1 st November 2017
INDEX Meaning of Aequitas Equity Advantage Why Aequitas? Process flow Risk Pitfalls we avoid Discipline Our Report Card Investment Philosophy - Multi-bagger Approach - Portfolio Construction - Company Attributes Our Stock picks Key personnel Best in class process Contact details Disclaimer Aequitas Investment Aequitas Investment
Aequitas is the Latin goddess of Equity and Fairness . She is most often depicted holding a pair of The word “Equity” originates scales to represent Fair Dealings and Equality . from the Latin word Aequitas She is shown in a dignified pose, wearing Aequi Ae quitas tas a diadem and holding a sceptre or staff, and sometimes She is also given a cornucopia, the symbol of abundance and wealth. She represents true fairness, a different concept from justice for justice is under the law, and must follow it to the letter. Some have seen in her a Goddess of honest merchants and fair dealings in contracts, negotiations, and other merchant- related endeavours: by this definition the cornucopia is seen as a symbol of the wealth to be gained through fair enterprise. Aequitas
Equity Advantage 3.50 3.00 31.4 2.50 2.00 1.50 1.00 0.50 3.99 0.00 ❖ Assumption - A monthly SIP of Rs. 1000 started in 1979 and increased every year by 10% till 2016 ❖ Monthly SIP in 2016 will be Rs. 34000 and total investments over the period will be Rs. 3.99 mn ❖ The value of that portfolio today would have been Rs. 31.4 mn Aequitas Investment Equity investments may not always give positive returns. Past performance may or may not be sustained in future.
Why Aequitas ? Low churn ratio -tax free returns and low transaction cost Tax efficient investing; tax free returns No distributors and intermediaries; grown through references Best risk adjusted returns Best 3 year performance Aequitas Investment
What Aequitas does differently!!! We don’t work with Distributors. Never have, never will ! We don’t watch CNBC. It is Cartoon Network for the Business Community! We don’t use Bloomberg. It’s an avoidable distraction! We have only one product. Only one yardstick to measure our performance! No marketing person. Our product should be good enough to sell by itself! Bespoke portfolios, no model portfolio. Models look good only on the ramp! Aequitas Investment
Process flow SCREENERS RESEARCH PORTFOLIO ONGOING CONSTRUCTION RESEARCH - Sales growth, PAT growth, - Annual report - 15-20 stocks capacity utilisation - Quarterly results - Balance across sectors - Valuation dislocation - - Industry & company news - Catalyst for stock EV/Sales, PE ratio, - Management interviews re-rating EV/EBITDA - Third party research - Debt - Management meetings - Dividend track record - Press releases - Promoter ownership - Conference calls/ - Insider Buying Analyst meets - Industry Leadership - Credit rating - Long term track record Aequitas Investment
RISK • Risk is not a number, it is a concept or a notion. Risk equates to what Ben Graham called a “permanent loss of capital”. • Modern finance measures risk on metrics like standard deviation, BETA, VAR etc. which we do not subscribe to. • We measure risk on 3 parameters Valuation Risk Earnings Risk Balance Sheet Risk Risk of buying stocks dear Risk that current earnings The risk of an over- without adequate margin could decline due to leveraged balance sheet of safety. Reasonable technological changes, which is ignored during valuation is the economic changes or good times as the weak cornerstone of all our deterioration in balance sheet is ignored investment decisions. management in favour of the cyclically high and un-sustainable earnings. Aequitas Investment
IPO’s Leverage Fad or hot sectors Low promoter holding Corporate governance QIP’s or secondary equity sales High institutional ownership Expensive valuations PITFALLS WE AVOID Aequitas Investment
DISCIPLINE - Avoid impulsive decisions - Don't focus much on market movements - Don't chase winners or hot stocks - Avoid trading and short term investments - We don't do derivatives Aequitas Investment
Our Report Card Aequitas Nifty Mid Cap Index Small Cap Index Avg Small & Mid Cap MF Chart depicts absolute performance since inception; Returns are adjusted for inflows/ outflows and are after expenses; 3 1 st Oct 2017 Aequitas Investment Past performance is no guarantee of future results. Past performance may or may not be sustained in future.
Investment Philosophy Aequitas Investment
Multibagger Approach Doing things differently Above average growth Cheap valuation ensures potential re-rating M u VALUE GROWTH CONTRARIAN L T The valuation has to be The company has to be a Contrarian approach does I reasonable. This is important growth company with above not mean doing the opposite B = because there has to be X X A Average growth potential for of others, it means doing potential for re-rating. A G The next 3-5 years . Markets things differently. Buying in combination of EPS growth G reward a higher PE multiple for popular names will not give and PE re-rating leads to E growth companies Multi-bagger returns Multi-bagger returns R Aequitas Investment
Portfolio Construction Industry • We invest in quality companies with a focus on small and mid-cap growth Prospects companies Quality Companies • Most market participants focus on price; we focus on company fundamentals Concentrated Holding • We aim to construct a portfolio of 15-20 stocks across various sectors Long-term Outlook • Invest with a 3-5 year horizon with a focus on low churn rate Catalyst • Value can remain value for long time. We actively look for catalysts which will lead to stock rerating. Aequitas Investment
Company Attributes Most of the companies in our portfolio are industry Industry Leaders leaders with a strong sustainable competitive advantage Companies need to have very low debt levels and some of Low Debt the companies are in fact net cash positive Good dividend paying record, corporate governance Management practices & sound long term performance record is a must. On a trailing basis the portfolio PE ratio is less than 12x Valuations cyclically adjusted earnings. Creeping acquisition/ Majority of our companies have done buy-back / creeping acquisition in the 12 months prior to our initial acquisition buybacks Our portfolio includes companies with strong and Cash flow consistent cash flow generation Aequitas Investment
Our Stock Picks Avanti Finolex Cables ✓ ✓ Industry Leadership ✓ ✓ Low debt to Equity (<1 ) ✓ ✓ Institutional Ownership (<20%) ✓ ✓ Long term track record (>10 years) ✓ ✓ Promoter ownership (>50%) ✓ ✓ Valuation (<12 PE) Introduction of Vannemei Shrimps Catalyst Exceptional write off’s Aequitas Investment
Our Stock Picks HEG Ltd. Rain Industries ✓ ✓ Industry Leadership ✓ Low debt to Equity (<1 ) ✓ ✓ Institutional Ownership (<20%) ✓ ✓ Long term track record (>10 years) ✓ Promoter ownership (>50%) ✓ ✓ Valuation (<12 PE) Global GE capacity shutdown Catalyst Aluminium Industry Turnaround Aequitas Investment
Our Stock Picks CCL Products Heritage Foods ✓ ✓ Industry Leadership ✓ ✓ Low debt to Equity (<1 ) ✓ ✓ Institutional Ownership (<20%) ✓ Long term track record (>10 years) ✓ ✓ Promoter ownership (>50%) ✓ ✓ Valuation (<12 PE) Commencement of Vietnam plant Catalyst Healthy dairy sector outlook Aequitas Investment
Our Stock Picks Maithan Alloys Motilal Oswal ✓ ✓ Industry Leadership ✓ ✓ Low debt to Equity (<1 ) ✓ ✓ Institutional Ownership (<20%) Long term track record (>10 years) ✓ ✓ ✓ Promoter ownership (>50%) ✓ ✓ Valuation (<12 PE) Subsidiary Turnaround Catalyst Direct Play on Stock Markets Aequitas Investment
Our Stock Picks Garware Wallropes Zuari Agro Chemicals ✓ ✓ Industry Leadership ✓ Low debt to Equity (<1 ) ✓ ✓ Institutional Ownership (<20%) ✓ ✓ Long term track record (>10 years) ✓ ✓ Promoter ownership (>50%) ✓ ✓ Valuation (<12 PE) Buy-back Catalyst Fertilizer Reforms Aequitas Investment
Key Personnel SIDDHARTHA BHAIYA, MD and Fund manager ❖ Siddhartha a qualified Chartered Accountant is the driving force behind Aequitas & has over 16 years of experience into Equity research and Equity Fund Management. ❖ Siddhartha started his career as a Research Analyst with Sushil Finance and has worked with Strat cap Securities, Principal PNB AMC & Reliance Capital Asset Management (RCAM). ❖ Siddhartha was part of RCAM for more than 6 years & had graduated to become a Fund Manager. ❖ Siddhartha has experience across all market capitalizations and is a specialist in bottom up stock selection. NEERAV SHAH – Director, Operations and Compliance ❖ Neerav is a qualified Chartered Accountant and has more than 12 years experience in the capital markets. ❖ Neerav has handled operations, back office, fund accounting & dealing functions at various points in his stint at Reliance and Birla AMC. Aequitas Investment
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