AUM of Marcellus Investment Managers surges to Rs. 7500 Cr ($1 Billion)
First, we have to congratulate Saurabh Mukherjea and his ace team at Marcellus Investment Managers for the quantum jump in the AUM.
Saurabh revealed that the AUM is now close to $1 Billion and that this has created a problem of plenty because he has to now scour in the Bushes for new stocks to buy.
“Flows into Marcellus have been very strong over the last 12 months. As the money that we are managing is basically moving towards the billion dollar mark, we are adding a few more stocks because there is only so much you can buy in a name and many of the names that we own we are already accounting for a substantial part of the free float and that is a little uncomfortable,” he candidly stated.
“We are trying to figure out what will do well over the next two, three, four years and launching a specific portfolio dedicated to that,” he added.
It is notable that Marcellus already has a small cap portfolio PMS Fund named ‘Little Champs‘ and another named ‘Kings of Capital‘.
Little Champs has potential mega multibaggers like Alkyl Amines (specialty chemicals), Lumax (auto ancillary) and Aavas Financiers (NBFC) (click here to see the full list).
Aavas Financiers has the unique privilege of being a part of both, the Little Champs and the Kings of Capital portfolios.
The flagship of the traditional Marcellus strategy is the ‘Consistent Compounders‘ portfolio.
This portfolio boasts of the old and trusted warhorses like Kotak Bank, HDFC Bank, Asian Paints, Berger Paints etc.
The ideal portfolio should be like a ‘Thali’, with consistent compounders and potential multibaggers
Saurabh advised that we should divide our portfolio into “core” and “satellite” parts.
He referred to the “Core” as the “Dal-Chawal” or the “main course” stocks and the “Satellite” as the “sweet dish“.
“The core has to be super strong. The dal chawal (bread and butter) portfolio has to be high quality compounders with impeccable pedigree; Nestle, Asian Paints, HDFC Bank, Kotak Bank, Berger Paints and so on. The main course, the vegetable dish can be one rung down in market caps — so AU Finance, Avaas Financiers and so on. The dessert can be really well-run small caps. The sweet dish has to be had in moderation, the main course also has to be had in a reasonable degree of moderation,” he said.
Saurabh also advised that while the dal chawal stocks or the bread and butter stocks should be 60-65% of our portfolio, the balance can be allocated to the sweet dish stocks which are small cap stocks.
“If you see it like that, it logically stacks up and you get everything in sort of good proportions, you protect the core of your franchise, the core of your portfolio and generate solid compounding through both bull and bear markets,” he stated.
Relaxo and Dr Lal Pathlabs can become 10x in 10 years
Saurabh advised us to consider tucking into Relaxo and Dr Lal Pathlabs, both of which are powerhouses amongst the mid and small-cap stocks.
“Relaxo and Dr Lal Path Labs are both franchises at $3 billion or less than $3-billion market cap. They have a dominant market share in their specific niche. In Relaxo’s case, it is the low end of the footwear market. They already have 20-30% share but they are not a dominant franchise in their entire footwear market. Dr Lal Path Labs in the northern Indian region is a good fifth to a third of the market but they are not yet dominant pan India,” he stated.
He also pointed out that if we invest in franchises like Relaxo and Dr Lal Pathlabs with great pedigree, great 10-year historical numbers, over the next 10 years they can become 10x in 10 years as they grow into the broader market.
“Invest in a franchise with great pedigree, great 10-year historical numbers and then look ahead over the next 10 years and say that as our country grows, this company — a Relaxo or a Dr Lal Pathlabs — can become 10x in 10 years as they grow into the broader market,” he said with clarity.
It is worth recalling that Saurabh had earlier recommended Relaxo to us when it was quoting at throwaway valuations (see Saurabh Mukherjea Recommends “Tremendous Wealth Creator” Stocks With 6x Gain Potential For Us To Buy Now).
The stock was also a hot favourite of Dolly Khanna. Unfortunately, she sold it prematurely and deprived herself of a mega fortune in excess of hundreds of crore (see Dolly Khanna lost colossal fortune of Rs. 100 crore by prematurely dumping Relaxo Footwear from portfolio).