Marcellus Little Champs PMS Portfolio (LCP)

Marcellus Little Champs PMS aims to identity small-cap companies (Market cap <US$500 Million or approx. 3500 Cr) with an excellent corporate governance and capital allocation track record and strong sustainable competitive advantages built around brands, business processes and strategic asset.

Marcellus Little Champs Portfolio or Marcellus LCP PMS follows a thorough analysis based on two objective steps as mentioned below :

• Marcellus LCP follows an objective analysis based on 12 accounting ratios covering income statement (revenue/ earnings manipulation), balance sheet (correct representation of assets/liabilities), cash pilferage and audit quality checks.

• Marcellus Little Champs Portfolio or Marcellus LCP PMS bets on the First rank stocks on each of the 12 ratios individually. These ranks then cumulated across parameters to give a final pecking order on accounting quality for stocks.

Marcellus Little Champs LCP PMS then picks companies from the filtered universe after interaction with industry players, competition, channel partners etc.

The 3 attributes for selecting stocks in Little Champs remain the same as in Consistent Compounders strategy:

1) Clean accounting and good corporate governance;
2) Historical evidence of prudent capital allocation; and
3) High barriers to entry so that companies are able to sustainably generate return on capital higher than cost of capital.

At Marcellus, the Purpose is to make wealth creation simple and accessible by being trustworthy and transparent capital allocators.

The investment philosophy at Marcellus has evolved from the ideas of Kirby and Thiel, which they have refined further.

The investing approach has 3 pillars:

Clean Accounts: They have quantitative frameworks which use a combination of forensic accounting and capital allocation assessment define our investible universe.

Capital Allocation: They look for companies with superior track record of capital allocation – companies that generate free cash flows and reinvest them in the business to fuel further growth.

Competitive Advantage: The experienced investment team through in-depth primary research, constructs a portfolio of companies with deep competitive moats.

These companies are then held on for long periods of time with little or no churn, which allows them to capture the benefits of long-term compounding and deliver superior returns.

Marcellus Little Champs Portfolio or Marcellus LCP PMS is a small-cap focused strategy.

On an average over the last ten years, about ~50 stocks have entered/exited BSE 500 every year indicating a high degree of churn. A stock entering the BSE 500 tends to significantly outperform the Index in the years preceding the inclusion.

The aim is to identify such stocks and capture the strong performance as much as possible.

• In 2021, Marcellus’ Consistent Compounders Portfolio or Marcellus CCP was awarded Rank #2 as the Best Newcomer PMS across all categories, on a 2Y Absolute Returns Basis. These Awards were hosted by PMS AIF WORLD, in association with IIM-Ahmedabad.

• In 2021, Marcellus’ Little Champs Portfolio or Marcellus LCP was awarded Rank #2 as the Best Newcomer PMS across all categories, on a 1Y Absolute Returns Basis. These Awards were hosted by PMS AIF WORLD, in association with IIM-Ahmedabad.