INVESTMENT PHILOSOPHY –
– As an investor in stocks, my weapon of choice is research. I firmly believe that one cannot make sound investment decisions without properly understanding the company’s value.
– My journey as an investor – My encounter with the works of Benjamin Graham, as repeatedly advocated by Warren Buffett, was a turning point. The concept of value investing resonated with me on a profound level, as if I had found my true calling. Since then, all my stock-picking decisions are based entirely on the principle of a margin of safety, a concept introduced in the book “Security Analysis,” which Graham coauthored with David Dodd.
– While I have my own version of Graham’s techniques, my objective remains the same: to protect my downside to prevent permanent loss of capital.
– I firmly believe that specific, known catalysts are not necessary for successful investing. The sheer, outrageous value of a company is enough to justify my investment.
– The investment landscape if approached in a global way, offers a range of opportunities in great businesses at fair prices and by tapping into different market cycles.
– As an investor, it’s critical to understand the nuances of the Indian business and political environment. It is imperative to undertake a thorough risk assessment and understanding of the bussiness landscape in India before making investment decisions. Regulations, policies, tariffs, and laws play a massive role in the Indian Investment ecosystem and are prone to changes at any given time.
– Despite the challenges, the investment landscape in India presents compelling opportunities to identify and invest in fundamentally solid businesses.
– Our investment philosophy entails buying and holding a few great businesses indefinitely, allowing the power of compounding to manifest over extended periods.
However, we recognize that this approach is constrained by the rarity of great businesses at fair prices worldwide, particularly when accounting for our restriction of Indian business alone. Furthermore, buying these businesses at a reasonable price presents as an opportunity infrequently, since they are typically overpriced.
Given that constraint, we don’t mind buying value stocks that are underpriced in the market and sell them when they have reached their fair value. I mention them as stocks, as I am simply looking at the valuation front rather than quality of the business in total.
– Our investment philosophy is rooted in the belief that it’s better to own a few great businesses and reap their benefits over an extended period than to hold a larger portfolio of average businesses, yielding lesser returns.
INVESTMENT REQUIREMENTS IN A COMPANY –
- Very strong defensive characteristics;
- Good solid value building up at a satisfactory pace and;
- Evidence to the effect that eventually this value would be unlocked, although it might take one year or ten years.
TAKEAWAY
– It’s important to understand that a concentrated portfolio implies a greater level of volatility. Such a portfolio entails the possibility of experiencing significant fluctuations, both positive and negative on a portfolio level.
The ability to manage both upside and downside movements with equanimity is critical. Conviction in holding the stock must remain irrespective of the level of volatility involved. It’s essential to note that this approach to investing is contrary to the industry’s prevailing mindset, as the finance industry tends to treat volatility as a risk and employ measures to mitigate it, such as diversification across numerous stocks and asset classes.
– As an investor, I hold the view that a different approach is possible and desirable, and holding a few great business can give good results over time. Nonetheless, there’s no guarantee that the portfolio will not experience further declines. Conviction in the chosen investments is critical, and this certainty is anchored in thorough research and analysis that informs investment decisions.
I obtained my CFA charter to argue my opinion convincingly.
– Ultimately, as opportunities to acquire more great businesses at reasonable prices arise, the concentration of the portfolio inevitably decreases. The key, however, is to maintain the same level of vigilance and commitment in evaluating every new investment.
We like to buy stocks when the market doesn’t like them. Helps accumulate at a lower price.
I would also like to point out that above said opportunities in great companies happen once in a while. And the market presents you the opportunity. You cannot create them. And that is where, patience gets rewarded. But if you were to be invested at all times as how the industry recommends, one cannot take advantage of such anomalies. My work as a value investor is to keep searching for Anomalies in the market. With the advancements in Quants and liquid markets overall, anomalies have become lesser over time comparatively. But, as long as human emotions exist, markets will swing between greed and fear, and give rise to Anomalies.
Finale
Accept the world for what it is.
Make use of the opportunities.
And importantly, try to do so
In as just a manner as possible.
Investing comes down to – Trying to make intelligent decisions consistently, as there is no surety of the future by any means.
I have tried to cover points which I felt might be of interest and disclose as much of our philosophy as may be imparted without talking of individual issues.
I believe it’s essential to me that those who join me on this investment journey understand my philosophy and thought process.
My mindset is best described as being excited when market prices fall, as it creates better opportunities to acquire stocks at attractive prices. I do not hold an expectation that stock prices will continue rising indefinitely.
As Warren Buffet has famously said, my focus is on buying well, not selling well. That is, my primary objective is to identify businesses that are trading below their intrinsic value with considerable growth prospects.
– Finally, I want to ensure complete alignment of interests between myself and my clients. Therefore, I intend to invest most of my capital in the portfolio management services (PMS), alongside my clients’ funds, except the part that I have invested in foreign equities. As our country allows us to invest abroad as a fund, we could definitely consider using that opportunity.
– Dr.Siddharth K J, CFA
FUND MANAGER
Kyng Capital Management Pvt Ltd