Complete Circle Steller Wealth PMS

Concentrated portfolio

• Portfolio on average comprises 20–25 stocks
• The aim is to generate a 20%+ CAGR for the portfolio over a minimum holding period of 3+ years at any point of time
• Sector and market cap-agnostic investing approach with bias towards under researched and well-run small to mid cap companies

Allocation flexibility

• No hard cap on contribution of portfolio from any idea or sector or market cap range, but prudence to be maintained Weight per stock may range from 3% to 5% @cost; exceptional opportunities may get an allocation of 10% @cost
• Decision to exit investments will solely be based on their business performance or their potential incremental IRR
• Will keep portion of portfolio in cash equivalents if valuations of existing holdings and watch list become exorbitant

Portfolio tracking

• Track industry trends of portfolio companies like changes in competitive landscape, technology, regulations, supply chains, etc
• Evaluate quarterly results of each company against own expectation & benchmark performance against that of competitors
• Carry out detailed diligence in case the investment’s performance is not as per initial investment hypothesis

Portfolio rebalancing

• Exit an investment if either its valuations become absurdly expensive or it there is a structural challenge to its business fundamentals
• Periodically rank portfolio companies based on valuations, earnings performance, expected future stock returns, and rebalance accordingly
• Fresh or follow on investment in an idea only if it can deliver an attractive IRR over a period of next 3 years

Sources of Idea Generation

• BSE corporate announcements
• Press releases, investor presentations
• M&A deal/Joint venture/Partnership agreements
• Quarterly results – watch out for breakout post a big earnings surprise (PEAD)
• Conference calls (Trendlyne, AlphaStreet, ResearchBytes, Company website IR section)
• Global peers commentary and outlook
• Management interviews
• Screeners (Tijori Finance, Screener.in) – big capex, 52-week/all-time/post IPO new high
• Equity research reports (Ambit, ICICI Securities, Spark Capital, IIFL, Nirmal Bang, Axis)
• Annual reports, credit rating reports, DRHPs, QIP Offering Documents
• Investor letters (Solidarity, SageOne, Equirus), Investing conclaves (TIA, IIC) and webinars
• Fund managers’ top 5 holdings from PMS Bazaar website
• Bulk deals+block deals+insider buying (StockEdge), 52-week high volume list
• Magazines/Newspapers/Industry-specific websites
• Discussions with peers and colleagues; views of the leading analysts of individual sectors
• Social media (Twitter, WhatsApp, Telegram) and online forums like ValuePickr, Multipie

Track Key Company Metrics

• Leaders in niche sectors with low competition
• Low leverage & high ROCE
• Revenue growth (operating leverage)

Track industry developments

• Sectors undergoing supply side consolidation
• Regulatory changes
• Emerging sectoral adoption trends

Track investment activities

• PE/hedge funds/mutual funds
• Respected individual investors
• Insider buying

Track corporate events

• Change in promoter/management
• Demergers; block deals; merger arbitrage
• Significant capex; product mix change

You will always take one of these four risks when buying a stock:

1. Business Risk
2. Management Risk (Intrinsic value of a business with fraudulent management is zero)
3. Valuation Risk
4. Industry Risk

There are only four things that can happen in investing:

1) Big Profit

2) Big Loss

3) Small Profit

4) Small Loss

If you can eliminate big losses, you shall do very well. There is no bigger mistake in investing than holding on to your losers for a long time. Going wrong occasionally is acceptable, staying wrong is not.

Variant Perception

• A differentiated view on the short to medium-term trajectory of the business
• Variant perception triggers:
  • Product mix change (margin expansion) • Operating leverage
  • Industry cycle shift
  • Regulatory change
  • Working capital improvement
  • Deleveraging
  • Improvement in asset turns
  • Corporate actions
    • Demergers
    • Reverse mergers
    • Promoter/management change
    • Divestiture of loss-making/non-core business

Long-term Structural Trends

• Favorable industry structure+tailwinds
• Consistency and predictability of cash flows
• Long runway for growth (high visibility for many years ahead)
• Value migration
• Structural growth plays in India:
  • CDMO/CRAMS/EMS
  • Specialty chemicals with critical application
  • Affordable housing
  • FinTech
  • Branded discretionary consumption
  • Financialization of savings
  • Digital transformation
  • Cloud computing