InCred MultiCap PMS


Key Portfolio Attributes

Inception Date: 24th May 2021

Portfolio Manager’s Name: Aditya Sood

Portfolio Manager’s Experience: 20+ years

Investment Objective

The investment objective of InCred Multicap PMS is that it aims to capitalize on opportunities across market capitalization segments, from small-cap to large-cap, as companies grow and transition between these categories.

The strategy seeks to deliver superior returns by investing in companies that have the potential for market cap graduation, benefiting from the potential undervaluation and growth of small- and mid-cap companies.

The goal is to identify companies at an inflection point that are poised to move from small-cap to mid-cap, mid-cap to large-cap, and large-cap to giant-cap status. The overall aim is to provide long-term capital appreciation.

Investment Strategy

The strategy capitalizes on valuation gaps between small-, mid-, and large-cap segments, through a multi-cap approach.

They follow a three-pronged approach: Buy, Size, and Sell.

  • Buy: Investing in “Great” businesses at a fair value or “Good” businesses at a discount to intrinsic value, while avoiding “Bad” businesses.
  • Size: Optimizing diversification and allocating capital based on conviction.
  • Sell: Reducing positions when the incremental upside-downside ratio becomes unfavorable or when the underlying business deviates from the investment thesis.

They emphasize rigorous quantitative and qualitative analysis. They seek companies with ROIC greater than WACC. They consider strong capital structure and cash flow adequacy. They analyze the character of management, alignment with minority shareholders, and pricing power. They prefer companies with low external dependence.

They seek companies with:

  • Capital allocation skills: the ability to allocate capital to improve shareholder returns
  • Superior Management: Owner-operator teams aligned with minority shareholders
  • Potential for High Growth: Companies in high growth industries with a large addressable market.
  • Smaller Size: Small companies with the potential to grow revenues, profits and cashflows
  • Longevity in Earnings Growth: Companies with earnings and cash flow that is sustainable over long periods of time.
  • Reasonable Valuations: Companies available at a reasonable price with enough margin of safety.

They also consider investment themes:

  • Value: Companies trading below their historic average valuations or well managed companies with strong operational metrics. They also look to benefit from corrections in sectors like cement and auto.
  • India’s Increasing Export Competitiveness: Companies with competitive products which can act as challengers to incumbents.
  • Changing Consumer Preferences: Companies in high growth sectors who offer a superior value proposition.
  • Corporate Restructuring: Companies with potential for value unlocking due to mergers or organizational restructuring.
  • MNCs: Multinational Corporations that have access to superior technology and global management teams.

Investment Philosophy

InCred’s investment philosophy centers around identifying “Great” businesses at a fair value and “Good” businesses at a discount to intrinsic value while avoiding “Bad” businesses.

The strategy leverages the potential for outperformance in mid- and small-cap stocks through good timing, stock selection, and appropriate holding periods.

They believe that many smaller companies at inflection points can provide significant capital growth. They aim to identify and invest in these types of companies.

They also focus on companies that have globally competitive products with low market share, making them viable challengers to established market leaders.

They consider a company’s ability to operate in high growth segments and deliver a superior value proposition to consumers.

They believe that market correction creates opportunities to invest in great companies trading below their historical average valuations while fundamentals remain unchanged/ are improving.

Do Not Simply Invest, Make Informed Decisions

WISH TO MAKE INFORMED INVESTMENTS FOR LONG TERM WEALTH CREATION

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