Investment philosophy adopted by Fundamental Blasters is primarily guided by the value investing priciples which includes buying scrips at a discount to intrinsic valuation. The value investing theory is made popular by Legends Benjamin Graham,Warren Buffett, Charlie Munger. Whenever scrip is bought, we are not only buying the shares of the company, we are owning the company at fraction. So when we buy any scrip, we think as if we are owner of the business. Ignoring vagaries of Mr.Market, we stick to the right picks in good and bad times.
Tantrums of Mr. Market actually offer wonderful opportunities of buying and selling scrips at discount/premium. The irrationality is primarily outcome of market fluctuations and pendulum swings from extreme pessimism to extreme optimism.
While selecting scrips in portfolios key points we consider are :
Margin of Safety, Economic Moat (Durability and sustenance), Quality and vision of Top management, Return on capital employed (and return of capital too ;-))
These chosen strict criteria help us to deliver superior returns over time. As said by Mr. Warren Buffett : “Time is the friend of the wonderful Company, the enemy of the mediocre”
We look at identifying stocks based on the below parameters.
Opportunity: Invest in businesses operating in sectors / industries that have huge addressable market and are growing at a faster rate than the economy. Also, the growth of the businesses / sectors should sustain over longer period of time
Longevity/Scalability: Identify businesses that are scalable and have sustainable competitive advantage through entry barriers, such as technology and processes, access to natural resources, brands and distribution network, and have visibility of earnings for next 2-3 years
Management: Invest in businesses where the management has both intellect and integrity, and have demonstrated innovative thinking. Also, seek out leaders whose objectives are aligned with shareholders and whose ambitions are in line with ground realities
Value Accretive: Focus on businesses that consistently generate returns better than their cost of capital, derive significant return on incremental capital and produce positive free cash flows from their operations
Emerging Themes: Focus on Identifying Emerging Stocks / Sectors which have potential to deliver growth over the long term