NJ Equity PMS

News & Updates

NJ Equity PMS is a new offering from the NJPMS Platform.

NJPMS is managed by NJ Advisory Services Pvt. Ltd. (NJAS), a subsidiary ofNJ India Invest Pvt. Ltd. NJAS is a SEBI licensed Portfolio Manager and managesAUMs of 142.76 crores with 812 live accounts as on December 31st, 2104.

Till date, NJAS has offered a MF-FOF strategy called Dynamic AssetAllocation Portfolio (DAAP). With its strong background in Mutual Fund researchand analysis, NJAS strength lies in identifying good Fund Managers to manageand grow client's wealth through the Mutual Fund route. With this new offering,NJAS endeavours to identify good PMS managers for managing wealth of HNIclients and family groups.

Why NJPMS
Investing through NJPMS offers the following advantages to clients andpartners:

  1. Clients can invest in multiple PMS strategies that are available on the NJPMS platform.
  2. Clients have the flexibility of splitting the investment amount across multiple PMS managers and strategies.
  3. Clients can manage all the PMS strategies from 1 Trading & Demat a/c.

NJPMS Advisor
As NJPMS does not have the requisite experience in managing direct equityinvestments, we have tied up with Motilal Oswal Asset Management Co. Ltd.(MOAMC) who will advise us on the PMS portfolios. MOAMC is one of India'sleading PMS providers with AUMs of approx. Rs.2700 crores and 4580 liveaccounts as on December 31st, 2014.

Investment Philosophy
“Buy Right : Sit Tight” is the investmentphilosophy followed by the MOAMC which has been distilled from over 25 years ofwealth creation.

Buy Right entails the following:

  1. Buying Quality businesses and management
  2. Focus on Growth in earnings and sustained ROE
  3. Identify companies that have Longevity of competitive advantage or economic moat
  4. Buy good businesses at fair Prices rather than fair businesses at good prices. This approach is called the Q-G-L-P approach to buying the right stocks.

Sit Tight can be split into 2 parts:

  1. Buy and Hold: Stocks are bought with the intention of holding them for the long term. Buying the right business requires skill and holding onto these businesses through the entire growth cycle requires even more skill and patience.
  2. Focus: The portfolios consist of high conviction stocks only with the number of stocks per portfolio not exceeding 20 – 25 stocks. While the stocks are well diversified across sectors and industries, over-diversification of the portfolio can result in dilution of returns for investors and increase in market risk.

The following Equity Portfolios are being offered under NJ Equity PMS:

  1. Large Cap Portfolio
  2. Mid Cap Portfolio

Large Cap Portfolio
This Portfolio is a mirror image of Motilal Oswal Value Strategy. The key highlights of the portfolio are as follows:

  1. Focus on companies that are growing 20-25% on their net worth year on year.
  2. Maintain a margin of safety by buying great businesses at a fraction of their true value.
  3. Focus on buying undervalued companies or buying reasonably priced companies with stable earnings/ cash flow.
  4. Money is made by investing for the long term only. No short cuts to wealth creation.
  5. Identity potential wealth creating companies by focussing on their individual strengths and management bandwidth.
  6. Portfolio size will be restricted to 15 – 20 stocks.

Investment Process
A rigorous investment process is followed covering the following

  1. Creating an Investment Universe from existing and emerging Large Cap companies including event-driven 'special situation' ideas
  2. Doing a Quantitative Screening of the universe with focus on earnings, free cash flow, return on assets and earnings. This results in a long-list of 500 stocks.
  3. Fundamental Analysis is done on each of the companies which covers '360 degree view' of the company, identifying competitive advantages, nature, duration and sustainability of the business and the model and barriers to entry. This creates a short-list of 80 – 100 stocks.
  4. The Fund Portfolio is created from this short-list which comprises of the high conviction ideas with superior risk-adjusted returns for clients. The portfolio comprises of 15 – 20 stocks.

Model Portfolios

Please Note: These stocks are a part of theexisting NJPMS Large Cap Portfolio as on Dec 31st, 2014. TheseStocks may or may not be bought for new clients. Past performance may or maynot be sustained in future and should not be used as a basis for comparisonwith other investments. The strategy may or may not have any present or futureholdings in these stocks. The companies mentioned above are only for thepurpose of explaining the concept and should not be construed asrecommendations from MOAMC.^ Based as per the closing market prices on Dec31st, 2014.

Performance Track Record

Strategy Inception Date: Mar 24, 2003; The Above strategy returns are of a Model Clientas on Dec 31st, 2014.

An investment of Rs.1 crore made in this portfolio in March 2003 is worthRs.17.86 crores as on December 31st, 2014. The same investment ifmade in the CNX Nifty is worth Rs.8.19 crores.

Mid Cap Portfolio
This Portfolio is a mirror image of Motilal Oswal Next Trillion DollarOpportunities Portfolio (NTDOP). Before we share details about this portfolio,let us look at some characteristics of the Mid Cap market:

  1. Large universe of stocks available for investments
  2. The companies are generally under-owned by investors and under-researched by analysts.
  3. The companies are in fewer business lines and therefore very focussed in their approach
  4. The valuation as compared to Large cap stocks is very attractive.

Strategy Objective
The objective of the Mid Cap Portfolio is to deliver superior returns byinvesting in focused themes from the small and mid cap stock segment which willbe part of the Next Trillion Dollar GDP growth opportunity. Some themes whichare likely to participate in this opportunity are as follows:

  1. Consumption Theme – which can include increasing consumer spending, retail, consumer durables, passenger cars and utility services
  2. Banking and Financial Services – will include Banks, Broking houses, Insurance and other financial intermediaries which are likely to benefit from the high GDP growth and savings rates.
  3. Infrastructure and related themes – which can include power, cement, capital goods, construction, real estate, engineering and any other sector likely to benefit from government spending.

Stock Selection Process
Stock selection plays a very important role in this portfolio due to the largeuniverse of stocks and the limited research available in the market. Theportfolio manager and his team will follow the following process for stockselection:

  1. Meeting with company management to understand the business dynamics
  2. Visit the company's plants and work-sites to understand manufacturing process, quality of fixed assets and entry barriers to setting up business
  3. The focus of the meetings and visits is to understand the corporate governance standards, management track record and capabilities for scalability
  4. The portfolio manager with also keep an eye out for turnaround stories, emerging sectors and product innovations.

Model Portfolio

Please Note: These stocks are a part of the existing NJPMS Mid Cap Portfolioas on Dec 31st, 2014. These Stocks may or may not be bought for newclients. Past performance may or may not be sustained in future and should notbe used as a basis for comparison with other investments. The strategy may ormay not have any present or future holdings in these stocks. The companiesmentioned above are only for the purpose of explaining the concept and shouldnot be construed as recommendations from MOAMC. .^ Based as per the closingmarket prices on Dec 31st, 2014.

Performance Snapshot

Strategy Inception Date: Dec 11, 2007; The Above strategy returns are of aModel Client as on Dec 31st, 2014.

An investment of Rs.1 crore made in this portfolio in December 2007 is worthRs.3.45 crores as on December 31st, 2014. The same investment if made in theCNX Mid Cap is worth Rs.1.49 crores.

Key Holdings
Some key holdings in the Mid Cap Portfolio are as follows:

  1. Page Industries – Exclusive Indian franchisee for Jockey International. A leading player in the rapidly growing branded inner-wear industry. Expected to grow at 25 – 30% with high dividend payouts and strong profitability to sustain its premium valuations.
  2. Eicher Motors – A Strong player in commercial vehicles, two wheelers and related components. Leader in the Cruise bikes segments and No.2 player in the Medium Commercial Vehicles segment. The company's best selling product, the Royal Enfield is called the India Harley Davidson. The stock has appreciated by 12x since it was included in the portfolio in August 2010.
  3. Bosch Ltd. - India's largest manufacturer of diesel fuel injection equipment. Company is a preferred supplier to most OEMs, with a 65% market share in spark plugs and more than 85% market share in diesel fuel injection pumps.

Conclusion
The Large Cap and Mid Cap Portfolios have done very well in the last 3– 5 years and with the positive sentiments in the economy, are expectedto perform very well doing forward. Since the underlying asset class in bothportfolios is equity, it comes with its inherent risks and volatility. Theminimum time horizon recommended for investment in both portfolios is at least3 – 5 years. These portfolios are designed and managed for long terminvestors who are looking to create substantial wealth for themselves and theirfamilies.

At NJPMS, our endeavour has always been to provide our clients and partnerswith meaningful products which capture a significant chunk of the market upsidewhile limiting the downside risk. Thereby, providing positive risk-adjustedreturns across market cycles.

Happy and Safe Investing!!

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