Fund Snapshot

Fund Overview

• Benchmark-agnostic diversified portfolio with bias towards mid- and small-cap
• 15: 15: 15 discipline: Invest predominantly in companies qualifying in at least 2 out of these 3 criteria:
  • >15% ROE
  • >15% earnings growth
  • <15 P/E Ratio
• Being a value-conscious investor prefer investing in 2nd or 3rd player vs paying abnormal premium to the leader
• Fundamental research-based investing
• Endeavor to generate alpha and wealth creation by investing with 3-5 years holding period
• Differentiated Portfolio picked on a bottom-up basis and adhering to our "MEETS" Framework

Investment philosophy

The primary focus of investment strategy is the risk-reward equation, which demands that expected returns match the risk taken. It distinguishes between a good company and a good stock by prioritising price and value. Opportunities are evaluated on an individual basis, encouraging flexibility beyond particular topics. The goal is to generate alpha by prioritising growth companies that are expected to outperform market averages and focusing on mid-cap stocks with growth potential that are fundamentally underpriced. Fundamental analysis requires bottom-up research that prioritises balance sheet indicators over hype. The strategy, which seeks early entry without monitoring market trends across various industries and sizes, includes contrarian investments.

Top 10 Holdings

• The Anup Engineering Limited
• Max Financial Services Limited
• PNB Housing Finance Limited
• Sarda Energy And Minerals Limited
• Federal Bank Limited
• LT Foods Limited
• Time Technoplast Limited
• ION Exchange India Limited
• IIFL Finance Limited
• Axis Bank Limited

Sector Classification

• Banks - 16.4%
• NBFC - 11.4%
• Industrials - 10.4%
• Healthcare - 9.3%
• Commodities - 8.9%
• Industrial Manufacturing - 7.9%
• Insurance - 5.4%
• FMCG - 5%
• Food Products - 4.9%
• Consumer Discretionary - 3.7%
• IT-Software - 2.5%
• Cement - 2.4%
• Auto Components - 2.2%
• Infrastructure - 2%
• Textiles & Apparels - 1.8%
• Consumer Durables Services - 0.9%
• Cash & Cash Equivalent - 2.9%

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About Abakkus

Contributing to the Community

Environmental responsibility

Over 2400 trees were planted in Tamil Nadu's Cauvery region as part of the "Cauvery Calling" initiative. As a result, the company's carbon footprint of 33 metric tonnes was surpassed by a carbon offset of 50.4 metric tonnes of CO2e, making it net carbon negative. The programme aims to restore biodiversity for the 84 million people who rely on the ecosystem. In addition, 3500 cooking burners were distributed to rural households, which are anticipated to reduce CO2 emissions by about 12,250 tonnes annually. By 2022, the company had achieved climate neutrality and received recognition for its climate initiatives.

Closing the gender diversity gap

Companies are giving gender diversity top priority in India, where women only make up 20% of the workforce. By 2025, they hope to increase this percentage to 30%. A G8-accredited programme that began in 2020 with a four-week intensive boot camp and paid internships at prestigious financial firms like Abakkus is one attempt to accomplish this. The "Young Women In Investment" programme of the CFA Institute also seeks to encourage women to pursue careers in finance. These programmes show a strong dedication to increasing gender diversity in the financial industry.

Empowering Children

Improved education and nutrition would benefit India's sizable adolescent population. Over the course of six years, from CY-2018 to FY-2023–2024, an initiative with the Cosmic Divine Society has fed about 1,200 children, underscoring the importance of fostering youth for future prosperity. In addition, a collaboration with the Vallabhdas Dagara Indian Society concentrated on providing two years of care for twenty mentally challenged children with the goal of preparing them for independent, skilled work (CY-2020 to CY-2022).

The Unique MEETS framework

• Management Capability and Quality: Pay attention to how well management allocates capital (capex vs. ROE) and treats minority shareholders fairly.
• Earnings Quality: Differentiate between reported and actual earnings, take into account structural versus cyclical factors, and highlight businesses that can drastically lower EV/EBITDA or double profits in four years.
• Events and Trends: Keep an eye on stock movements brought on by impending events as possible buy/sell opportunities, and spot any disruptive trends or emerging themes that might have an impact on market behaviour.
• Timing Considerations: Stress that a good company might not be a good investment if the timing or price is unfavourable; evaluate the investment time frame and the price discount.
• Structural Analysis: To ascertain the viability of an investment, assess the opportunity size, competitive positioning (MOAT), and steady profit growth.

The 5D Investment process

• DISCOVER: Identify investable companies from a universe of 6,000, narrowing down to approximately 1,500.
  • Leads: Utilise annual reports, analyst insights, in-house screeners, team experience, ecosystem knowledge, and news to gather information.
• DELVE: Conduct in-depth analysis on around 350 companies with assistance from an experienced investment team.

• DEVELOP: Perform macro and micro-analysis on over 100 companies.
  • Analysis: Hold management meetings, assess competitive advantages, identify potential triggers, conduct peer comparisons, and execute financial modelling and sensitivity analysis.

• DETAIL: Generate investment ideas focused on about 75 stocks.
  • Portfolio Construction: Consider liquidity, sector exposure, portfolio beta, and risk management strategies.

• DELIVER: Manage and monitor a portfolio consisting of approximately 30 stocks, including monitoring news flow, conducting quarterly reviews, and maintaining a sell discipline.

Abakkus Avoid the four “C”s

Steer clear of the four "Cs": Churn Unnecessarily (avoid needless trading), Copy & Mimic (do not follow herd mentality; investments must be internally analysed), Credit Risk (avoid stocks with fractured balance sheets, as they frequently become value traps), and Chase Momentum (rely on fundamentals rather than price movements).

Exit Discipline

Recognising when initial investment fundamentals fail because of industry decline or company-specific governance issues is known as exit discipline. Recognising incorrect investment theories is crucial because stocks may surpass expectations in spite of difficulties. Investors may choose not to make additional investments when a position becomes insignificant. Furthermore, reallocating resources from current holdings may be necessary if new opportunities with better risk-reward profiles are found.

Risk management

Risk to Business

The best way to manage business risk is to have a clear understanding of what you own and why. There is no way to replace this. Their steadfast focus on the balance sheet and numbers will help us lower business risk.

Valuation Risk

Despite the fact that there is no right or wrong valuation figure, they are wary of overpaying. In this sense, they maintain strict discipline.

Market Risk

They would be focussing more on the portfolio rather than trying to predict the direction of the markets. Even though they would definitely be monitoring the market, they believe that the best way to manage market risk is to be patient.

Liquidity Risk

In mid- and small-cap investing, liquidity can be a short-term risk. The portfolio is designed to manage this, and investors are recommended to think about a time horizon of three to five years.

Concentration Risk

Try to have a portfolio that is adequately diversified across industries and stocks.

Why You Should Choose Abakkus

• Experience: A group of experts with about 300 years of combined experience.
• Performance: Proven track record in public equity funds over a range of market cycles.
• Commitment: Has a start-up culture that prioritises passion, commitment, and urgency.
• Positioning: Concentrated investment in Alpha plays through internal, non-consensus research.
• Opportunistic: The ability to make investments in novel industries and topics propelled by an economy driven by entrepreneurs.
• Consistent: Throughout market cycles, the investment team has continuously produced results.

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