Small and Midcap stocks have lately shown a strong resurgence in performance and there has been a renewed focus on them.

However, they are quite tricky to pick and require a lot of patience and persistence to stick to as they are generally prone to volatility.

History has shown that a small portion of these mid and small-cap companies will eventually multiply and grow quickly and with a strong budget, and the current state of the economy - it brings strong opportunities for our subscribers.

Quick 101

Portfolio Construction: ~15-20 Small and MidCap stocks, typically equal-weighted

Size: Small companies and MidCap Companies

Time Horizon: 3-5 year target holding period (like Teji Mandi Flagship)

Philosophy:

Extremely picky. Businesses must still meet our rigorous investment checklist. See this below

Capital Allocation:

We look for companies with a superior track record of capital allocation. Excellent corporate governance and capital allocation track record and strong sustainable competitive advantages ensure that we identify winners.

Low coverage of mid and small-caps:

Analyst coverage of mid and small-cap stocks is much lower than large caps. This gives the fund manager an edge in spotting good businesses early and generating higher alpha.

Favourable cyclical upturn:

Small and midcaps tend to perform in extremes and revive sharply after bouts of negative returns. After the correction in small caps in the last 3 years, we expect a significant revival in performance

Other Facts

  • Minimum Investment: This strategy is much more long-term for us but we have kept the minimum investment low - starting at just Rs 20,000.

  • SIP: We suggest a monthly or quarterly SIP in this to truly take advantage of our allocations.

  • Fee: Rs 1500 for 3 months or 3000 for 6 months.

Rebalance Frequency

While there is no set rebalance frequency, we ensure that the stocks continue to meet the above criteria. If we feel there is a better opportunity available and suits our portfolio allocation, we will execute a rebalance.

Sample Stock: Persistent Systems:

Entry Price: Rs 1750
Status: Holding
Return: 37.86%

Rationale

  • Strong Presence in Newer Technologies

Persistent Systems is a global software company specialising in product and technology services. The company has proven expertise, a strong presence in newer technologies, and the strength to improve its IP base.

  • Growth Opportunities

Alliance with IBM and investments in new-age technologies like IoT, Blockchain, Artificial Learning, and Machine Learning to help Persistent Systems capture growth opportunities.

  • Strong Deal Wins

The Technology Services Unit contributing 80% of the revenue has been growing strongly at a Compounded Quarterly Growth Rate (CQGR) of ~5% over the last 8 quarters. Strong deal wins and robust deal pipeline provides revenue visibility

How to Subscribe?

We like to keep things simple on our app so The multiplier portfolio is not yet available on our app. We are working on building the ideal experience on the app for our customers. However, Subscribers can access and subscribe to the multiplier portfolio by visiting our smallcase page.

Have any questions about this portfolio. Reach me and my team at [email protected]