We believe investing success is an outcome of making good decisions consistently over a long period of time. We strive to make Good decisions. Good decisions = FPR (Facts free of bias + Probability + Risk Reward)
We believe in evaluating investment decisions following risk-reward metrics, wherein the consequences must dominate probability.
We believe investing in growth business
We are happy to be contrarian when risk reward is compelling: Mimicking herd = regression to mean
We believe in being patient and long term. Investing is like watching grass grow.
We prefer definite returns over immediate returns.
We don’t mind sitting on cash if we can’t find better use.
Our Philosophy
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We believe investing success is an outcome of making good decisions consistently over a long period of time. We strive to make Good decisions. Good decisions = FPR (Facts free of bias + Probability + Risk Reward)
-
We believe in evaluating investment decisions following risk-reward metrics, wherein the consequences must dominate probability.
-
We believe investing in growth business
-
We are happy to be contrarian when risk reward is compelling: Mimicking herd = regression to mean
-
We believe in being patient and long term. Investing is like watching grass grow.
-
We prefer definite returns over immediate returns.
-
We don’t mind sitting on cash if we can’t find better use.
Our
Approach
We have devised a unique three basket approach – the MCO (Magic, Compounder, Opportunistic) framework for identifying companies (illustrated below).
1. Magic basket = capture earnings growth + valuation re-rating
2. Compounder basket = well discovered stable growth stories with a long tailwind and potential of valuation re-rating
3. Opportunistic basket = short term opportunities including special situation, valuation dislocation, etc..
Our investment approach has been to look for good businesses with long-term competitive advantages and good management available at reasonable valuations using our proprietary frameworks, forensic expertise and industry knowledge. We believe margin of safety lies in detailed work. We strive to identify companies where we can capture high growth phase triggered by various catalysts like change in management/CEO/industry structure/business strategy, balance sheet improvement, product innovation, etc. which will lead to re-rating in valuations. We also like stable businesses operating in growing markets, run by proven and experienced management, generating robust cash flows with superior capital return ratios available at reasonable valuations. We shy away from businesses which are regulated, cyclical in nature, have poor corporate governance and low returns on capital.
Our Services
AIF
Alternative Investment Fund (AIF) – An AIF is a privately pooled investment vehicle that collects fund from sophisticated investors to invest with a certain investment strategy to attain specified objectives. AIF does not come under the purview of SEBI’s mutual fund regulations. Venture capital funds and hedge funds are some examples of AIFs.
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Long only, multicap and sector agnostic fund
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Absolute Return oriented
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Focused on fundamental driven growth investing
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Bottom up stock picking using our unique framework
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Objective to create long term sustainable alpha
PMS
Alternative Investment Fund (AIF) – An AIF is a privately pooled investment vehicle that collects fund from sophisticated investors to invest with a certain investment strategy to attain specified objectives. AIF does not come under the purview of SEBI’s mutual fund regulations. Venture capital funds and hedge funds are some examples of AIFs.
-
Long only, multicap and sector agnostic fund
-
Absolute Return oriented
-
Focused on fundamental driven growth investing
-
Bottom up stock picking using our unique framework
-
Objective to create long term sustainable alpha
Investment Process
Our investment ideas should pass undermentioned hurdles to qualify admission to Carnelian Portfolio.
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Large opportunity size
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Sustainable Moat
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Capable and honest management
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Efficient capital allocation
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Healthy cash flows
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Strong Balance Sheet
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Impeccable Governance track record
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Favourable risk reward metrics
Our investment philosophy revolves around Carnelian PIU framework which involves deep dive into Business, Management and Risk Reward metrics:
"PROFITS IMPRESS US"
Process Mapping
Carnelian Filter on Capital Allocation & Governance
*Carnelian preferred assets - Assets not susceptible to real value diminution risk
**Discretionary Profit - can be invested to generate growth or returned to shareholder
***Non-discretionary profit - Required to be re-invested in the business to maintain current profit.
We are very comfortable rejecting opportunities which fail our first litmus test.
Forensic Expertise
Our founders take pride in pioneering forensic research under the brand name “Analysis Beyond Consensus” which is followed by the investors across the globe.
Our forensic research has a successful track record of more than a decade, wherein we have consistently highlighted red flags across various large caps ahead of consensus. Our findings, therein has helped investors to take informed investment decisions based on true numbers instead of reported numbers, thus avoiding pitfalls – One of Carnelian strong virtues.
We will continue to filter all our stocks using decades of our forensic expertise, which at times may lead to error of omission, however safeguards our investors against error of commission. Breaching governance framework has “ZERO TOLERANCE “in Carnelian world of investing
Our forensic framework involves deep dive into:
i. Earning quality: true economic profits vs reported profits
ii. Cash flow sustainability: sustainable cash flows vs reported cash flows
iii. Hidden liability: true debt vs reported debt
iv. Asset quality analysis: where is my profit Vs what is my Profit analysis
v. Hidden risks: off balance sheet risks
vi. Capital allocation analysis – deep dive into source of ROE vs reported ROE
vii. Governance issues: related party transactions/ scrupulous transactions
Check our Forensic research.
