FAQ – TREASURE TROVE

The following checklist shall help you determine the suitability, you must meet each of the following points:

1. I have a portfolio that is over Rs 10 lacs (otherwise Index or Mutual Fund, via monthly SIP, could be a more cost-effective way to invest in a diversified portfolio).
2. I don’t need this capital for at least the next three years (the longer the better).
3. I am investing for capital appreciation to beat inflation (instead of generating regular income).
4. I understand these returns will not be steady but lumpy with some negative years too.
5. I have the ability to stomach volatility and wouldn’t panic seeing my portfolio temporarily go down even by 30-40%.
6. I have an adequate health insurance policy for myself as well as my dependents (Ideally at least Rs 5 lacs per person).
7. I have a life insurance policy (term plan) which is at least 10 times my annual income.
8. I have six months of household expenses as an Emergency Fund.
9. I have no outstanding high-cost loans like Credit Cards or Education Loan.

Treasure Trove is an advisory / research service suitable for do-it-yourself investors who have time & inclination to manage their own portfolio. Unlike a PMS or Mutual Fund wherein an investor has to write a cheque to the fund manager, under this advisory model the money stays in your existing broking account, under your name/PAN and full control, while we guide you on which stocks to buy, when to buy, for how long to hold & finally when to exit.

Further, unlike a PMS or Mutual Fund which involves an annual management fee of 1-2% of your capital in addition to a 10-20% share in profits (in case of PMS), Treasure Trove charges a nominal flat fee irrespective of your portfolio size and returns.

As a thumb rule, an investor should not be paying more than ~2% of the portfolio as advisory fees per annum. Therefore to justify Treasure Trove’s annual subscription fee one should have a minimum capital of Rs 10 lacs, higher the better. If you have a lower capital to start with, but are confident of adding at regular intervals, then also you may opt for the service. For smaller portfolios index or mutual funds (via monthly SIP) could be a more cost-effective way to invest in a diversified portfolio.

While researching stocks we do not constrain ourselves on market cap or sectors. We look at small caps, mid caps as well as large caps. Wherever we see value and find opportunity to make high absolute returns with limited downside risks, we go ahead with researching it in more depth, making Treasure Trove a collection of sector-agnostic multi-cap stocks.

Anywhere between 15 – 20 stocks.

Treasure Trove is not a tip-service with any fixed number of new stock ideas or at any pre-defined frequency, as that’s very counter productive for investors. For us new stock addition is a function of market volatility, cash availability in the basket and whether we are able to find better opportunities compared to what we already hold.

We manage risks by investing in opportunities where we feel downside risk is limited, business prospects are good and management is ethical, even if that means buying at fair price (rather than cheap). Return is a function of how our portfolio companies execute (earnings growth) and market cycle/sentiment (valuation). Over 3-5 years horizon, our goal is to outperform markets by generating 3-5% higher returns.

Markets are inherently volatile; even for blue-chip stocks a 20-25% movement between 52-week high and 52-week low occur every year, 30-40% every 3-4 years and 50-60% every decade. However, we don’t look at volatility / drawdowns as a risk. For us risk only has one meaning which is ‘permanent loss of capital’ i.e. when stock prices fall and we have to exit at those lower prices (with little hope of recovering). To avoid the permanent loss of capital, we invest in businesses with strong balance sheets (mostly debt-free), run by a competent and ethical owner-operator with skin-in-the-game at reasonable valuations.

Subscribers could allocate to stocks based on their risk profile and with the help of our Sizing Guide – Low / Medium / High. As a thumb rule, low could have anywhere between 3-5% weightage, medium 6-7%, and high 8-10%. As a risk management practice, it is generally not prudent to allocate beyond 10% on one stock. There would be some stocks where we initiate with a low sizing and over time it could be upgraded to medium or high level as conviction goes up due to the thesis getting stronger or valuation getting more favourable, and subscribers could adjust the allocation accordingly.

Our starting point isn’t any index rather we follow a bottom-up stock picking strategy where we assess downside risks, visibility of earnings, size of the market opportunity, management competence & integrity and judge attractiveness at prevailing market prices.

It is not going to be all multi-baggers only, which are infact far and few, and only clear in hindsight. We have had our fair share of lemons too – stocks which we eventually sold at a loss or like Wonderla Holidays where thesis is yet to play out despite holding for many years. However, every cycle we will have few winning outliers which will not only make up for positions where the thesis does not play out but considerably lift the overall performance of the portfolio. This cycle has the likes of APL Apollo (5x in 2.5 years) and Suven Pharma (7x in 4 years), the previous cycle had Tasty Bite Eatables (9x in 2.5 years). That’s the nature of the game – lose some, win big. It is important to be at peace with few loss-making or non-performing stocks realizing the outliers will more than makeup for them. No matter how much we try, unfortunately, there is no way we can fully avoid losing positions as it’s all too dynamic. Even the best of investors and fund managers globally have not got it right beyond 6 out of 10 positions as per Peter Lynch.

Ultimately what matters is how we do at the portfolio/basket level despite losing on some positions, as the winning positions more than make up for the losing positions – maximum one could lose in a stock is the invested capital, however there is no upper limit to returns in positions where we get it right. The 80:20 rule applies in investing too – 80% of the gains come from 20% of the positions. To win a cricket match, not every player has to hit a century, and ultimately what matters is winning the match (portfolio returns) and not how every player performed (individual stock performance) and our focus is on winning the game (portfolio returns). It is extremely important for the subscribers co-investing with us to be aligned in this thought-process.

You may signup for free and see some of our existing holdings with detailed initiating coverage reports at http://investor.stalwartvalue.com/users/sign_up

We hope these reports will give a fair idea on our research process and indicate the kind of depth we go into.

To know more about our process, we suggest you to go through the Stock Selection Process. Also, you may read our blog where our CIO Mr Jatin Khemani has shared some of his old work and thoughts on investing.

Each subscriber who signs up gets a unique login ID to enter the SA investor dashboard, where he/she can read Initiating Coverage Reports, Quarterly Updates, AGM Notes, Annual Report Dissections and other updates.

We have proprietary publishing technology that prohibits unauthorized saving/printing/forwarding of the reports. This ensures only registered & paying subscribers access and benefit from the same. This is in stark contrast to other research firms whose reports/pdfs often float on social media and messengers like Whatsapp. In those cases, the wider public may act on it first, driving the stock prices high/low before registered subscribers are able to execute the suggested buy/sell transactions.

All updates are notified to subscribers in real-time on the registered email address.

Further, crucial alerts like buy/exit are also notified on SMS.

Price is a function of two factors- Growth in earnings per share (depends on how well company does) and Valuation i.e. P/E multiple (depends on market sentiments). We prefer to invest in companies where earnings growth prospects are high and valuations have scope of re-rating. Having said that, being human we understand our limitations in predicting the future and hence refrain from sharing any target price or any kind of excel-based forecasting where next quarter’s EPS is forecasted to second decimal point. We will stay invested as long as the thesis is playing out well or till we find better opportunities. Either ways, we will keep you posted with our thoughts through regular (generally quarterly) updates on all our positions.

All our stock ideas are fundamentally backed and are only for investments, implying a long term horizon (at least 3 years). We keep stocks on ‘buy’ rating until they stay in the buying range post which the rating gets changed to ‘hold’ and eventually ‘exit’. We do not issue any kind of trading recommendations and hence no stop loss.

• Signup at http://investor.stalwartvalue.com/users/sign_up
• Assess suitability via Risk Assessment Questionnaire
• Pay subscription fees through a secured payment gateway and get instant access to dashboard or transfer to bank details shared on the dashboard, share the transfer details on email, your account will be activated within 01 working day.

Subscription once taken is non-cancellable and non-refundable. Since execution is completely under your control, you may ignore the research and avoid acting on it.

The annual fee of Rs 25,000 is exclusive of 18% GST.
The total fee including GST is Rs 29,500 per annum.
There are no discounts, as the fee is kept at a nominal level and shall make economic sense to any portfolio of Rs 10 lacs or higher.