We believe in investing heavily in resources to support our detail oriented approach. Our Fund Manager and Advisor to the Fund together bring complementary but rich and relevant experience spanning over two decades each, and have had a track record of excellence in equity research and portfolio management respectively. Because of their prior education and experience in technology sector, they are very comfortable understanding complex industry dynamics that may shape the future of companies available for investment.
We focus on process driven investing and have developed proprietary analytical models and methods which we follow rigorously to identify companies with superior risk-reward characteristics. A comprehensive set of rules guide us in our investment process and arguably reduce individual biases and mistakes.
We pursue an absolute return strategy and invest in equities with a long term (three year plus) horizon but do not restrict ourselves to any specific holding period. We have an additional advantage of being able to invest also in small and midsize companies that are outside the radar of many large investors but offer opportunity for high returns because of both growth in earnings as well as valuation. We structure portfolios based on merits of fresh investments as defined by an absolute return potential over a two to three year horizon at any given point in time. As such, a part of our portfolio may be invested in liquid money market funds if we are unable to find suitable investments. Despite not taking full market exposure, we have been able to deliver strong absolute and relative performance as well as superior risk adjusted performance in USD terms. Most importantly, we believe in earning from performance and believe that our fee structure is designed in accordance with that principle.
Fund Objective and Strategy
- Provide superior long term returns while protecting against permanent loss of capital using Long biased strategy:
- Invest in long-term growth opportunities in Indian companies across market capitalization (with greater emphasis on mid and small cap companies that are not fully discovered) that have superior business model, sufficiently large market opportunity to deliver growth, strong and shareholder focused management and are available at price that would result in sufficiently attractive risk adjusted returns over a horizon of at least two years
- Manage market exposure by modulating cash position in the portfolio depending on the opportunity set and attractiveness of investment ideas and through the use of index futures and options
- Follow rigorous fundamental research-driven and rule based investment process that is disciplined and yet leaves enough room for creativity and ingenuity; Investment process entails interactions with the companies through common as well as uncommon means, detailed financial model on the company as well as the industry to properly size up the growth opportunity, completion of a detailed check-list and review of investment argument by the entire research team
- Focus on long-term return and hence may experience short term volatility, but will use its research capability to minimize the permanent loss of capital and will adhere to established risk guidelines
Opportunity, competence, values and our “secret” sauce
- With a young and growing population, the Indian economy will enjoy strong growth for a longer horizon than many other large economies of the world.
- Penetration levels and consumption per capita levels of a vast range of products and services suggest a long period ahead of high single digit to double digit growth. This creates numerous opportunities to invest in established as well as emerging companies.
- India is not one market but many markets: Urban versus Rural, Bottom of the pyramid all the way to the super luxury. As such, Indian economy is already large to offer sizable growth opportunity for a whole range of goods and services covering the entire spectrum of luxury to bare necessity.
- Government is in full throttle mode to revive manufacturing in India. India possesses competitive advantage to achieve this. Availability of cheap abundant labour allows manufacturing-oriented companies to create competitive advantage and gain share in the global market.
- Indian Paradox: Though India has been a difficult place to do business, there is a strong entrepreneurship culture that leads to formation and scaling up of some great companies. These companies erect competitive barriers and earn high returns on capital.
- India has been a good market to invest in equities across market capitalization and will remain so due to vibrant startup eco system and large domestic market.
Competence = Competitive Advantage
- Experience: Fund manager and Fund Advisor both having strong track record spanning over 20 years in equity markets and five years in technology industry. Fund Manager known for integrity, leadership, innovation and excellence. Benefit of additional ongoing input to the investment process and strategy by a professional with very relevant experience and a full strength research team on the ground in India. Background in technology has programmed us to be on lookout for disruptions that can fundamentally change any industry.
- Ability to identify and access relatively undiscovered companies: Have been following a strategy of reaching out to companies relatively unknown to market for last eight years. Have identified more than three dozen stocks that delivered many fold returns over this period. In many cases, there was absolutely no sell side research on such companies.
- Being able to reach out to top management: Having worked with top management of companies with market cap ranging from $50 mn to $100 bn and being the first call for global Institutional Investors on some of biggest tech companies in Asia (TSMC, Infosys), we are able to succeed in getting time from business owners and CEOs to engage in two-way discussion on their business and on wide ranging issues such as financing option, capital allocation, dividend policy and other topics. Such meetings prove very valuable not only in decision making but also in sourcing liquidity at times.
- Roll-up the sleeves approach to access and understand businesses: We put our on-the-ground presence to smart use and spare no effort even if it means travelling to remote corners of the country with no air connection. We meet companies in a situation that most of our peers would consider either inefficient or below their status. We have access to niche corporate access events where we have met companies that are otherwise not attending such events. Some great investment ideas have been identified by us through such unconventional methods.
- Rigorous Investment Process aided by Proprietary and third-party tools as well as automation: We bring engineering mindset to equity research and have developed and deployed several proprietary and third-party tools to aid our process driven approach. Our repertoire of tools (>100 item long Qualitative checklist, Database linked and template based financial model on Google Apps embedded with dynamic DCF/excess ROE framework and version history, Asana) enable us to (1) identify investment opportunities, (2) improve productivity, (3) achieve consistency, (4) improve our process by identifying and analyzing past mistakes, (5) institutionalize accumulated knowledge, and (6) improve usability of previous work. We have an ever-growing knowledge base of full fledged financial models and running notes on more than 200 companies and that comes handy when we want to revisit any name that we previously worked on. Our Qualitative checklist covers almost every possible aspect of equity analysis ensuring that we cover all bases.
- Track Record: We have delivered very good risk adjusted performance till date.
Portfolio Discipline and Our Values
- Investment Discipline: Sameeksha Capital employs a proprietary multi-layered stock selection checklist to filter through a legion of stock ideas. Process based stock selection helps get rid of any personal bias. Own ‘Value Versus Quality Matrix’ analysis for each investable idea with a high bar for quality, helps instill discipline into Buy/Hold/Sell Decisions
- Qualitative and Quantitative Analysis: Detailed standardized Financial Model template embedded with unique dynamic DCF allows Sameeksha Capital’s research team to quickly build high quality financial models on the company and industry and enables them to fully understand value of every stock analysed.
- Alignment of interests of clients with ours: We believe in earning primarily from performance. The fund charges among the lowest fixed management fees in the industry. The employee incentives are totally dependent on the Fund’s ability to generate value for our clients. Though not required, Sameeksha Capital uses custodian to add additional layer of protection for its investors. Bhavin shah, the fund manager directs equity investments by his family approaching $5mn through Sameeksha Funds.
- Competitive and Fair Fee structure: We not only charge competitive fees but also negotiate heavily with third party service providers to keep expenses charged to clients as low as possible.