Alpha Moguls | India’s Best-Performing Portfolio Manager In 10 Years Swears By Buying High, Selling Higher

The best-performing Indian portfolio manager of the last 10 years swears by buying quality high-priced stocks, betting that the growth prospects of the underlying business would propel them further.The methodology, known as the Canslim approach, was developed by William O’Neal, founder of the U.S. firm Investor’s Business Daily. And it has propelled Mumbai-based Girik Capital’s multi-cap investment strategy as the best performer, according to a study by PMS research firm PMS-AIF.“Our stock picking is an extremely process-oriented exercise,” Charandeep Singh and Varun Daga, co-founders of Girik Capital, said on BloombergQuint’s special series Alpha Moguls. We have certain parameters with which we screen to find the large potential winners, they said.Girik Capital, which manages nearly Rs 500 crore in assets, returned nearly 17.15% to investors in the ten years through June 30, 2020, compared with the Nifty 50’s 7.84%. Avoiding errors by not investing in loss-making stocks is extremely important, they said. “A lot of your returns come from avoiding errors,” Singh and Daga said, adding: “The whole secret to winning big in the stock market is not to be right all the time but to lose the least amount when you’re wrong.”The firms weeds out losers very fast and that makes all the difference in its investing style, the co-founders of Girik Capital said. “Even if you look at the index, Nifty weeds out its losers. Imagine if you had Nifty with Suzlon Energy Ltd., Unitech Ltd. and Reliance Communication Ltd., where would it be?”The duo termed the process of buying high and selling higher a “paradox”. What seems too high, usually goes higher and what seems too low usually goes lower, they said. “That’s one place where we focus and when we open the fundamentals, we find there’s so much going on in those companies and they’re probably at one of the cheapest levels that they have been in their histories.”The co-founders of the portfolio manager said that the price-to-earnings ratio is one of the “most misused and misunderstood number”, preferring to overlook it for growth. “Most of the leading companies of the past decade or two decades have been expensive before their biggest move,” they said. “What’s more important is how the company’s growth can accelerate in the future.”When growth comes, in hindsight it will look very cheap and they have seen that with many companies, the duo said.The duo said that based on their studies, nearly half of their stocks move because of the sector they’re in. “You could be in a great stock but if the sector isn’t in flavour and overall strength of the industry and demand isn’t good, then even the best of the stocks suffer,” they said, pointing to the example of Sun Pharmaceutical Industries Ltd. over the last five years.“It was the darling of the market in 2015 and then everybody bought it at every fall and then it fell like 60-70%, 80%,” they said. “Every stock can fall when the sector goes bad. So, we believe that it’s very important when you’re managing public money to be in the right sector where there’s tailwind and earnings growth and to stick to the leaders.”Forecasting can be a folly, according to the co-founders. 'The minute you tell yourself that you’re not a good forecaster, you have won half the battle,' they said. “Build a process and build discipline.”.Watch the full interview here:

Alpha Moguls | India’s Best-Performing Portfolio Manager In 10 Years Swears By Buying High, Selling Higher

This portfolio manager swears by buying high-priced stocks, betting they’d rise further amid growth prospects in their businesses.

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