Samit Vartak is the Founding Partner and Chief Investment Officer of SageOne Investment Managers LLP.He is a CFA® charter holder, an MBA from Olin School of Business of the Washington University in St. Louis and holds a Bachelor of Engineering degree with Honors from Sardar Patel College of Engineering (SPCE), Mumbai University. He has been investing in the equities markets since 1999.
In this alpha series session, Mr. Samit Vartak talked about SageOne’s style of identifying investing opportunities. He also talked about the common traits of winning stocks and the role of earning growth, entry valuation in multi-baggers and also the role of timely exits. He also discussed Warren Buffet’s stratergy of 1950’s & 1960’s and economic moats in the Indian Context.
SageOne’s commonly followed investment style:
- Quality businesses with high barriers to entry ( Moats )
- Businesses with high and sustainable ROE/ROCE
- Size of opportunity – duration of growth more important
- Consistent and high growth
- Attractive price
Find companies with high Economic Moats
- Cost advantage – RM, Manufacturing costs
- Size advantage – Economies of scale
- High switching costs
- Intangibles – IP, Patents, Technology
- Management/ Culture/ Execution
MOAT philosophy in Indian Context
- Very few businesses with long term moat available in India
- Almost all are well known and priced to perfection
- Would WB have invested in such businesses in his early year?
- Above investment style may still generate some alpha if investment horizon is very long ( 10+ years )
- This style would still save you from making blunders and suits someone who is a passive and part time investor
- For a full time investor who is willing to do hard work , WB’s style of 1990’s can still generate multi-baggers (>26% CAGR) in India
What to look for
- Differentiating factor that will acquire Market Share even if for a short term ( 3-4 years )
- Great executioners who can do it without diluting profitability
- Opportunity which is not well known to the markets and where your in-depth research gives you first mover advantage.
- Businesses which can double their earnings in 3 years and where risk of valuation derating is very low
- Icing on the cake would be if you find businesses which can also double the valuation multiple in 3 years
- Growth and timely exists
- Growth covers many other mistakes and miscalculations
- Study of cash flows etc. to ensure earnings are real
Series Link: https://indianinvestingconclave.com/recordings/99
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