Investment Services

1. Enterprising Investing
2. Value Investing
3. Passive Investing

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  • We choose stocks with huge MOAT
  • We invest in stocks with understanding of the economic conditions.
  • Moderate Risk – Moderate Returns (Benchmark – More than 18-25% CAGR)
  • We choose stocks with huge MOAT
  • Investment in stocks below
    its Intrinsic Value (Also Known as Margin of Safety)
  • High Risk – High Returns (Benchmark -More than 400% returns in 6-9 years)”
  • We mostly invest in large-cap stocks.
  • Diversified portfolio
  • Low Risk – Low Returns (Benchmark – More than 10-15% CAGR)

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Enterprising Investing

“Benjamin Graham defines the enterprising investor as someone who will “devote a fair amount of his attention and efforts toward obtaining a better than run-of-the-mill investment result”. The Enterprising Investor has the time and experience (or proper guidance) in investing to expand the possible universe of opportunities beyond conservative investments. It is an active approach that requires constant attention and monitoring. He or she are willing to put forth the extra effort required for dynamic portfolio management, research, and selection of individual investments.

  • We choose stocks with huge MOAT
  • We invest in stocks with  understanding of the economic conditions.
  • Moderate Risk – Moderate Returns (Benchmark – More
    then 18-25% CAGR)

Negative Approach

Graham first addresses the enterprising investor by giving him a list of “don’t”. When the enterprising investor is willing to step beyond the scope of the defensive investor he should have an astute rationalization for the departure. He advises investors to avoid lower rated bonds and preferred stock unless there is substantial upside potential in the price of the securities. Lower rated securities have a tendency to plummet in adverse markets. The small additional annual income you receive from lower rated securities is not worth the risk unless there is the possibility of large capital gains. In other words, you should not be buying lower rated issues at a price close to Par (100).  A bond selling at 66 has the potential of a 50% capital gain versus no capital gains for a bond bought at 100. He also thought it was imprudent to buy new issues. He noted there are always exceptions to the rule. However, generally new issues are brought to market when it’s favorable for the company and with great hype and sales promotion; and therefore, probably not a bargain price for the investor. Graham didn’t like foreign bonds because of their poor investment history. Zweig points out in the commentary that some of Graham’s criticisms have been mitigated with the advent of exchange traded funds (ETFs) and mutual funds that specialize in lower-rated securities and foreign bonds.

Positive Approach

The goal of the enterprising investor is to achieve a higher than average rate of return. Graham laid out four activities where the enterprising investor can go beyond the defensive investor. These are buying in low-priced markets and selling in high-priced markets (tactical asset allocation), buying growth stocks, buying bargain issues, and buying “special situations”. Where the defensive investor would stick close to a 50% stock, 50% bond or cash plan, the enterprising investor has more leeway to take valuation into account. Portfolio rebalancing can be adjusted based on the attractiveness of an asset’s valuation. Graham sets an equity allocation minimum of 25%, maximum of 75%, based on the attractiveness of valuations. For the enterprising investor to buy a growth stock, he will usually have to find a larger company that is currently unpopular. The price of a growth stock usually reflects the expected growth, and that growth is, many times, overestimated by the markets. That means the enterprising investor must be extra careful when picking growth stocks. Buying bargain issues means finding stocks that are selling for less that their intrinsic value. A stock may be undervalued due to disappointing earnings or general disfavor. The best bargain would be a well established company priced well below its average historical price and it’s past average price/earnings ratio. 

Value Investing

Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Value investors actively ferret out stocks they think the stock market is underestimating. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond to a company’s long-term fundamentals. The overreaction offers an opportunity to profit by buying stocks at discounted prices

  • We choose stocks with huge MOAT
  • Investment in stocks below
    its Intrinsic Value (Also Known as Margin of Safety)
  • High Risk – High Returns (Benchmark -More than
    400% returns in 6-9 years)”

How Value Investing Work??

The principle behind value investing is – purchase stocks when they are undervalued or on sale, and sell them when they reach their true or intrinsic value, or rise above it. Another condition which value investors follow is allowing for a margin of safety when trading in value investing stocks. Stock prices can change owing to several reasons, underlined by a popularized market tendency which causes a share’s price to waver from its intrinsic value.

For instance, if as per popular market belief Company A will perform extremely well in the future, its share prices might increase from Rs. 100 to Rs. 120, further influencing the market into raising its demand and price dramatically from Rs. 120 to Rs. 180. However, upon inspection and proper analysis, it is found that the company has an average financial and organizational structure that does not withstand such high expectations. Thereby, its intrinsic value is determined at Rs. 80, which means it is overvalued by Rs. 100.  Top value investors refrain from partaking into such market tendencies and ferrets for stocks of companies that have sound long-term fundamentals. Still, due to several contributing factors, their prices are lower than their inherent value.

Passive Investing

Passive investing is an investment strategy to maximize returns by minimizing buying and selling. Index investing in one common passive investing strategy whereby investors purchase a representative benchmark, such as the S&P 500 index, and hold it over a long time horizon.

  • We mostly invest in large-cap stocks.
  • Diversified portfolio
  • Low Risk – Low Returns (Benchmark – More than
    10-15% CAGR)

Key Factors of Passive Investing ?

  • Passive investing broadly refers to a buy-and-hold portfolio strategy for long-term investment horizons, with minimal trading in the market.
  • Index investing is perhaps the most common form of passive investing, whereby investors seek to replicate and hold a broad market index or indices.
  • Passive investment is cheaper, less complex, and often produces superior after-tax results over medium to long time horizons than actively managed portfolios.

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