PMS Investment Philosophy & Process
Fundamental Driven Appraoch: Our investment philosophy is anchored in fundamental research, emphasizing a comprehensive understanding of businesses and their future potential. Evaluating a business involves multiple parameters, recognizing that each company and its management team are unique. Our approach incorporates various aspects of business valuation, including management capabilities, competitive landscape, operating effectiveness, growth drivers, sensitivity to key market variables, and more. We conduct an in-depth analysis to explore the business from different angles, continuously refining our thought process by closely monitoring the business models over long periods of time.
Business Quality & Management: We place great importance on business quality and competent management. Ideally, we prefer managements who have a skin in the game —owner-operators. Key financial metrics we consider to assess business quality include superior returns on capital employed, increasing cash flows for equity holders, and capital allocation capability of the management.
Importance of Macroecnomic Factors: We also acknowledge the significance of macroeconomic factors, such as the overall economic climate and the political environment, which guide our long-term investment decisions. This thorough process often leads us to gain unique insights that provide a competitive advantage to us in selecting the right investments, ultimately enhancing our long-term returns.
Special Situations: While our primary emphasis remains on long-term investments, we maintain flexibility in our approach and are receptive to specific short-term opportunities or special situations that may arise over time.
Valuations: When it comes to valuations, we appreciate the fundamentals of assessing a business's worth. A business's value is essentially the present value of its future cash flows over its lifetime, discounted by expected returns. While the calculations are one important aspect, we believe that the true advantage lies in making the judgments about the same and adjust them with time.
Core Beliefs of Our Investment Philosophy
1. Risk vs. Returns: In the stock market, risk is inevitable while returns are not guaranteed. The potential for higher returns exists precisely because of these risks.
2. Managing Volatility: We believe that risks of stocks market are better managed through overall asset allocation rather than solely focusing and worrying about how to control the short to medium term downsides in equities.
3. Embracing Uncertainty: The future is inherently uncertain. We seek opportunities in strong businesses during turbulent times, leveraging our deeper insights into these companies.
4. Long-Term Horizon & Patience: A key component of our investment strategy is maintaining a long-term perspective. We believe that an overemphasis on short-term performance can result in suboptimal outcomes over time. Therefore, we adopt a 5–10-year outlook and understand that patience is essential for successful investing.
5. Art & Science of Investing: Ultimately, we view investing as not merely a science but as part "Art" and part "Science"
