Ayaz Motiwala learnt the ropes of investing at Highbridge Capital Management, Hong Kong. In 2014, when he was confident of his stock picking prowess, he started a hedge fund called “Amala Emerging Asia Fund”. The fund is managed by an asset manager in Hong Kong called “Nivalis Partners”. Ayaz has ambitious plans to raise $250 Million (Rs. 1500 crore) by the year 2020.
Ayaz Motiwala’s strategy is to buy top-quality companies which are “under researched and less crowded”. He also has a conservative streak and seeks to buy stocks where the “downside is protected”.
Ayaz appears to have mastered the fine art of finding winning stocks because one of his favourite stocks, ZF Steering, is up a whopping 40x.
Now, let’s take a quick look at Ayaz Motiwala’s investment strategy and latest four top-quality stock picks:
Investment strategy – Go beyond the top 100/ 200 companies and find top-quality hidden gems:
India is the unique market where we have lots of interesting companies, even if we exclude the top 100 names. If you were to dip a little deeper beyond the top 100 names, or may be top 200 names, you have a very large set of companies in which you can do work and try and get across these companies and hope that these entrepreneurs stick to the knitting and their underlying business delivers on the expectations, then you have the recipe for a long term compounded money making idea.
Top stock picks:
Hindustan Media Ventures Ltd – dominant market share in the media sector:
Hindustan Media Ventures’ business is growing because of faster economic growth in certain states, improved literacy and reading habits and rising ad rates in India. Hindustan Media Ventures’ revenues and profits are expected to continue growing as the publication gains market share.
Vinati Organics – unique competitive advantage, high quality & consistent, numbers, high ROC, reasonable valuations:
If you observe Vinati’s 10-year financial numbers, the company has built the business starting with IBB. But they got this other product, which is a unique product, where there are only three companies manufacturing this chemical in the world.
That gives it a unique competitive advantage and this has helped the company deliver numbers in the last five to seven years. If you look at its 10-year financial numbers, they are of really high quality, pretty consistent, steady. The company has high returns on capital (ROC). So in the short term, the market seems to be a little dismayed by flat revenue growth, which is a function of what they make the chemical off, which is crude underlying through the benzene chain.
So we are hoping that this is the opportunity that we are looking for where we have a pretty decent to high quality business, which because of this air pocket is giving us a chance to own at a reasonable multiple.
Camlin Fine Chemicals – supplier to high quality businesses:
We are trying to buy high quality businesses and these are suppliers which are having relatively high quality economics depending or feeding off these sort of OEM (Original Equipment Manufacturer) companies. An oft repeated example is that of generic companies, supplying products to international companies. This is a good business to be in whether it is very large companies like Lupin or Dr. Reddy’s or even Aurobindo Pharma. The smaller ones are also doing a pretty good business. So our approach is to look out for emerging companies.
We own a company called Camlin Fine Sciences, which deals with global edible oil companies that, in turn, supply to food companies like McDonalds. They make food antioxidants and have had decent economics in the last couple of years. So this is the way in which we are trying to play on the fringes and stay in the game.
Phoenix Mills – a play on consumption theme:
One of the businesses which we like as a play in to consumption is Phoenix Mills, which has got a few malls in India. The commentary has been quite negative on online shopping and people over time will not go to malls. But if you see their numbers they have been holding up quite well. They have moved their business model from fixed rentals to sort of a minimum guarantee with a percentage of revenue playing into the consumption which takes place in those malls.