What’s in a Name?
A symbol of reaching phenomenal feats, and the instrument to literally go “to the moon”, this portfolio is a growth-chaser like you’ve never seen.
Its aggressive nature causes it to hunt the market for companies that exhibit the potential for supernormal profits, and invests in it as early as possible, so as to reap the rewards in the long run.
The portfolio is charted out with rigorous screening and research, with ample evidence to prove that the companies that make the cut are in it to win it.
If you’re a sports fanatic, you or your friends may have tried their hands at creating a fantasy team, where you carefully take all the information that is available to you and chart out who you would pick to play on your team, the reasons for the same and keep shifting them around according to how the games are being played in real life.
Creating this portfolio was not all that different. The companies are the players, the companies’ investment into innovation, increasing production and making calculated decisions that assist in their revenues “sky-rocketing” is the player’s training, and how the stock market reacts to their performance is how the players perform in their game.
An infamous investor and author by the name of Peter Lynch had cracked the code to discovering these companies and his fund, Fidelity Magellan, made enormous returns using this strategy in the 70s. To put it into perspective, an investment of $10,000 would’ve grown by 20 times its size in just 10 years! Our Rocketship aims to use a similar strategy.
Recipe for the Dough 💸
The core thesis is to look for companies that can exhibit phenomenal growth. So phenomenal that the stock also gets driven by significant valuation re-rating. Earnings growth + valuation re-rating is the magic we look for.
Look for companies with >15% earnings growth. Growth in the past doesn’t reflect what will happen in the future. We hunt for companies with dynamics that are favourable to support consistent >15% growth in the future.
Analyse financial statements, industry data and macroeconomic trends. Taking into account past performance, current situation, and research, we estimate what will happen in the future, and if growth will continue or accelerate from current levels.
To ensure sustenance of growth, we dive into extensive research about the competitive advantages they possess over other companies, the industry that they hail from and why their business model works as well as it does.
Quality is mandatory for valuations to re-rate and sustain at higher levels. Checking on corporate governance standards, leadership strength and capital allocation are the basic checks a company needs to pass, despite high growth.
Ascertain how many stocks of each company we wish to invest in by a process called weighting. We do this basis our expectations of their performance and our conviction towards the same. We also ensure sector and stock concentration don’t adversely add to risk.
Monitor their progress, or lack thereof and make adjustments to the portfolio accordingly (Rebalance).
Constantly look for new developments and ideas to predict which sectors or companies will deliver high growth in the future.
Skin in the Game
Still aren’t convinced? Let’s take an example of one of the stocks that Rocketship used as fuel for lift off - Shriram Fibres Ltd (SRF). SRF has been in the chemicals industry since 1970 and is a leading player in three key areas:
Fluorine based chemicals (mainly used in refrigeration)
Plastic packaging (BOPP and BOPET)
Technical textiles (nylon, conveyor belts)
SRF was initially only a technical textiles manufacturer (nylon fibre). It then diversified into making polymer products, and then fluorine chemicals. It has a leadership position in all three businesses.
The phenomenal success story has resulted in a 14% earnings CAGR over the last 5 years. This has only accelerated over the last 3 years, where profits have increased by 40%.
Re-rating in SRF has been led by expansion into new businesses, leadership in all segments, and a consistent movement towards higher-value business. The stock has gone from trading at 30x 1-year-forward PE 5 years ago, to 45x now!
A share that was worth around INR 380 in 2016 hit highs of more than INR 2,700 in 2021. Fortunately for Rocketship investors, we rode growth wave towards victory!
The combination of high-growth and re-rating usually happens with stocks that aren’t discovered yet, or that have just started orbiting to the next level. However, this may not always play out as the probability of failure is high at that time.
To safeguard the portfolio from stories not working as we envisage, we also add companies that qualify the high-growth criteria, but are already trading at high valuations. Take TCS for example - high growth, but valuations are already at a premium. This gives us some stability to the portfolio, and ensures outperformance with reduced risks.
Meet Your Maker
Presenting - Prasanna Bidkar
He has spent more than 17 years in the equity markets. For a decade, he was the Head of Research at the iconic Dalal Street Investment Journal, where he also launched several successful products.
His rich experience also includes heading research and investment advisory services at Dalal Times and Pentad Securities.
Prasanna has also managed equity portfolios for HNIs, and has conducted more than 200 investor awareness programmes across India.
Piece of the Action 🍕
Want to be a part of our journey while knowing exactly where and why your money moves? Just click below and hop on aboard!
Alphaware Advisory Services Private Limited (Brand Name - Rupeeting) makes no warranties or representations, expressed or implied, on products and services offered through the platform. It accepts no liability for any damages or losses, however, caused in connection with the use of, or on the reliance of its advisory or related services.
Past performance is not indicative of future returns. Please consider your investment requirements, risk tolerance, goals, time horizon, risk and reward appetite, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. Performance and returns of any investment portfolio can neither be predicted nor guaranteed.
Investments in mutual funds, stocks, ETFs and any other investment products that you see Rupeeting's views being expressed on are subject to market risks. Please read all scheme related documents carefully.
Performance results do not include any fees or charges that may be incurred by investors, including the advisory fees charged by Alphaware Advisory Services Private Limited.
The strategies referred to in this document have been launched in August 2021. Any representation of the performance of these strategies prior to that is basis time-based backtesting of the strategy. All figures represent performance of a hypothetical account created on Rupeeting's Core Strategies with a hypothetical launch date of July 1, 2011.
Annualised Return refers to a ten-year Compounded Annual Growth Rate (CAGR). Standard Deviation is the annual standard deviation seen over the same ten-year period. For Sharpe Ratio, and Alpha, the risk-free rate used is of 3%, which is the return on the Nifty 1D Rate Index in 2021.
All performance metrics using results for Rupeeting's Core Strategy, when compared to the performance of the Nifty 50 Index is for informational purposes only. Reference or comparison to an index does not imply that the strategy will be constructed in the same way as the index or achieve any of the performance metrics similar to the index.
Performance results were prepared by Rupeeting, and have not been compiled, reviewed or audited by an independent accountant.
Certain information contained herein constitutes “forward-looking statements”. Due to various risks and uncertainties, actual events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking statements in making their investment decisions. No representation or warranty is made as to future performance or such forward-looking statements.
© Alphaware Advisory Services Private Limited
[SEBI RIA Registration No: INA000015747] [Validity of registration: February 08, 2021-Perpetual] [Address: 1 Janki Centre, Off Veera Desai Road, Andheri West, Mumbai 400053] [Principal Officer details: Mr. Sagar Lele, Email ID: firstname.lastname@example.org, Contact No. +91-22-26730890]
[ARN - 168001] [Platform Partner: BSE (Member code-3864501), smallcase] [CIN – U74999MH2019PTC320573] [GST No: 27AARCA8847R1ZF]