NIO

VRDDHI is meant for someone who has an investment horizon of 5+ years. We invest in a space which is exciting as there is a possibility of finding undiscovered gems. However in this segment stock prices can have huge swings on either sides – the prospective investor should not be plagued by the volatility of the stock price (smallcaps/microcaps/midcaps can correct by 30-40-50% or even more during bear phases). It is important that the prospective investor should align with our investing process and try to understand how we manage and control risks and only then invest with us. We don’t focus on maximizing returns instead we focus only on minimizing risks.

We follow a bottom up method of picking stocks. We read 100s of Annual Reports and attend 100s of AGMs and concalls across the year to generate ideas. Further, we also participate in industry trade shows & exhibitions. Lastly, we run qualitative and quantitative screens to find new ideas.

Our entire focus in investing is to manage and control risks. Our belief is that if one is able to protect the downside, then up-side usually takes care of itself. We try to find undiscovered gems – businesses which are market leaders in their niche, are run by honest & capable owners/managers and are available at attractive valuations.

Since these businesses are usually not covered by brokerages and do not have much information available on them – we need to get on the ground to uncover insights – we do this by speaking to people in the value chain of the business – customers, suppliers, distributors, competitors, auditors, bankers, employees, ex-employees etc to understand more about the business, industry, and the people who run the company. This enables us to develop differential insights and sown the business over a long period of time ignoring the market gyrations.

While it is important to understand what we do, it is equally important to state what we don’t do – and that also makes us different.

Timing a market top or bottom is almost impossible. We encourage our prospective investors to have a long term view as the impact of timing significantly reduces over a long term. 

Further given we don’t follow a model portfolio approach as a result all the money is not invested on day 1. Our investment is driven by bottom up opportunities that we may find at any given time. During a heated market, our opportunity set reduces and as a result we may not invest the entire amount fully. Thus, when the market corrects, the portfolios may be cushioned due to the cash (un-invested portion). The corollary of this approach is that we may under-perform in newly opened accounts in a rising market as we haven’t invested money and the market continues to rise. 

Similarly in a a benign market, we may invest more aggressively and deploy the money much faster. Below are exhibits of actual accounts that have opened at differing market periods and how we have invested.

This way of investing has worked for us over market cycles- we believe it makes sense to be patient and rational and not be driven by market levels as long as one has a long term view (5 years+)