Negen Capital Emerging Opportunities Fund

Fund Snapshot

Investment Philosophy

• They follow a unique Value+Growth strategy.
• Value investing via Special Situations.
• Growth Investing via Technology sector.
• They give special emphasis to risk management and position sizing. As mentioned, we do not take undue high exposure to any 1 company. With its disciplined methodology, Negen Capital has been able to stand out in the PMS industry.

The Unique Workflow of Negen Capital

• Idea Generation: A distinctive combination of Special Situation Investing is present in most portfolio firms. It gets inspiration from mergers and changes that are promoted by better management. These circumstances have resulted in Alpha Returns.
• MEGA Trends: Negen Capital recognises Mega Trends and makes investments in the businesses that stand to gain the most from them. Due to their early investments in consumer tech companies, Negen produced alpha returns.
• Conservative Approach: Avoid PSU and cyclical investments. Negen has 6.74% CASH on hand and is seeking new chances.

Why should you invest in technology?

• Every second, three new users join the Internet.
• Every moment, 5 smartphones are sold worldwide.
• India has been ‘Internet-unified as a result of Jio.
• India is experiencing an early technological revolution.
• Negen Capital are witnessing a technological supercycle.
• Every decent-sized business will upgrade its IT infrastructure in the coming years.
• Pure technology platforms, as well as IT product and service providers, should experience unprecedented structural growth.
• These businesses are typically debt-free, have a high RoIC, a high FCF, and, most importantly, are growing.

Exceptionally Placed:

1. Special Situations: Investing in value with a trigger

Mergers and acquisitions and Promoter changes.

1. Technology: A continuous supercycle

Indian Technology and Global Technology (FAANG plus)

Investing in Value:

1. Nowadays, it is done differently. It is known as Special Situation.
2. Mergers and Acquisitions We are interested in two themes: change and evolution.
3. A demerger is performed to free up value.
4. New promoters buy companies to maximise profits. It increases shareholder value.
5. Berkshire Hathaway is a poster child for what promoter change can accomplish. Warren Buffett purchased it for $14, and it is now worth $408,000.
6. Adani Group is a great example of how a large conglomerate can incubate and demerge smaller businesses, creating enormous shareholder value.
7. Negen Capital do not decide to purchase random, low-cost stocks from the market. These stocks are inexpensive for a reason.
8. They only buy cheap stocks if they demerge or a fresh promoter buys the company to create value.

The unique risk management:

1. The PMS has taken a cautious approach, keeping cash on hand in unforeseen events. As of December 21, the PMS had retained 6.74% of its cash and generated alpha returns with 93.26% investment.
2. They reduce risk by avoiding cyclical, commodity, and PSU investments.
3. They focus on technology, information technology, mergers, and promoter changes.

Mission: Their mission is to create consistent profit but without taking too much risk. Our portfolio largely contains debt free companies, 25%+ RoIC businesses and companies with long term growth potential. All of these are either Special Situations or from the Technology basket.

Vision: They want to create Alpha for our clients consistently. We want to be able to satisfy all the investment needs of our clients whether it is from Indian Capital Markets, Startups or American Investing.

Values: They, at Negen Capital PMS want to generate Alpha the right way without taking undue risks of Cyclical stocks. We own companies with High RoIC, Growth and ones which are generally debt free.
You would not find us owning companies from Metals, Sugar, Commodities, Power, Infrastructure, Real Estate sectors. We also refrain from buying PSUs.
*Unless ofcourse, there is a Special Situation opportunity from these spaces.

Unique Feature

-Best Performing
Best performing PMS across all fund categories in June 2020 (+24.71%)

-Time Horizon
Best performing PMS across all fund categories in August 2020 (+25.13%).

-Expected Returns
Best Indian fund across all categories (+61%) over the last 3 months period (Jun-Aug 2020).

– Ranked 1st
Ranked 1st on all India basis for Financial year to date period with +114% gain (April 2020- November 2020).

Special Situations:
One of the world’s best and biggest companies: Berkshire Hathaway was a Special Situation. It showcased exactly how the fortunes of a company can change with a better promoter at the helm. (Warren Buffett took control of this company at $14/share. Today is trades at $421,000).

There are innumerable examples of how Special Situations have created value throughout history but we find that still, rarely does any institution follow this strategy. *We are not complaining.

In a nutshell:
We are focused on finding emerging opportunities from the Midcap and the Smallcap universe but we only stick to companies which have structural growth (Technology companies) or with Special Situations where a company undergoes transformational change for the better.

This is our area of expertise and we stick to our circle of competence. We do not venture out of this circle. There is no random stock picking. Everything is backed with a process and a focused mindset to creating Alpha without venturing into random stocks, commodities and cyclicals, unless it were a Special Situation.

Investor ROI –  In June 2020, the best-performing PMS across all fund types was +24.71 percent.

In August 2020, the best-performing PMS across all fund categories was (+25.13 percent).

In December 2020, the best-performing PMS across all fund types was +12.83 percent.

Over time, the best Indian fund in all categories (+61%) (Jun-Aug 2020).

About the fund:

In November of 2017, Negen Capital PMS was launched. They are primarily a smallcap and midcap-focused PMS with a strong interest in identifying value investing prospects through special situations such as demergers and spin-offs.

This PMS has earned a total return of +47.29% over the last year, compared to +19.56% for the Nifty 500, and has been India’s No. 1 PMS for the majority of the months. They have successfully managed to gain +2.11% returns for April 2022, compared to -0.75% for the benchmark.