C A P S T E M

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Equity is an asset class that offers superlative returns. But a very minority of people are the ones who are making huge money in stock market. Why?

For most, stocks market is more like a casino because they are investing blindly. Therefore, it is imperative to have proper guidance as Equity is one of the toughest asset classes to judge and hold.

India presents a unique opportunity in times of the current mayhem. Formalization of economy and the demographic dividend provides huge opportunities. Financialization of householding savings in lieu of under-penetration in insurance and investments would enable additional thrust.

Model Portfolios

We have 2 model portfolios, Capstem 3P and Capstem Unsung Heroes.

Capstem 3P Portfolio

This is the all-weather flagship portfolio we offer. It has industry titans, large co.’s with MOATs, Consistent compounders, earnings multipliers. This is a long-term investment strategy that you can use to build wealth over the years to come.

Capstem Unsung Heroes

This offers investors a flavor of growth and fast growth companies from the midcap universe, giving a hold of potential multibaggers.

Common Mistakes in Equity Investing

Anchoring

People look at stocks after sharp correction and think it is relatively cheap to what it was in the past without considering the changing fundamentals and the industry landscape.

Miscalculated Risk Appetite

Stocks selected without considering the risk appetite/profile of the client leading to huge drawdowns or lack of performance.

Concentration Risk

Investing large chunks in specific scrips leading to huge bias and exposure risk.

Misdirection

Lot of times, people choose stocks based on recommendation of close associates and invest in them without any subsequent research.

What we do?

We construct a portfolio that fits your needs, matches your risk profile and gives the optimal return.

Quality

Relative Value

Stocks that are better placed for appreciation relative to peers.

Management Integrity

Allows us to identify businesses that are compounders in the long run.

Business Cycles/Economic Climatte

Identifies stocks that are cyclical and invests in them as following the cycles is rewarding

Growth/Innovation:

Goes beyond conventional ratios and sees possible disruptions and high growth segments.

Performance

ROE

It is a measure of the profitability of a business for equity shareholders post all interest costs. It reflects on the operational efficiency of a company.

Revenue Growth

It reflects on the company’s business potential and future earnings; high growth companies will have higher earnings too.

Interest Coverage Ratio

It shows how much of the interest payments are covered by the Company’s earnings; better coverage ratios help companies navigate downturns.

Economic Cost of Capital

True measure of cost a company is bearing, any return has to be measured against it rather than WACC which discounts interest capitalized.

Momentum Portfolio

Momentum portfolio includes stocks showing long term breakouts, result related re-ratings, sectoral churns and sudden surge in activity due to corporate actions. These portfolios would have 5-8 stocks at any time and would have limited holding period till the basis pans out.

Methodology

We construct a portfolio that fits your needs, matches your risk profile and gives the optimal return. We look at qualitative and quantitative factors to arrive at an investible universe.

Strategy

The investible universe arrived at based on above criteria is updated regularly. It forms the base for portfolio design.

Companies are analyzed from the perspective of sustainability of growth, business viability and quality of the book more than near term profitability.

Such designed portfolios are closely monitored for their sustainability of growth and quality and validation of thesis, and continuously revisited and updated as needed.

Risk management

Risk is managed at the portfolio level. This is done by tracking drawdown in real time. We use portfolio level VaR, Beta, Sharpe ratio, Down Beta to track and manage risk. Once the risk metrics cross predefined thresholds, we rebalance to minimize portfolio level Beta and VaR or liquidate holdings to reduce equity exposure.

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