Invest in attractive businesses
We take a fundamental approach of qualifying exceptional business based on fundamental analysis. Thorough research is carried out using various sources like the company reports and industry research.
Look for companies which have had strong historical financial performance in key return and liquidity ratios such as return on invested capital and free cash flow.
This involves detailed study of the industry, the company and its competition, employing the Porter 5-Forces Framework to assess the industry attractiveness.
Buy at deep discounts
Price v/s Value Approach:
Invest only when the price of the stock is significantly lower than the intrinsic value of the business.
If the business is attractive enough, we invest only if there is enough margin of safety or wait for the right moment to get a bargain price, when market inefficiency prices them below their real value.
Sustainable return is possible only if the risk is reduced.
Thorough assessment is done of various risks-business risk (for example supplier or customer concentration), liquidity risk ( for example debt/equity ratio) and operational risk (for example inventory management ).
Investment in a company is made only when these risk are significantly low.
Long term investments
Market price of a great business with consistent earning is likely to reflect the earning over long period. Therefore if we find a good business, we stay invested long term.