We refrain from investing in sectors like distilleries, meat, leather and tobacco as they do not align with our principles. Similarly, upon client request, we tailor portfolios to exclude sectors that contradict their values. This customization ensures alignment with each client’s comfort level regarding specific sectors or industries.
Investment Process
We shortlist companies based on ongoing fundamental triggers or during quarterly earnings seasons using Care PMS’s proprietary screeners. This process ensures a thorough analysis of selected companies to make informed investment decisions.
We conduct extensive fundamental research on the shortlisted stocks as well as their peer group to identify trends or potential turnarounds within the segment or industry. This comprehensive analysis enables us to make well-informed investment decisions.
We diligently incorporate recent developments within the segment or industry into our analysis. This includes meeting with industry participants across the entire value chain to validate our insights and conclusions. By staying abreast of the latest trends and insights, we ensure our investment decisions are well-informed and thoroughly validated.
The decision to add a new company to our portfolio or replace an existing one is made only after achieving consensus among the investment team. This collaborative approach ensures thorough deliberation and alignment of investment strategies, leading to well-considered portfolio adjustments.
We conduct a detailed analysis of a company’s strategies, management’s execution capabilities and the pedigree of its leadership. This involves thorough research followed by a Q&A session with the company’s management or investor relations team. By delving into these aspects, we aim to gain deeper insights into the company’s operations and prospects, ultimately forming our investment decisions.
Care PMS also applies top down approach for investments sighting industry tailwind or understanding triggers that can benefit industry for medium to long term which will enhance business prospect of the industry leader eventually lead to positive rerating of the industry and company.
Investment Criterion
Growth
We track historical volume growth, forecast revenue growth and margin expansion, aim for decreased expenses as a percentage of revenue and project profit after tax (PAT) growth.
Management
We assess management’s track record in providing accurate guidance, adherence to corporate governance principles, their rational and trustworthy approach, as well as their experience in executing strategies effectively.
Financials
We evaluate factors such as zero debt or high interest coverage, a contracting working capital cycle, improving turnover ratios, historical trends in return on equity (ROE) and the dividend payout ratio.
Valuation
We analyze valuation metrics including P/E, PEG, EV/EBITDA, P/B, DCF, and Replacement Cost, comparing them with competitors in the same segment and benchmark indices.
Sectors We Avoid
Risk Management
Disproportionate Risk-reward
We conduct a thorough analysis of the potential downside risks corresponding to the potential upside before incorporating any investment into the portfolio.
Diversify
All portfolios are diversified across 18-20 companies spanning 8-10 sectors to mitigate risk and optimize returns.
Macro Indicators
We closely monitor macroeconomic factors such as interest rates and institutional flows, adjusting our portfolio accordingly to seize opportunities and manage risks effectively.
Continuous Monitoring
We conduct real-time monitoring of news and developments affecting portfolio companies, alongside quantitative reviews of individual portfolios as part of our ongoing rebalancing process.
Exit Process
Partial Profit Booking
When price rise is driven by euphoria rather than fundamentals.
Portfolio Rebalancing
When the weight of individual stocks or sectors within the portfolio exceeds predetermined limits, we may consider reducing the weight of a particular company in the portfolio.
Shift to better opportunities
Research is an ongoing process, leading to the discovery of new shortlisted companies. If an alternative with superior prospects emerges, we may replace an existing portfolio company.
Deterioration of Fundamentals
An exit is justified when there is a change in the company’s fundamentals, leading to a downward revision of earnings expectations.
External / Macro Dynamics
An exit is warranted when there is a change in the macroeconomic environment affecting the company’s operations, leading to a downward revision of earnings expectations.
Price reaches Fair Value
When earnings reach the anticipated level and attain fair value, signaling a plateau thereafter.