Honestly if there was a formula to make money in stock markets, it would have long been found, we believe Stock market is a composition of various factors – not only fundamentals, technicals but also study of the human behavior in the markets. There are various facets – the important ones we think are understanding Macro Theme, Industry life Cycle, Sector opportunity, Company positioning and stock market pricing. Each one of them requires an in-depth understanding and experience of the criss-cross impact it has on one another.
In words of respected Mr. Charlie Munger he calls it the Lollapalooza impact. It is not a work in isolation but an ability to comprehend, understand and dissect the situation to arrive at meaningful decision. We attempt to invest in businesses that are likely to grow mani-fold over a period of time. We try to identify the opportunity early on and ride the wave of their growth journey. The companies we invest in are relatively unfamiliar names. We apply the traditional investment matrix of Business, Management and Valuation and take the investment decision.
Generally businesses grow at a moderate pace in an almost linear fashion over a period of time, but the stock market exhibits a see-saw movement, stock prices fluctuate due to various factors in short term due to sentiments, in medium term due to liquidity and cycles and in long term due to the profits of the underlying companies. We try to differentiate not only between price and value but also try to take a fair assessment of where are we in the market cycle and try to position the portfolio accordingly. We do not attempt to beat a benchmark but focus on wealth creation and hence end up beating the benchmark by miles. So our approach is an accumulation of understanding market cycle, sectors life cycle and identifying companies with management of integrity and zeal for growth and most importantly at prices that provide margin of safety.