Alphamultiple Advisors

Hello, I am Raghav Behani - Founder and Research Head of Alphamultiple Advisors (Earlier: DalalStreetBulls).

Over the last 18 months, we have maintained equity allocation of less than 50% for all new investors. We have still not crossed the > 50% allocation. We are bullish on Credit Rating Companies, Midcap IT (Tata Elxsi we entered in 2017), Gold financiers (We chose Muthoot over Manappuram), Entertainment companies coming out of heavy inventory investing, White good makers which will benefit directly from higher GDP per capita and more women in workforce.

Some duds from our end were:

PC Jewellers - First entered in 2013-14 and kept adding positions. We had just 3% allocation for members joining in 2017. So old members exited with decent profits while new members lost ~ 1.5% of the portfolio in this.

DHFL- First added in FY15. We booked half the position in June 2018 as higher share of Loan-against-property was a red flag for us. We sold the balance after the crash. So again not much lost here.

What we saw before the market:

Shakti Pumps was the biggest gainer for our investors. From an average price of Rs 100-130, we sold it at Rs 500-550. Technocraft Industries is another smallcap which surprised most.

How our portfolio has been performing:

Since the allocation to equities was below 40% for those who joined a year back, their portfolio would be down by roughly 7% to 8%. However, those who started in early 2017 with us are seeing a CAGR in the range of 10% to 15%. Our asset allocation model saved us from a major drawdown but the year went rather slow.

Where do we see the market going:

The number of stocks in our universe is high but most are still 30% to 40% above our fair value estimates. For example, most auto-ancillary companies are in the PE range of 15 to 20 while ideally we would want to pay 8x to 12x for them considering the future risk of electric vehicles and the low pricing power of the industry. If someone starts investing today, he has a good chance of earning 20% to 25% CAGR over the next 3 years.

We do not like commodity companies. They are very much cyclical and you want to buy them when they are reporting losses and the cycle is yet to reverse. We like companies who demonstrate the ability to earn a ROCE > COC. They should be increasing sales on a YoY basis for atleast 3 out of 5 years. Cash utilization is another metric to judge the management.