MF Navssai

02/05/2017

Investment Philosophy: Ingredient for delivering consistent performance
May 1, 2017

What an investment philosophy is all about?

An investment philosophy is “A set of guiding principles that informs and shapes an individual’s investment decision-making process.” Philosophy acts as the glue that holds everything together.

It’s a kind of framework which helps to build tenets by which they abide in order to avoid permanent impairment of capital, while generating additional alpha consistently, No matters what is the direction of the markets might be.

Why to have it?

An investment firm without a philosophy is like a ship without rudder which will never reach its destination.

Generally its been observed especially in India, When markets are moving up everyone makes money and by doing so one gets greedy and doesn’t think rationally, this is because of lack of strong investment foundation. A house built on a weak foundation isn’t likely to crumble when there isn’t an earthquake.

World’s Successful investors have built their investment philosophy knowing exactly what they will do when these market earthquakes comes, and they have built a solid foundation to withstand these inevitable tremors.

For instance: “Buy wonderful businesses at a fair price with the intention of holding them forever”, investment philosophy of one of the world’s greatest investor none other than Mr. Warren Buffet. Since Mr. Warren Buffett has seen many market scenarios, yet his investment philosophy has never wavered regardless of what has happened around him in last 5-6 decades.

In fact, those who have successful track record as an investors further endorsed that nothing is more important in investing than a strong investment philosophy. Irrespective of market conditions, upheaval and through the dark of uncertainty, investment philosophy enables us to control our emotions, shut out the noise and focus on the things that really matter over the long term. Investment philosophy can help us focus on process rather than the outcome, once a strong process is laid down, The output would be immense.

Investment Philosophy at Motilal Oswal Asset Management Company (AMC)

At Motilal Oswal Asset Management Company (MOAMC), our investment philosophy is centered on two critical pillars of equity investing – 'Buy Right: Sit Tight'. 'Buy Right' means buying quality companies at a reasonable price and 'Sit Tight' means staying invested in them for a long time to realize the full growth potential of the stocks.

How to ‘Buy Right’?

Over the last 19 years, our chairman, Raamdeo Agrawal (one of India's foremost value investors) has been analyzing the Indian equity market to come up with investing insights in the form of the Annual Motilal Oswal Wealth Creation Study. The learning’s from all these studies have helped us evolve a unique and focused investing process - 'QGLP' where Q stands for quality of business and quality of management, G stands for Growth in earnings, L stands for longetivity of the competitive advantage, P stands for Price.

How to ‘Sit Tight’?

While Buying Right is all about following a process, Sitting Tight on a good buy requires Focus & Discipline.

Buy and Hold: We believe in focused stock portfolios and are strictly buy and hold investors and believe that while picking the right business needs skill; holding onto these businesses to enable our investors to benefit from the entire growth cycle needs even more skill.

Focus: Our portfolios are high conviction portfolios with 20 to 25 stocks being our ideal number. We believe in adequate diversification as over-diversification results in diluting returns for our investors and adding market risk.

MOAMC is a boutique fund house, firmly believes that specialty is the definite way to achieve better results. Therefore, We follow the mandate that each of our portfolios should do just one thing — practice a single investment specialty –Buy Right, Sit Tight

We establish the charter for each investment specialty as explicitly as possible and do not deviate. In this way, there are no surprises; our actions and performance always follow directly from the job we're hired to do.

Thanking you

Your sincerely

Vikas Agrawal

22/09/2016

Logical versus out of d box thinking:

Many hundreds of years ago in a small Italian town, a merchant had the misfortune of owing a large sum of money to the moneylender. The moneylender, who was old and ugly, fancied the merchant’s beautiful daughter so he proposed a bargain. He said he would forgo the merchant’s debt if he could marry the daughter. Both the merchant and his daughter were horrified by the proposal.

The moneylender told them that he would put a black pebble and a white pebble into an empty bag. The girl would then have to pick one pebble from the bag.If she picked the black pebble, she would become the moneylender’s wife and her father’s debt would be forgiven. If she picked the white pebble she need not marry him and her father’s debt would still be forgiven. But if she refused to pick a pebble, her father would be thrown into jail.

They were standing on a pebble strewn path in the merchant’s garden. As they talked, the moneylender bent over to pick up two pebbles. As he picked them up, the sharp-eyed girl noticed that he had picked up two black pebbles and put them into the bag. He then asked the girl to pick her pebble from the bag.

What would you have done if you were the girl? If you had to advise her, what would you have told her? Careful analysis would produce three possibilities:

1. The girl should refuse to take a pebble.

2. The girl should show that there were two black pebbles in the bag and expose the moneylender as a cheat.

3. The girl should pick a black pebble and sacrifice herself in order to save her father from his debt and imprisonment.

The above story is used with the hope that it will make us appreciate the difference between lateral and logical thinking.

The girl put her hand into the moneybag and drew out a pebble. Without looking at it, she fumbled and let it fall onto the pebble-strewn path where it immediately became lost among all the other pebbles.

“Oh, how clumsy of me,” she said. “But never mind, if you look into the bag for the one that is left, you will be able to tell which pebble I picked.” Since the remaining pebble is black, it must be assumed that she had picked the white one. And since the moneylender dared not admit his dishonesty, the girl changed what seemed an impossible situation into an advantageous one.

MORAL OF THE STORY: Most complex problems do have a solution, sometimes we have to think about them in a different way.

Thinking "Out of Box"...

09/02/2016

02/10/2015

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