ॐ नमः शिवाय (Om Namah Shivaya)

"Conviction comes from self knowledge. You can not borrow it."

-Rakesh Jhunjhunwala

Investment Philosophy
This is what we keep on telling our clients. There is just no need to jump from one stock to another, in search of the next HOT stock. Find few good companies, buy their stocks at attractive prices. Monitor their fundamental performance & keep on holding them with conviction if their performance continues to do well. And the stock that you bought when no one was even talking about, becomes the next hot stock one day. This is how real wealth is created in the investment world. You don’t have to create a portfolio of 15-20 stocks or bet all your money on 1 or 2 stocks either. All you need to do is to strike the balance & figure out few good companies that suit your risk profile. Buy them & hold them tight. This sounds really simple, but to practice it in real world is a tough job. Markets tend to tempt us with their daily ups & downs & investors are bound to make mistakes. These common mistakes are the only difference between successful investors & the unlucky ones. As they say, investment is 1% skill & 99% temperament.
  • Start early & exploit the power of compounding.
  • Start with meaningful capital. No point in investing in equities, if you are going to put 5% of your net worth into it.
  • Do not lose money, capital protection is the first priority.
  • In your entire investment career, all you need is 4-5 good companies with potential to give multifold returns. You don’t have to buy & sell 100’s of companies to make profit in stock markets.
  • Concentrated portfolios are ticket to wealth creation. If you see all successful investors, all their money is made in 4-5 stocks which they bought at a very early stage. On an average 60% of their wealth is concentrated in these 4-5 stocks.
  • Look for stocks where there is high margin of safety. We do valuations just to check the downside, so that we can at least gauge maximum downside. Heads we win, tails we lose nothing !
  • For upside, there is no fixed target. We like situations where the downside is known & upside is unknown & it could be anything depending on how company evolves over a period of time.
  • Invest in stocks of companies that are operating in a huge & untapped market. And are in a position to make most of the opportunity available. No company can grow bigger than the external opportunity. And no company can grow greater than the addressable opportunity that its product & services offer.
  • Invest in companies that have the capability to emerge as leaders from sector / category they operate.
  • Invest in companies run by managements who respect shareholders equity & are growth oriented.
  • Risk is manageable, but ignorance is costly !
  • Stock markets are for wealth creation & not for short term profits or trades. If done right, investors can create wealth without taking too much of risk. Patience & having long term approach is the key.
  • Buy what you see. Observe things that are happening around us, look out for goods & services that are selling in the market.
  • Companies that have solid predictable businesses on ground, have pricing power & business economics that can’t be easily replicated by competitors.
  • With enough margin of safety downside should be known & upside should be unknown offering huge potential.
  • This way, even if things don’t work out, we have margin of safety on our side for capital protection.
  • Make sure that at least 60-70% of the portfolio is in top 5 stock ideas. Even if 1 or 2 ideas don’t work out in our favor, serious wealth creation happens in rest & returns are far better than markets. There is no point in having 5% allocation to your best stock idea with potential to go 10x.
  • If taken informed decisions, midcaps are not risky at all.
  • Midcaps are often ignored by the market for long periods & hence they give an opportunity to buy at extraordinarily cheap valuations.
  • Midcaps are often valued irrationally & are relatively illiquid for institutional investors. Institutional investors enter at a later stage, providing great price acceleration in such stocks. Even if they do not enter, sooner or later stock adjusts with its underlying earnings & valuations.
  • Small companies can grow rapidly, in terms of business performance. It is easier for a company to grow multifold.
  • Big companies are fairly valued most of the times. They can compound your money. They are good for consistent returns & dividend yield. To protect & grow your wealth, there is nothing like good blue chips or fairly large companies. Serious wealth creation can be done only via midcaps.
  • In big companies you can benefit from earnings growth. In small companies you benefit from both earnings growth & valuation expansion. Earnings grow, PE’s expand & capital compounds faster.
  • Today’s blue chips were midcaps once upon a time ! People who had the acumen or luck to grab those companies at early stages have created enormous & sustainable wealth. By having a research oriented approach and patience to wait for long term, we intend to get a mix of both acumen & luck !
  • Invest in a predictable business. We avoid getting into unpredictable / high end technology or things that are out of our circle of competence and which we do not understand.  
  • Company should have good brand value & a business model that is already making sales. It must be a leader in its segment or at least one of the major players in that segment.
  • Company must have the potential to emerge as a leader, or one of the top players from its category.
  • It must have the pricing power or ability to gain pricing power in future.
  • It must operate in a huge & untapped market segment of the economy.  
  • It should be a fast growing business or a company that is presently facing temporary problem that can be solved in the long run, or a company that has a very stable business.

It is far easier to own businesses than owning stock prices. We are not obsessed with valuation metrics of companies & trying to predict quarter over quarter growth rates / earnings estimates. We prefer to go deeper into understanding the business model & various cycles surrounding them. Attempt is to focus more on the big picture analysis of how a company can evolve & how its business will transform. Once we like the company, entire research runs around 3 major factors.

  • Determining entry value
  • Reviewing the company performance & stock price periodically
  • Making exit an independent decision

We prefer having stocks with high margin of safety giving downside protections . We like situations where downside is known & upside is unknown. In general the attempt is to get into a stock where we can double the money in 3 years, and the stock has the potential to be 5x + over a the long term.

We enter the stock with an initial target on it. If the company performance is better than our expectations, the targets are revised upwards depending on the financial performance & outlook at that point of time. If the company performs below the expectations or all the hopes of performance revival are gone, we exit the stock. There is no downward revision in the stock price.

In short there is no fixed price target to claim fame ! We have general expectations about a future price, and these expectations are revised from time to time.

Exiting from each stock has to be an independent decision, irrespective of financial gains or loss.

If we think, that the best is behind the company & market momentum too may not take the company very far from present levels, we simply exit the stock & move on.

Vice versa, if we think that the best is yet to come. We may delay the exit decision and hold on to the position even if the desired target has been reached.

Being full time investors in stocks, we have own research, stock ideas & do not have to make any special efforts on that. Anyone who wishes to access our stock ideas & views can simply subscribe and see what stocks we like at present. Stay updated as we exit these stocks, change strategies, add new ones etc. Subscription business helps us in generating the capital & also establishes a track record in public domain. It shall reap rich dividends as & when we move into fund management activities.

100% of Alpha Invesco’s & company promoters investible capital is always invested in stocks that are accessible to our subscribers & fund partners. In short, we put our money where our mouth is.

You can download SEBI’s investment advisors regulation Here

Registration Details -
Alpha Invesco Research Services Limited (SEBI registration No : INA000003106 ) Valid Till 23rd June 2020

General responsibility
Alpha Invesco acts in a fiduciary capacity towards its clients and is bound to disclose all conflicts of interests as and when they arise. Alpha Invesco does not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.

Know Your Client –
Alpha Invesco follows Know Your Client procedure as specified by the SEBI Board from time to time. We must collect clients risk profile & risk assessment of all clients from time to time. Being an online subscription services provider, we take only basic information as the decision is taken by the client. And Alpha Invesco’s services merely act as a research input for the client.

Disclosures & Conflict Of Interest -
Alpha Invesco invests in securities markets & has interest in all securities it recommends. Alpha Invesco discloses to the client its holding or position, if any, in the financial products or securities which are subject matter of advice. Alpha Invesco ensures that in case of any conflict of interest of the investment advisory activities with other activities, such conflict of interest shall be disclosed to the client. Alpha Invesco does not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice. Provided that during the period of such fifteen days, if we are of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.

We are SEBI registered and are mandated to follow certain guidelines. We do have our own set of rules that we follow for our advisory service.

  • We do not recommend any stock unless we have a position in them. We believe any advice without own money at stake is worthless & should not be taken seriously. Putting own money makes sure that our interests & clients interests are aligned.

Tracking Positions

  • Apart from recommended stocks to clients, we do initiate small positions in stocks that are not recommended to clients. These are purely ‘tracking positions’ for following developments in those particular securities. We track stocks for a while before they are recommended to understand financials & other aspects. The moment we plan to add the stock to our core portfolio & give it significant allocation, the same is disclosed to our clients & the stock is recommended.

We make sure that clients are informed in advance as we plan to exit certain stocks. While exiting the stock, we make sure that it is a parallel process along with our clients.

Wrong Stock Selections & Opportunity Cost

We misjudged the evolution of business models, went wrong on timing of certain stocks and ended up getting into value traps / bad companies. This is what we call our ‘Hall Of Shame’. The term is borrowed from Prof. Bakshi. We even have photo frames of these stocks hanging on our office walls. This reminds us of not to repeat these mistakes again, keeps us humble & asserts that markets are supreme and one must never stop learning.

The biggest loss in having these stocks in our portfolio has been the opportunity cost more than the monetary one.

Stock Name Entry Exit Return
Prime Focus June 2012 ( 45 ) July 2014 ( 50 ) 10%
International Travel House October 2010 ( 265 ) August 2015 ( 240 ) -10%
Action Constructions May 2011 (42) September 2014 (35) -16%
Fedders Lloyd February 2010 ( 75 ) July 2014 ( 80 ) 7%
Fortis Healthcare August 2011 ( 150 ) June 2015 ( 175 ) 16%
Suzlon October 2011 ( 40 ) September 2015 ( 22 ) -45%
Globus Spirits April 2012 ( 75 ) August 2015 (78 ) 4%

Selling Out Early

We were able to identify these gems at extraordinarily low levels. However we made an error in judging their future prospects & sold out early. These mistakes have not cost us any financial loss but a huge pain when we look behind.

Stock Name Entry Exit Net Return Current Price
Cera Sanitaryware Nov 2011 ( 170 ) April 2014 ( 850 ) 400% 1700
Bliss GVS July 2011 ( 20 ) July 2014 ( 55 ) 175% 170
Poly Medicure December 2010 ( 65 ) September 2014 (300) 362% 423
La Opala July 2010 ( 9 ) Nov 2013 ( 100 ) 1011% 485
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