But this still leaves a very large pool of businesses from which to choose and Sell likes to look lower down the market cap spectrum than many peers, for the companies best connected to the growing domestic Indian market. He has three core themes in the stocks he wants to invest in: monetisable structural growth, cyclical positioning and sustainable competitive advantage.
Sell then separates out the best, well-managed companies trading on attractive valuations. He will perform a deep-dive analysis to understand the current picture of the company, as well as modelling forward to help understand the inherent value of the business, and what it could be worth in the future.
Company meetings are an essential part of the process and Sell will never invest in a company when he, or a member of the team, has not met the management.
After investment, there is a continual review process for each stock, whether this be on the company itself, the broader industry, or the wider economic picture to make sure the investment case and the drivers for potential outperformance are still in place. Stocks are held for around three to five years.
The overall portfolio will have between 30 to 50 holdings, with position sizes between 1 per cent and 10 per cent, meaning there is high conviction. However, all positions that are more than 5 per cent cannot total more than 40 per cent to ensure there are not too many concentrated bets. This means that active share is likely to be considerably above 70 for the fund.
This fund is not for the faint-hearted, but when coupled with Alquity’s excellent responsible investment approach, over the long term I think it makes a great investment for both the soul and the pocket.
Darius McDermott is managing director at FundCalibre
