Prof. Sanjay Bakshi, the authority on value investing, and Ian Cassel, the founder of the MicroCapClub, have heaped lavish praise on each other for their respective stock picking skills.
The Prof has written a piece in which he has eulogized Ian Cassel. The Prof complimented Ian for dispensing “wisdom through wonderful tweets”. He also said that he is “overwhelmingly in sync with Ian’s thoughts on investing”. “I think you are doing a wonderful service to the investment community by telling them in a very articulate manner why it make sense to invest with great, yet to be discovered, businesses and entrepreneurs. I love your ideas on illiquidity and inactivity too” the Prof said. The Prof added that he would “love to meet and exchange my learnings” with Ian Cassel. The Prof urged all his fans to follow Ian Cassel on twitter to “learn from his wisdom and experience”.
Ian Cassel reciprocated by paying rich tribute to the Prof’s stock picking ability.
In the interview, the Prof has made several interesting revelations with regard to the ValueQuest India Moat Fund.
The most important one is that the Fund has given a mind-boggling return of 108% since April 2014 (its inception) till 30th April 2015. This is an incredible performance because the Nifty has delivered a meager 15% in the same period.
Prof Bakshi pointed that there are only 11 stocks in the portfolio. The portfolio appears to be equally balanced with the largest position taking up 13% of the assets. He also stated that the weighted average market cap of the stocks in the portfolio is about $600 million (Rs. 4000 crore). This means that all the investments are in small-cap and mid-cap companies.
The Prof described the stocks in the portfolio as follows:
(i) Very high quality of earnings: The aggregate pre-tax ROE of the portfolio is 37% a year;
(ii) Exceptionally strong balance sheet quality: Of the 11 businesses, 8 have no net debt and the most leveraged business has interest cover of more than 3x;
(iii) Highly Scalable Businesses;
The Prof made it clear that he follows the “buy-and-hold” strategy which is shown by the low portfolio turnover ratio of 13%. He explained out that a stock is sold only if the stock is unworthy of investment or if its valuations are excessive.
The other interesting revelation is that the Fund earns a management fee of 1% and a performance fee of 20% over a hurdle of 8%.
The Prof did not indicate the names of the stocks in the portfolio. However, we are free to speculate. Two stocks, namely, Ambica Cotton and Poddar Developers, are known to be a part of the portfolio of the ValueQuest India Moat Fund. The other stocks in the portfolio may be the Prof’s favourite stocks, namely, Relaxo, Thomas Cook, Vaibhav Global and Ashiana Housing.