June 2015

Age Old Businesses

In our opinion managing risk is far more important than generating returns. By owning age old and proven businesses we have negated company specific risk to a large extent. We are seeing few of the businesses owned by us going through a tough time but we do not foresee a risk of these companies going out of business. The average age of the stocks in our portfolio is around 60 years which gives an idea of their pedigree. Careful due diligence has been done to chose companies who have spent years to build their franchise. At the same time we have also ensured that most of them have remain focused in their line of business. All of them have created world class distribution reach to ensure their products and services reach the last mile. This has been the bedrock of stability of our portfolio in the toughest of times.

In the last five years we have delivered alpha of more than 450% at one of the lowest levels of volatility in the industry. We’re proud of the fact that we managed to achieve this inspite of staying away from the recent fads in the market. We will continue to take high conviction bets to generate long range sustainable returns even though that’s the more difficult approach. Even though some of the companies owned by us are century old businesses in India, we are amazed to see their enthusiasm and willingness to change with time and remain relevant. It’s because of these reasons we can confidently say that our holdings are true wealth creators.

Regards,

Vinod Jain