ACE Focused 10 PMS Strategy

Backbone of The Research

• Promoter Holding
• Key Institutional Shareholding
• Promoter Pledging
• Frequent Buy/Sell done by Promoters
• Business efficiency (any cost control measure or margin improvement)
• Historical dividend payout ratio
• Remuneration paid to promoters (As % of PAT)
• Related Party transaction with Promoter/Group companies
• Any internal Loans & Advances/Investment to Group companies
• Any notice by SEBI/ any other authority regarding breach of regulations
• Contingent Liabilities : Anything Material
• If the Company pays tax or not
• Transparency in treatment of Minority Shareholders
• Material non-core business interests of the promoter group
• Structure of the Board : Number and Quality of Independent Directors
• Quality of Auditors : How transparent is the rotation process of Auditors
• Nature of growth progression

• Is there any empirical evidence which suggest that a concentrated strategy does well in long them? Yes! The 80-20 rule, also known as the Pareto Principle, is a familiar saying that asserts that 80% of outcomes (or outputs) result from 20% of all causes (or inputs) for any given event. As per one of the articles by Mr. Sean Williams, 86% of Warren Buffett’s Portfolio is invested in 10 Stocks
• What differentiates this strategy? – “You can’t take the same actions as everyone else and expect to outperform.” – Howard Marks. Under concentrated strategy, the primary risk management techniques is insisting on knowing what we own and why we own it. This strategy will contain only as many ideas as can be well researched. The ability to focus on a smaller number of companies will give a competitive advantage. Furthermore, the investment under this strategy will be for long term, which will reduce the short-term volatility in the portfolio.
• So, diversification is unnecessary? – Not exactly. We believe diversification is important part of portfolio  construction, but if one diligently searching for good opportunities may only find a few to invest. When someone finds a good opportunity, then they should hold a substantial position in that investment to make a good return out of it. Furthermore, the strategy will invest across the market sector & market cap, which will enable to achieve an optimal portfolio diversification. So, in nutshell, this strategy will be concentrated yet diversified enough.
• But high concentration can lead to overconfidence? – Not always. As Warren Buffett mentioned in his 1996 letter, what an investor needs is the ability to correctly evaluate selected (not every or even many) businesses. The size of the circle of competence is not very important; knowing its boundaries, however, is vital.” So many times, concentration is a sign of humility by knowing what your boundaries & doing well think that.

Investment Strategy

Endeavour is to identify and invest in maximum 10 high-conviction stocks, primarily for long term

Focus on Fundamentals

Investing in companies with high industry growth along with strong corporate governance, high quality management pedigree and superior execution capabilities

Portfolio Composition

Investment strategy will be sector & market cap agnostic but with high liquidity. The portfolio’s exposure to debt and money market instruments/funds will be a maximum 20% at all times

Investment Approach

Concentrated strategy, better stock picking through solid research & rational thinking, timely entry depending on valuation and constant monitoring can help to generate outsized returns over the time cycle