Omkar’s Portfolio Analysis and Discussion

Hello

My investing philosophy at present remains bottom up. My current thought process is that once I decide to partner with management over a long term, I believe its management’s headache to manage tough macro conditions or industry headwinds than me worrying about the same. My job is - making sure I select right managements and then periodically review management/business is on track. The question – 1) how to make sure at the time of investing that selection of management is right and 2) what should be the review period?

Following is my current thought process –

1. Invest in companies which are constantly de-risking their business model while growing their business so that they are making business model stronger after each passing cycle

2. Therefore rather than too much worrying about quarter on quarter numbers, the key parameter which I monitor is how management is pivoting business model to manage business/industry risk. As change of business model takes time, it is good to review progress over a period of 2-3 years which naturally becomes frequency of ‘’review’’ than reviewing business every quarter

How do portfolio companies fair in this assessment ?

Suprajit engineering –

Rather than me worrying about next auto down turn, I believed in management to do that and I think they have done decently well

Ajanta Pharma

Rather than me worrying about GOI policy mandating doctors to prescribe generic medicines, I trusted management to take care any geography specific regulatory risk and to my opinion, they have fairly insulated business model which takes care of such risks. Also as you can see, rather than me worrying about Institutional business which is tender based and lumpy, management was mindful about that as they de-risked their business model which I believe now, is much stronger than 2018

Kotak Bank, bajaj finserv and HDFC/HDFC Bank

As mentioned before, My inclination is towards buying diversified financial group than just a lender or an amc or an Insurance company.

Abbott – No change in the risk profile over last 3 – 4 years and that is why it will not get same allocation as Ajanta pharma

HCL Tech – Even though market is favouring niche companies, I would like to invest in companies which has traditional IT component as well along with ER&D which makes more diversified revenue streams and hence superior business model in my view

Next company I am looking to add – PI Industries

To conclude, rather than being reactive to any risk, I prefer to consider as many risks as I can in the beginning. Also, I don’t wish to spend any time on forensics as that is not my strong area and hence I don’t generally compromise on management ‘’perception’’.