Investment Strategies
Care PMS Large & Midcap Strategy : The strategy is launched in June 2020 with a focus to invest in 18-20 companies from Top 250 companies by marketcap. The strategy will invest in companies which has sustainable business model across market cycles. Strategy is having well defined profit/loss booking policy. The strategy will have a model portfolio concept for investing.
Care PMS Growth Plus Value Strategy : The strategy was launched in July 2011 with a focus on investing in companies across marketcap. The higher weightage is given to lower valuation multiple. Strategy will have higher allocation towards smallcap companies which is growing their business at higher rates. An individual portfolio is constructed based on investment time and risk profile of client.
Investment Approach
Bottom-up, Stock specific approach
1 Shortlisting of companies on ongoing basis (on any fundamental trigger) or during quarterly earnings season (after applying Care PMS proprietary quant screeners) for detailed analysis
2 Extensive fundamental research undertaken on shortlisted stocks and their peer group to spot trend or turnaround in that segment or industry
3 Take account of recent developments in that segment or industry and meet industry participants across the value chain and to confirm inferences
4 Decision to add a company or to replace and existing company taken only after consensus among all three investment directors
5 Detailed analysis about company’s strategies, management’s execution capabilities and on pedigree of management followed Q & A with management or investor relations
Investment Criterion
Growth
Historical Volume growth, Revenue growth expectation, Margin expansion, Expense decrease (as a % of revenue), PAT growth expectation
Management
Track record of management commentary and achieving guidance, corporate governance, rational and trustworthy management, execution experience.
Financials
Zero debt or high interest coverage, Contracting working capital cycle, Improving turnover ratios, historical ROE trend, dividend pay-out ratio
Valuation
Comparing valuation metrics (such as P/E, PEG, EV/EBITDA, P/B, DCF, Replacement cost) with other player in the same segment and benchmark indices.
Sectors We Avoid
We do not invest in sectors such as distilleries, meat, leather, and tobacco. Investing in these sectors does not fit in our principles. Likewise, on client request we custom build client portfolios avoiding sectors that do not match their principles. The idea is to offer personalization where client is not comfortable with a certain sector or industry.
Risk Management
Disproportinate Risk-reward :A detailed analysis of probable downside corresponding to probable upside is done before adding it to the portfolio
Diversify : All Portfolios will be diversified in 18-20 companies and 8-10 sector
Macro Indicators : : Macros like interest rates, institutional flows, etc. will be monitored and appropriate actions will be taken in portfolio
Continuous Monitoring : Real-time monitoring of any news or developements in portfolio companies. Quantitative review of individual portfolios as a part of portfolio rebalancing exercise
Exit Process
Partial Profit Booking - when there is price rise on account of euphoric environment not backed by fundamentals.
Portfolio Re-balancing – when the weight of individual stocks or sector within the portfolio goes above limits, we may consider shaving off the weight of a certain company in the portfolio.
Shift to better opportunities – research is a continuous process which result in new shortlisted companies. When an alternative with better prospects is found, an existing portfolio company may be replaced.
Fundamental Deterioration – Exit is warranted when there is a change in fundamentals of the company due to which earnings expectation is revised downwards
External / Macro Dynamics - Exit is warranted when there is a change in macros in which company operates due to which earnings expectation is revised downwards
Price reaches fair value – When earnings grow to a level as envisaged and reach fair value post which earnings plateau.