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Hexagon : Small-Midcap Focused Portfolio
Philosophy
Positioning Stock Prices are
slaves of earning
Small-midcap
power
focused portfolio.
Process Period
Stringent Long term
investment Investing with
process and Risk minimum churn
Management
2
Small & Midcaps : Wealth Creation
2500
22x
2000
1500
1000 9x
500
0
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Nifty Free Float MidCap Index Nifty Index
97% of the multi baggers were from Small & Midcap universe
(<INR 5000 cr Mcap)
152 24 4
Note: Multi bagger is defined as stocks which have given more than 25% CAGR for more than 3 years. Market cap filtering is done based
on initial Mcap. 4
Wealth Creation: Stock Picking Matters !!
Multibaggers = 75%
Index = 25%
34x
Multibaggers = 50%
Index = 50%
26x
Multibaggers = 25%
Index = 75%
18x
Mutual Funds
9.8x
If 25% of the portfolio comprised of
Index = 100%
2.6x Multibaggers & remaining 75% was
invested in index funds, the
portfolio would have still delivered a
1.8x stellar 9.8X returns
Returns calculated from 1st April 2008 till 31st March 2015 taking top 50 multibaggers into account. Multibaggers are stocks that have grown by more than 5
times from 2008 till 2015. Mutual funds returns have been calculated using HDFC Equity Fund, HDFC Top 200 Fund, Birla SL Frontline Equity Fund, ICICI Pru
Focussed BlueChip Equity Fund, Franklin India BlueChip Fund, DSP BR Top 100 Equity Fund, Reliance Vision Fund. Index returns have been calculated using
CNX NIFTY. 5
Portfolio Management Services
6
Investment Philosophy
9,000 500
8,000 450
7,000 400
350
6,000
300
5,000
250
4,000
200
3,000
150
2,000 100
1,000 50
0 0
Over last 16 years Nifty Index has followed Nifty Earnings - Nifty EPS up by
6.6x Vs Nifty Index up 6.4x
7
Investment Philosophy: Key Tenets
8
Hexagon: Investment Strategy
CONSISTENT
EXCELLENCE
COUNTER
CLIMBING
CYCLICAL
THE VALUE
CURVE
EMERGING
TURNAROUND INDUSTRY
COMPANIES LEADERS
CORPORATE
ACTIONS
9
Hexagon: Investment Strategy explained
11
Consistent Excellence : APL Apollo Tubes Ltd.
APL APOLLO TUBES LTD. • APL Apollo Tubes (APL) makes steel pipes that find
application across a wide range of uses in agriculture,
APL Apollo Tubes Ltd Nifty infrastructure, construction and household.
400
• To further fortify its position and maintain leadership,
the company has introduced new technology DFT
300 (Direct Forming Technology) which will enable APL to
decrease the cost further and expand customer base.
200
130
100
• With GST implementation, APL is in a strong position
to grab market share from unorganized players which
0 is 50% of the tube industry. Based on the shift from
unorganized to organized, new use-cases (import
Sep-15
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18
Dec-15
Dec-16
Dec-17
Jun-16
Jun-17
Source : Capitaline | Stocks referred to are not an endorsement of their soundness or a recommendation to buy or sell. The same may or may not be a part of the
Hexagon Portfolio. 12
Turnaround Companies: Himadri Sp. Chem. Ltd
HIMADRI SPECIALITY CHEMICAL LTD • Himadri Speciality Chemical Ltd (HSCL) continues to
be a market leader in its core business of coal tar
(HSCL) pitch (CTP) with a 70% market share and is a cost
leader in carbon black and CTP due to integrated
Himadri Sp. Chem. Ltd Nifty
manufacturing.
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18
Dec-16
Dec-15
Dec-17
Jun-16
Jun-17
Source : Capitaline | Stocks referred to are not an endorsement of their soundness or a recommendation to buy or sell. The same may or may not be a part of the 13
Hexagon Portfolio.
Consistent Excellence: Mold-Tek Packaging Ltd
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Source : Capitaline | Stocks referred to are not an endorsement of their soundness or a recommendation to buy or sell. The same may or may not be a part of the Hexagon 14
Portfolio.
Turnaround
Climbing theCompanies: Vaibhav
Value Curve: Shree Global
Pushkar
SHREE PUSHKAR CHEMICALS • Shree Pushkar Chemicals & Fertilisers Ltd (Shree
Pushkar) is a dye intermediates (DI) manufacturer
& FERTILISERS LTD and is forward integrating into dyes stuff (DS)
manufacturing. Dyes are colouring agents which are
Shree Pushkar Nifty mainly used in textile.
600
• In an industry where effluent treatment is a major
550 risk for sustenance of the business, Shree Pushkar
500 has achieved status of ‘zero-waste plant’. They have
450 achieved that by converting effluents into saleable
400 products like fertilizer.
350
300 322 • The company is “moving up the value curve” by
250 forward integrating into dye-stuffs. It is in the process
200
of establishing its own brand as well.
150 130 • The company is expanding capacity backed by orders
100 from MNCs and establishing its own brand. We
50 expect 21% PAT CAGR over FY18E-20E.
Sep-17
Sep-15
Mar-16
Sep-16
Mar-17
Mar-18
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Source : Capitaline | Stocks referred to are not an endorsement of their soundness or a recommendation to buy or sell. The same may or may not be a part of the Hexagon
Portfolio. 15
Investment
Process
16
Small-Midcaps- High Returns ≠ High Risk
Larger Selection Pool allows for high rejection- Investable Pool for Small-Midcaps is 5x of
large caps
High Rejection rate ensures cherry picking stocks with strong fundamentals- Out of 100
companies we reject 80 companies
874
336
159
87
18
Risk Management Framework
Diversification Review
20 Stock Portfolio
Spend 50% of time
revisiting stocks
within portfolio
No Over Exposure to
single sector
19
Risk Management - Time Diversification
Why Time diversification ? How do we do that ?
Certain events are un predictable (Brexit, China, New clients or New stocks are on-boarded in 3
Interest rates etc) tranches over 30 days
Benefit from short term volatility COP – Client On boarding Protocol
Dollar Cost Averaging principle - Potential for lower SOP – Stock On boarding Protocol
average cost of buying
20
*Assuming target equity weight in portfolio for client is 100% **Assuming target weight of 5% in each stock 20
Note: In few cases portfolio manager might take new clients or stocks directly to Step 2 /Step 3 of COP/SOP depending upon the market scenario.
Performance
and Portfolio
21
Hexagon Portfolio Performance
Hexagon Portfolio has delivered 21% annualized returns (since inception till 30-April-18)
Jan-18
Nov-15
Jan-16
Apr-16
Jul-16
Nov-16
Jan-17
Apr-17
Jul-17
Nov-17
Apr-18
Sep-15
Feb-16
Mar-16
Aug-16
Sep-16
Mar-17
Sep-17
Feb-18
Mar-18
Aug-15
Aug-17
Dec-15
Dec-16
Dec-17
Oct-15
Jun-16
Oct-16
Jun-17
Oct-17
May-16
May-17
`
50.0 60%
50%
40.0 38%
40%
30.0 23.9 30% 24%
22.4
20%
20.0
10%
10.0 0%
P/E FY 18E EPS Growth (FY18E-20E)
Hexagon Portfolio Sensex S&P BSE MidCap Index Hexagon Portfolio Sensex S&P BSE MidCap Index
Quality of Business is Better
Risk is Lower
25% 6.0
19%
20% 4.2
15%
15% 4.0
10%
10% 1.8
2.0
5% 0.3
0% 0.0
ROE-FY20E Net Debt/EBITDA-FY20E
Hexagon Portfolio Sensex S&P BSE MidCap Index Hexagon Portfolio Sensex S&P BSE MidCap Index
*Estimates of S&P BSE SmallCap Index are not included for comparison purposes as the volatility of these estimates is high.
Source of Indices Data: Bloomberg
Hexagon Portfolio Vs BSE Sensex & BSE Mid Cap Index - Growth is High, Quality of business is better, Balance sheet risk is lower while
valuations are lower Vs BSE Sensex & BSE Mid Cap Index 23
Top 5 Alpha Contributors
Average
%
Sr No Stock Name Holding Period
Returns*
(Days)
* Returns mentioned are the returns of the stock since their buying, till date i.e. 30th April 2018
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Portfolio – Salient Features
NO USE OF
DERIVATIVES
PORTFOLIO
TARGET • 25% p.a.
• Min 4% CONCENTRATION
RETURN • 2x in 3 years
• Max 15% PER STOCK
BENCHMARK:
S&P BSE NUMBER OF
STOCKS • Min 15
SmallCap
• Max 25
Index
25
Edelweiss
Advantage
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The Edelweiss Advantage – 3 fold approach
Edelweiss Edge
• Generation of synergies help us in providing more detailed and insightful analyses
• Strong corporate relationships enable us in taking a holistic view
The
Equity Investment
Lending Edelweiss
Research Banking
Advantage
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Awards and recognitions
29
Investment Specialists
30
Investment Specialists
2011-2015
AQF Advisors
Co-Founder
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DISCLAIMER & RISK FACTORS
Disclaimer and Risk Factors
Past Performance is not an indication of future performance. Investments in securities market are subject to market risks. Please read the Disclosure Document
carefully before investing.
The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the readers. This document
has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The Portfolio Manager, it’s
Holding Company, associate concerns or affiliates or any of their respective directors, employees or representatives do not assume any responsibility for, or warrant
the accuracy, completeness, adequacy and reliability of such information. Whilst no action has been solicited based upon the information provided herein, due care
has been taken to ensure that the facts are accurate and opinions given are fair and reasonable. Recipients of this information should rely on information/data arising
out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any
investments. None of the Portfolio Manager, its Holding Company, associate concerns or affiliates or their respective directors, employees or representatives shall be
liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained
in this material. This document has been provided on a strictly private and confidential basis and is being furnished to you solely for your information and is not
intended as an offer or solicitation for the purchase or sale of any financial instrument/security. The information contained in this document should not be
reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. The
investments in the PMS Strategies may not be suited to all categories of investors. The Strategies may be exposed to various risks depending on the investment
objective, investment style and the asset allocation pattern of the Portfolio. The value of the portfolio can go up or down depending on various market factors.
Investors are not being offered any guaranteed or indicative returns through the Strategy. The name of the Strategy does not in any manner indicate its prospects or
returns. The performance of the PMS strategies may be adversely affected by changes in the market conditions, micro and macro factors and forces affecting capital
markets in particular like interest rate risk, credit risk, liquidity risk and reinvestment risk. The Portfolio Manager is not responsible or liable for any loss resulting from
the operations of the Strategy/ Portfolio. Investors are advised to refer to the Disclosure Document for detailed risk factors/disclaimers. Stocks referred to in this
document are not an endorsement of their soundness or a recommendation to buy or sell. The same may or may not be a part of the PMS Strategy in future or any
other PMS Strategies launched from time to time.
Edelweiss Multi Strategy Funds Management Private Limited is registered with Securities and Exchange Board of India as a Portfolio Manager vide Registration
Number INP000004631 and has its registered office at Edelweiss House, Off. CST Road, Kalina, Mumbai 400 098 and correspondence address at 801, 802 & 803, 8th
floor, Windsor, Off C.S.T. Road, Kalina, Santacruz(E), Mumbai – 400098
Corporate Identity No.:U67120MH2009PTC194273
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