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Investment Analysis and Portfolio Management: Submitted To

The document outlines an investment firm's philosophy and process, which focuses on identifying undervalued companies through a combination of top-down macroeconomic analysis and bottom-up fundamental research, then taking a long-term approach to generating risk-adjusted returns by diversifying across high-quality stocks while avoiding over-diversification. Key sectors of focus are listed and the stock screening and portfolio management processes described, along with the fee structure and formula for calculating alpha.

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30 views4 pages

Investment Analysis and Portfolio Management: Submitted To

The document outlines an investment firm's philosophy and process, which focuses on identifying undervalued companies through a combination of top-down macroeconomic analysis and bottom-up fundamental research, then taking a long-term approach to generating risk-adjusted returns by diversifying across high-quality stocks while avoiding over-diversification. Key sectors of focus are listed and the stock screening and portfolio management processes described, along with the fee structure and formula for calculating alpha.

Uploaded by

jadgug
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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INVESTMENT ANALYSIS AND

7/10/2020
PORTFOLIO MANAGEMENT

Submitted to:
Dr. Mayank Joshipura
Submitted by:
Section B Group 10:
Akash Sethia (F051)
Bharath L (F035)
Kshitij Malhara (F037)
Raunaq Saraf (F049)
Renu Joshi (F032)
Ronak Jain (B030)
Alpha Investors
“We grow together”
Investment Philosophy
Our investment philosophy is based on the fact that it is important to get into the markets at
the right time and stay committed for a long period in order to generate risk adjusted returns
that is capable of beating the benchmark index. We strive to achieve this by diversifying our
portfolio in order to minimize risk and increase return. We also ensure that we do not over
diversify which will result in minimized returns.
Our focus is to identify the undervalued firms whose fair asset value and potential earning
capabilities are not reflected in the market. Investing in such companies gives us the
opportunity to catch onto trends early to maximize returns. We also concentrate on those
companies which have a strong management and a high potential to grow in the future.

Investment Process
We do not try to predict what the market is going to do tomorrow or six months from now.
Instead, we look for ways to deliver long term returns to our customers. We adopt a
combination of top-down and bottom-up approach to select the companies which are
consistent with our investment philosophy.
In top-down approach, we study the macroeconomic environment and the sectors which are
likely to be benefitted from such factors. We look at different companies in the selected
sectors on the basis of the quantitative factors such as historical stock trends, ratios and other
financials, and qualitative factors such as management, corporate governance and wide
presence. We keep equal focus on bottom-up approach as well because we believe that those
stocks with great fundamentals and high potential are worth investing even if that sector is
not performing well or current macroeconomic scenario is not favorable.
We constantly monitor and rebalance our portfolio to efficiently connect the financial goals
to its associated risk factor.
Our Approach

• Macroeconomic factors Top


• Sector specific • Stocks with strong
Down Bottom fundamentals
• Company specific
- Quantitative factors Up • High growth potential
- Qualitative factors
Stock Screening Process
Our stock screening process is a five-step process:

1. Identify Universe: Our universe consists of stocks traded in BSE and NSE.
2. Remove Outliers: We conduct a financial statement analysis for companies from the
chosen sectors to avoid firms in financial distress.
3. Screen for Value: We screen for stocks with low enterprise values relative to operating
earnings and other sector specific multiples.
4. Screen for Quality: We rank the cheapest stocks on their long-term business
fundamentals and current financial strength.
5. Investment with Conviction: We seek to invest in a concentrated portfolio of the
cheapest, highest quality value and growth stocks to increase risk adjusted returns.

Sectors

These sectors will be our major area of focus. But since we also deploy the bottom-up
approach to investing, we do not restrict ourselves from investing in stocks from other
sectors that have a potential to generate returns.

Benchmark Index: Nifty 200 Broad Based index


Fee Structure
Fixed 0.5% of asset under management
7.5% of total profits if alpha* less than or
Variable equal to 1%
10% of total profits if alpha* greater than 1
% and less than equal to 2.5%
15% of total profits if alpha* greater than
2.5%

*The excess return of an investment relative to the return of a benchmark index is the
investment’s alpha
Alpha generation
α = Rp – (Rf + β*(Rm – Rf))
α = The alpha you want to determine,
β = The beta of the investment or portfolio compared to the selected index,
Rp = The realized return of the portfolio or investment,
Rf = The risk-free rate of return, and
Rm = The return rate actually realized by the market or index

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