![“ In Search of Morpheus , to dive the rabbit-hole “
• Education : BBA , CFA I , NCFM , CAT ~93%tile , ISB-UCLA Financial Engineering & LBS VC - Program.
• Work Experience : 6yrs. ( kid )
-AAnand R hi G
d Rathi Group ( 2 years ~ W k d one-year i sync with R hi ji , the only j i member to attend monthly d l organization strategy
Worked in i h Rathi h l junior b d hl day-long i i
meetings , First transaction in career - 10crs in ADS arbitrage , highest sales-trader revenue ’06. )
- JM Financial Group ( 3.5 years ~ First transaction 50crs Open offer arbitrage , Highest revenue ’07 , Highest IPO Funding & Margin
Funding for 2 years , Aggregate cumulative revenue approx. $2mn , Aggregate cumulative volume $50mn+ equities , $2bn+ derivatives , IPO Funding
$200mn+. )
Research Indulgences :
Ø - INDIA HYDROCARBON Sector: Perspectives, Potential, Insights, Economics, Proxies, Impact, Bourses.
Ø - RELIANCE INDS. – World Scale & World Class, Vision 2010 & Beyond. ( Operational Integration, Divestiture, Fiscal Impact,
Valuation, Fin. Performance, Benchmarking EM/Chevron/Petroplus & Saras, Potential Scalability. )
Ø - SPECIAL SITUATIONS : Divestitures [ Perspective from Developed Markets, Experience of Previous Divestitures, Divestiture Structures,
Current & Potential Divestiture Plays. ] ; Screener Portfolio’s ( Liquid Assets / Market Cap. ) ; Open offer & De-listings.
Ø - DA N-I-F-T-Y Code – Concept of ‘Index – Change Mgmt.’ ≈ Composition, Reorganization & Impact.
Ø - Selected Mid-Cap Research : Stable & High MOAT businesses , Capex Beneficiaries.
- Derivatives : Market Neutral strategies , Long-term Options.
g g p
Have experienced client losses ~$30mn. Have made conscious effort towards reading about the experiences of institutions &
institutional-investors in capital markets in the last few decades. ( ~300 Sovereign defaults in the last 200years ,169 in last 50years )
Reading Influences ~ Fundamental ( Warren Buffet , Charlie Munger , Benjamin Graham , A. Damodaran , Joel Greenblatt , George
A
Soros , Connie Bruck , Janet Lowe , Roger Lowenstein , Peter Bernstein , Monish Pabrai , Eric Beinhocker , Alan Greenspan , Bruce Greenwald ) ;
Trading Psychology ( Nasim Taleb , Jack Schwager , Steven Drobny ) ; Quantitative ( Paul Willmott , Charles Cottle , Guy Cohen ,
Richard Tortoreillo , James Montier , R.Arnott, V.Katsenelson ) ; Management & Strategy ( Mckinsey , CK Prahalad , Tom Peters , Bill
Gates , Jack Welch , Ayn Rand , Robert Green ,Jim Collins…) 2](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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- 1. DHANDHO INVESTING Re-Imagine SIMPLICITY for ‘Growth at Reasonable Price’ Varun Goenka JM Financial Group. Varun.goenka@jmfinancial.in / +9004670600
- 2. “ In Search of Morpheus , to dive the rabbit-hole “ • Education : BBA , CFA I , NCFM , CAT ~93%tile , ISB-UCLA Financial Engineering & LBS VC - Program. • Work Experience : 6yrs. ( kid ) -AAnand R hi G d Rathi Group ( 2 years ~ W k d one-year i sync with R hi ji , the only j i member to attend monthly d l organization strategy Worked in i h Rathi h l junior b d hl day-long i i meetings , First transaction in career - 10crs in ADS arbitrage , highest sales-trader revenue ’06. ) - JM Financial Group ( 3.5 years ~ First transaction 50crs Open offer arbitrage , Highest revenue ’07 , Highest IPO Funding & Margin Funding for 2 years , Aggregate cumulative revenue approx. $2mn , Aggregate cumulative volume $50mn+ equities , $2bn+ derivatives , IPO Funding $200mn+. ) Research Indulgences : Ø - INDIA HYDROCARBON Sector: Perspectives, Potential, Insights, Economics, Proxies, Impact, Bourses. Ø - RELIANCE INDS. – World Scale & World Class, Vision 2010 & Beyond. ( Operational Integration, Divestiture, Fiscal Impact, Valuation, Fin. Performance, Benchmarking EM/Chevron/Petroplus & Saras, Potential Scalability. ) Ø - SPECIAL SITUATIONS : Divestitures [ Perspective from Developed Markets, Experience of Previous Divestitures, Divestiture Structures, Current & Potential Divestiture Plays. ] ; Screener Portfolio’s ( Liquid Assets / Market Cap. ) ; Open offer & De-listings. Ø - DA N-I-F-T-Y Code – Concept of ‘Index – Change Mgmt.’ ≈ Composition, Reorganization & Impact. Ø - Selected Mid-Cap Research : Stable & High MOAT businesses , Capex Beneficiaries. - Derivatives : Market Neutral strategies , Long-term Options. g g p Have experienced client losses ~$30mn. Have made conscious effort towards reading about the experiences of institutions & institutional-investors in capital markets in the last few decades. ( ~300 Sovereign defaults in the last 200years ,169 in last 50years ) Reading Influences ~ Fundamental ( Warren Buffet , Charlie Munger , Benjamin Graham , A. Damodaran , Joel Greenblatt , George A Soros , Connie Bruck , Janet Lowe , Roger Lowenstein , Peter Bernstein , Monish Pabrai , Eric Beinhocker , Alan Greenspan , Bruce Greenwald ) ; Trading Psychology ( Nasim Taleb , Jack Schwager , Steven Drobny ) ; Quantitative ( Paul Willmott , Charles Cottle , Guy Cohen , Richard Tortoreillo , James Montier , R.Arnott, V.Katsenelson ) ; Management & Strategy ( Mckinsey , CK Prahalad , Tom Peters , Bill Gates , Jack Welch , Ayn Rand , Robert Green ,Jim Collins…) 2
- 3. Pursuit “ Predicting rain doesn't count , building ARKS does “ To have a ‘ G.A.R.P Long-only Equity Investing Strategy Template ‘ for very large semi-passive investors towards material medium and long term relative out-performance. To T appeal to large investors, from the perspective of process, sustainability, transparency , positioning l l i f h i f i bili ii i vs individual competence and Maximize ‘ Emotional Quotient ‘ . A Strategy for business-houses , investors to cut across sectors & companies and invest in a portfolio of ‘ Companies which are Globally competitive & have High Operating yields ‘ ,which give us high-visibility and maximum value for money. To align and target the ‘ Cause ‘ for performance and not ‘ Return ‘ itself ; as in the case of a business engagement vs mere financial investment. To extract the Maximum ‘ Value ( fundamental performance ) per unit of ‘ Market Cap. & Leverage ‘. To align portfolio based on ‘ Endogenous factor ‘ and let ‘ Exogenous factors ‘ generate the alpha. g p g f g f g p To realign our stakes vs the house so as to : A. Minimize our odds of irreversible losses amidst black swans & B. Maximize our odds of above-average gains in euphoria. (Focused Intensity / Time )* God = Unstoppable Momentum 3
- 4. “ The ZEN of Portfolio Strategy “ Timeless / Perpetual ‘ AAA ‘ Bonds enclosed in an Equity capsule + Positioned for ( Earnings & Multiple Expansion ) + Averse to ( Multiple contraction , Sentiment / Liquidity & Event-outcome lead - reversal ) + Mr. Market is the boss ( Market Cap. is non-negotiable ) + A simple model-generated 40-50 stock portfolio with weights vs benchmarks i l d l d 40 50 k f li i h i h b h k Education required: Grad. School Finance + Well Read + Common Sense + Exceptional EQ + Avg. IQ VS Other Assets : The only Asset class to be relatively recession proof , deliver operating performance in line with AAA Bonds even during the worst periods. 4
- 5. ( Simulation * Munger’ism )* 2 3 Key Templates of 40-50 stock portfolio’s from BSE500 Universe. l f k f l ’ f 1. Top100 by Market Cap. vs BSE200 2. Bottom 100 by Market Cap. vs Midcap Indices. 3. 3 Market Cap. neutral vs Major MF s. Cap MF’s Absolute Returns ~ 10yrs / 40 Qtrs. * 3 Templates * 5 Portfolio’s = 600 pt-to-pt portfolio returns. Rolling returns ~ 10yrs / 40 Qtrs. * 3 Templates * 5 Portfolio’s = 11700 pt-to-pt portfolio returns. Benchmarks : 3 Major Indices & 2 Top Performing MF’s = 200 pt-to-pt returns. Multiple Dynamic ~ Valuation & Return metrics. Both Equal-weight & Value-weight comparisons. Both a Portfolio Valuation positioning & Return p p p g perspective to substantiate cause-effect. Over 300 Excel Sheets. 5
- 6. Value –for- Every penny !! 6
- 8. 0 5000 10000 15000 20000 25000 200012 2 200103 3 200106 6 200109 9 200112 2 200203 3 200206 6 200209 9 CNX Midcap HDFC Top 200 200212 2 200303 3 200306 6 200309 9 Dhandho Multicap. ~ SW 200312 2 200403 3 Dhandho Mid/Small Cap. ~ SW 200406 6 200409 9 200412 2 200503 3 200506 6 200509 9 200512 2 200603 3 200606 6 200609 9 BSE200 200612 2 200703 3 RIL Growth 200706 6 200709 9 200712 2 200803 3 200806 6 200809 9 200812 2 Rs.100 on Dhandho Portfolio's vs Benchmarks over 36 Qtrs. 200903 3 200906 6 200912 2 Dhandho Large & Quasi Large Cap. ~ SW
- 9. 3 Dhandho Portfolio's vs 4 Benchmarks ~ 2005 onwards Dhandho Multicap. ~ SW Dhandho Large & Quasi Large Cap. ~ SW 500 Dhandho Mid/Small Cap. ~ SW RIL Growth 450 HDFC Top 200 BSE200 CNX Midcap 400 350 300 250 200 150 100 50 0 200506 200509 200512 200603 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 200912
- 10. 3 Dhandho Portfolio's vs Benchmarks ~ 2008-09 Dhandho Multicap ~ SW Multicap. Dhandho Large & Quasi Large Cap. ~ SW Cap Dhandho Mid/Small Cap. ~ SW RIL Growth HDFC Top 200 BSE200 120 100 80 60 40 20 0 200712 200803 200806 200809 200812 200903 200906 200912
- 11. 0.0% 20.0% 40.0% 60.0% 60 0% 80.0% ‐40.0% ‐20.0% 100.0% 120.0% 199912 200003 200006 200009 200012 200103 200106 200109 HDFC Top 200 200112 200203 200206 Dhandho Multicap. ~ SW 200209 200212 Dhandho Mid/Small Cap. ~ SW 200303 200306 200309 200312 200403 200406 200409 200412 200503 200506 200509 200512 BSE200 200603 RIL Growth 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 Relative Perf. - 3 Dhandho Portfolio's vs 3 Benchmarks over 40 Qtrs. 200812 Dhandho Large & Quasi Large Cap. ~ SW 200903 200906 200912
- 12. Relative Perf. - 3 Dhandho Portfolio's vs 3 Benchmarks over 16 Qtrs. Dhandho Multicap. ~ SW Dhandho Large & Quasi Large Cap. ~ SW Dhandho Mid/Small Cap. ~ SW RIL Growth 120.0% HDFC Top 200 BSE200 100.0% 80.0% 60.0% 40.0% 40 0% 20.0% 0.0% 200512 200603 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 200912 ‐20.0% ‐40.0%
- 13. Relative Performance : Dhandho vs Benchmarks 2008-09 Dhandho Multicap. ~ SW Dhandho Large & Quasi Large Cap. ~ SW Dhandho Mid/Small Cap. ~ SW RIL Growth HDFC Top 200 BSE200 120.0% CNX Midcap p 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 200712 200803 200806 200809 200812 200903 200906 200912 ‐20.0% ‐40.0%
- 14. 20.0% 40.0% 60.0% 80.0% ‐40.0% ‐20.0% 0.0% 100.0% 199912 200003 200006 200009 200012 200103 200106 200109 200112 200203 RIL Growth + Nifty Short 200206 200209 200212 Dhandho Multicap. + Nifty Short 200303 200306 200309 200312 200403 200406 200409 200412 200503 200506 200509 200512 200603 200606 200609 200612 BSE200 + Nifty Short 200703 200706 200709 200712 200803 Dhandho & Benchmark Portfolio's + NIFTY Short over 40 Qtrs. 200806 200809 200812 200903 Dhandho Large & Quasi Large Cap. + Nifty Short 200906 200909
- 15. 0.0 500.0 1000.0 1500.0 1500 0 2000.0 2500.0 3000.0 3000 0 3500.0 199912 200003 200006 200009 200012 200103 200106 200109 200112 200203 RIL Growth + Nifty Short 200206 200209 200212 Dhandho Multicap. + Nifty Short 200303 200306 200309 200312 200403 200406 200409 200412 200503 200506 200509 200512 200603 200606 200609 200612 BSE200 + Nifty Short 200703 200706 200709 200712 Rs.100 on ' Dhandho & Benchmark Long-Short over 40 Qtrs. 200803 200806 200809 200812 200903 Dhandho Large & Quasi Large Cap. + Nifty Short 200906 200909
- 16. Rs.100 on ' Dhandho & Benchmark Long-Short over 19 Qtrs. 200 Dhandho Multicap. + Nifty Short Dhandho Large & Quasi Large Cap. + Nifty Short 180 RIL Growth + Nifty Short 160 BSE200 + Nifty Short 140 120 100 80 60 40 20 0 200503 200506 200509 200512 200603 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 200909
- 17. Rs.100 on ' Dhandho & Benchmark Long-Short 2008-09 Dhandho Multicap. + Nifty Short Dhandho Large & Quasi Large Cap. + Nifty Short 140 RIL Growth + Nifty Short BSE200 + Nifty Short 120 100 80 60 40 20 0 200712 200803 200806 200809 200812 200903 200906 200909
- 19. “ Dhandho PE “ consistently in bottom quartile… " MultiCap Portfolio's PEx " vs Market across 40 Qtrs. 90.0 BSE500 Uni. ~ Equal Weight BSE500 Uni. ~ MCap. Weight BSE500 Uni. ~ Screener Weight Dhandho MultiCap - Equal Weight 80.0 80 0 Dhandho MultiCap - Screener Weight 70.0 60.0 60 0 50.0 40.0 40 0 30.0 20.0 20 0 10.0 0.0 00 199912 200003 200006 200009 200012 200103 200106 200109 200112 200203 200206 200209 200212 200303 200306 200309 200312 200403 200406 200409 200412 200503 200506 200509 200512 200603 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 200909 200912
- 20. “ Dhandho EV/Sales “ consistently in bottom quartile… " MultiCap. Portfolio's EV/Sales x " vs Market across 40 Qtrs. 18.0 BSE500 Uni. ~ Equal Weight BSE500 Uni. ~ MCap. Weight 16.0 BSE500 Uni. ~ Screener Weight Dhandho MultiCap - Equal Weight Dhandho MultiCap - Screener Weight 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 199912 200003 200006 6 200009 200012 200103 200106 6 200109 200112 200203 200206 6 200209 200212 200303 200306 6 200309 200312 200403 200406 6 200409 200412 200503 200506 6 200509 200512 200603 200606 6 200609 200612 200703 200706 6 200709 200712 200803 200806 6 200809 200812 200903 200906 6 200909 200912
- 21. “ Dhandho Op. Yield “ consistently in top-quartile… " MultiCap. Portfolio's Operating Yield " vs Market across 40 Qtrs. BSE500 Uni. ~ Equal Weight BSE500 Uni. ~ MCap. Weight 60.0% BSE500 Uni. ~ Screener Weight Dhandho MultiCap - Equal Weight Dhandho MultiCap - Screener Weight p W g 50.0% 40.0% 40 0% 30.0% 20.0% 10.0% 0.0% 0 0% 199912 200003 200006 200009 200012 200103 200106 200109 200112 200203 200206 200209 200212 200303 200306 200309 200312 200403 200406 200409 200412 200503 200506 200509 200512 200603 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 200909 200912
- 22. “ Dhandho RoIC “ consistently in top-quartile… " MultiCap. Portfolio's RoIC % " vs Market across 40 Qtrs. BSE500 Uni. ~ Equal Weight BSE500 Uni. ~ MCap. Weight 40.0 BSE500 Uni. ~ Screener Weight Dhandho MultiCap - Equal Weight Dhandho MultiCap - Screener Weight 35.0 35 0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 199912 200003 200006 200009 200012 200103 200106 200109 200112 200203 200206 200209 200212 200303 200306 200309 200312 200403 200406 200409 200412 200503 200506 200509 200512 200603 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 200909 200912
- 23. 0.0 5.0 ‐5.0 10.0 15.0 20.0 25.0 30.0 199 9912 200 0003 200 0006 200 0009 200 0012 200 0103 200 0106 200 0109 200 0112 200 0203 200 0206 200 0209 200 0212 200 0303 200 0306 BSE500 Uni. ~ Equal Weight 200 0309 BSE500 Uni. ~ Screener Weight 200 0312 200 0403 Dhandho MultiCap - Screener Weight 200 0406 200 0409 200 0412 200 0503 200 0506 200 0509 200 0512 200 0603 200 0606 200 0609 200 0612 200 0703 200 0706 200 0709 " MultiCap.Portfolio's P/BVx " vs Market across 40 Qtrs. 200 0712 200 0803 200 0806 BSE500 Uni. ~ MCap. Weight 200 0809 Dhandho MultiCap - Equal Weight 200 0812 200 0903 200 0906 200 0909 200 0912 “ Dhandho P/B“ consistently in bottom-quartile…
- 24. “ Dhandho BS Strength “ consistently in top-quartile… " MultiCap. Portfolio's BS Stength /Liquidity " vs Market ~40 Qtrs. 160.0% BSE500 Uni. ~ Equal Weight BSE500 Uni. ~ MCap. Weight 140.0% BSE500 Uni. ~ Screener Weight Dhandho MultiCap - Equal Weight Dhandho MultiCap - Screener Weight 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 19991 20000 20000 20000 20001 20010 20010 20010 20011 20020 20020 20020 20021 20030 20030 20030 20031 20040 20040 20040 20041 20050 20050 20050 20051 20060 20060 20060 20061 20070 20070 20070 20071 20080 20080 20080 20081 20090 20090 20090 20091
- 25. “ Dhandho Leverage“ at acceptable levels… " MultiCap. Portfolio's Leverage " vs Market ~40 Qtrs. 1.4 BSE500 Uni. ~ Equal Weight BSE500 Uni. ~ MCap. Weight BSE500 Uni. ~ Screener Weight Dhandho MultiCap - Equal Weight 1.2 Dhandho MultiCap - Screener Weight 1.0 0.8 0.6 0.4 0.2 0.0 199912 200003 200006 200009 200012 200103 200106 200109 200112 200203 200206 200209 200212 200303 200306 200309 200312 200403 200406 200409 200412 200503 200506 200509 200512 200603 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 200909 200912
- 26. “ Avg. Market Cap. / Stock in Dhandho Portfolio at competitive levels… " Portfolio Liquidity " - Average Market Cap. / Stock q y g p 35000 BSE200 Dhandho Top.100 Dhandho Mid. & Small Cap. Dhandho MultiCap. CNX Midcap BSE Small Cap. 30000 25000 20000 15000 10000 5000 0 199912 200003 200006 200009 200012 200103 200106 200109 200112 200203 200206 200209 200212 200303 200306 200309 200312 200403 200406 200409 200412 200503 200506 200509 200512 200603 200606 200609 200612 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 200909
- 27. A string of impressive no.s * ‘ ZERO ‘ = 0 27
- 28. Is there just one solution / perspective !! “ The problem is never to get new , innovative thoughts into our minds – but how to get the old ones out. “
- 29. Varun Goenka JM Financial Group. +9004670600 Varun.goenka@jmfinancial.in Disclaimer: This email is solely for the addressee(s) and may contain confidential information. If you have received this email in error, please destroy and notify l Th l ll h dd () d d l h d h l l d d sender immediately. Sender does not intend to waive confidentiality or privilege. If you have received this email in error and / or are not the intended recipient, you are notified that reading, using, copying, printing, forwarding or distributing of this email is strictly prohibited. You are therefore advised to immediately delete this email communication including any attachments permanently from all your systems wherein this email may be received or stored intentionally and/or inadvertently. 29