January 2013

A recent study by Morgan Stanley suggests that only 51 stocks in the world are covered by more than 50 analysts. Out of the 51 stocks 49 are Indian companies, the other two being Apple & Intel. The study further states that only 500 out of the 5500 listed companies in India are covered by analysts. Our study suggests that most of the wealth has been created in such untracked companies. For example Gruh Finance & HDFC Limited both come from the same parentage. Returns generated in the last decade by Gruh Finance is 6600% & HDFC Limited is 1000%. It is extremely difficult for institutions like Mutual Funds to venture in companies beyond the 500 highly tracked businesses due to extremely closely held shareholding pattern.

In our PMS we are trying to complement Mutual Funds by investing in businesses which are difficult to own by institutions. We will unlock value in a lot of businesses after they attain a size worth looking at by analysts. This in turn will also create a huge positive divergence in the performance of our portfolios. As always we are extremely conscious about the quality of management and businesses we own. We are proud to say that it’s been a whole one year in all the three strategies without a single churn in stocks which shows our commitment and focus on capturing long term growth.