“We at JamaWealth suggest a simple investment philosophy called Roots & Wings.”
Roots
Roots aim to preserve wealth by selecting companies with low debt, consistent ROE/ROCE & promoter integrity.
We prefer to invest in businesses that carry very low debt. This means that their growth is fueled by their customers and through internal accruals.
We like companies that consistently reward their shareholders through high levels of Return on Equity, Return on Capital Employed and Return on Assets. This signals not only an efficient business but also one that is shareholder friendly.
We like promoters who demonstrate both skin-in-the-game and soul-in-the-game. Such promoters retain significant ownership in their business, which prevents the ‘agency problem’.
We like companies that have already run the marathon and have demonstrated stamina. As a corollary, we avoid nano caps, micro caps and baby caps because the intent is to preserve capital first and not be exposed to risks stemming out of promoter integrity (or lack of it).
Wings
Wings aim to increase prosperity by identifying growing companies (sales/profit/cash flows) that are resilient and have pricing and staying power in their markets.
We like companies that have a huge runway of growth ahead of them. Usually they tend to grow 1.5 to 3 x times that of the GDP Growth.
We prefer companies that possess significant operating cash flows. This also indicates that their growth is real, and not manufactured.
Companies that are dominant in their markets and continue to hold good Market Share are preferred.
Investment is not a static process. Buying and forgetting, or just sitting tight, is a luxury that the smart investor cannot afford. If you don’t review, companies can sink in days or even industries can get upended in months.
We grill each stock with an intense review process that periodically checks for all the fundamentals. The model clinically picks early indicators which help exit risky stocks in time. To err on the side of caution is far more preferable to losing hard-earned capital.
The investment philosophy is fully backed up by a system that takes emotion out of the picture, leading to balanced decisions which augur well for the portfolio.
