ANALYSIS

Portfolio Holdings


Holding %
Asian Paints Ltd. 12.00
Bajaj Finance Ltd. 10.10
Dr. Lal Pathlabs Ltd. 8.70
HDFC Bank Ltd. 8.50
Titan Company Ltd. 7.70
Pidilite Industries Ltd. 7.50
Nestle India Ltd. 6.90
Page Industries Ltd. 6.70
Tata Consultancy Services Ltd. 6.10
ICICI Lombard General Insurance Company Ltd 5.80
Kotak Mahindra Bank Ltd. 5.70
HDFC Life Insurance Co Ltd. 5.50
Divi's Laboratories Ltd. 4.20
Berger Paints India Ltd. 3.80
Top 14 Equity Holdings 99.20

Sector Allocation


Holding %
Cash 1.00
Consumer Staples 7.00
Consumer Discretionary 14.00
Pharma & Health-Care 13.00
Home-Building Materials 23.00
Financial Services 36.00
Information Technology 6.00

Market Cap Allocation


Allocations %
Large Cap 83.8
Mid Cap 15.4
Small Cap 0.0
Cash 0.8

Disclaimer

#Returns as of 30 Apr 2022. Returns up to 1 Year are absolute, above 1 Year are CAGR.

*QRC Report Card data is updated quarterly. Current data is as of Mar 22.



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