Kotak PMS, registered with SEBI, is one of the largest Portfolio Management Service providers in the country today. Our approach can best be summarized as making concentrated investments in well-managed, high quality companies that are purchased at significant discounts to their intrinsic values. Like any investment style, such stocks can be out of favour and trail broad benchmarks for a period of time. We make such bets because we are confident that this approach leads to superior investment returns over the long term.

The portfolio shall essentially target to invest in Value Opportunities and Special Situations in individual stocks and related instruments. The portfolio will be market capitalisation and sector agnostic.

Value Opportunities

These are ones, where in the opinion of the fund manager, the company’s Intrinsic Value is ‘X’, while the stock is trading at a discount to X. The discount should be such that it offers reasonable ‘Margin of Safety’ for an investment in the stock. This discount to Intrinsic Value is a result of multiple reasons i.e. temporary miss in performance, risk aversion at broad market level, regulation uncertainty, etc. As uncertainty regarding these aspects abates, the Intrinsic Value is expected to be realized.

Special Situations

These shall be investment opportunities dependent on the probability of occurrence of one or more corporate events, rather than market events. These situations can largely be classified as:

  1. Price related situations: Buybacks and Delisting
  2. Merger related situations: Mergers and Demergers
  3. Corporate Restructurings: Asset Sale, Special dividend, Change of management etc.

This strategy shall follow a stock-specific approach with a medium to long term perspective. The portfolio shall invest across sectors with a bias to invest in companies backed by able managements with sound fundamentals and strong future potential. At least 75% of the portfolio will be invested in Small and Midcap securities with addressable market capitalization of 200 cr to 5000 cr

Why invest in Small and Midcap companies?

  • Investment in Small and Midcap stocks renders better returns if invested judiciously at attractive valuations
  • Many Small and Midcap companies are leaders in their respective markets
  • Perceptions change with consistency in earnings growth of companies. Temporarily weak perceptions are an opportunity
  • Large arbitrage available due to low focus and research coverage
  • Divergent Trends in ownership patterns between Promoters, Strategic investors and Institutional investors in small cap stocks makes the investment case interesting
  • Prudent stock selection in small cap stocks can take care of risk of
    • Corporate governance
    • Business growth volatility
    • Scalability
    • Balance Sheet strength to withstand business volatility