Anupam Singhi, CEO, O'Neil Capital Management India, said that our investment methodology involves the idea of investing in growing companies with an RoE of over 17%. There is a lot of screening done both fundamentally and technically.
Singhi joined William O'Neil India in May 2013. He has single-handedly formulated and executed the company’s India strategy and leading the team towards making the India division a Centre of Excellence for all the William O'Neil companies, thus bringing in high-quality assets to India.
In an interview with Moneycontrol's Kshitij Anand, Singhi said that for picking stocks we have a threshold market cap of Rs 750 crore and an average trading value of Rs 1 crore. We do not discriminate stocks between large and smallcap stocks.
Edited excerpts:
Q) Market hit a fresh record high in H12021 and the momentum continued at the starting of H22021 as well. What is driving markets – is it FOMO, TINA, or plain liquidity?
A) It’s a blend of all three that is currently driving the markets. The rate of recovery in corporate earnings and liquidity flow are the key drivers that fuel this rally.
Having said that, we cannot ignore the fact that TINA is also a factor working here. From global investors’ perspective, there exist very few alternatives to India, and within India also, alternatives to equities are very few.
These factors are acting as a strong tailwind for the market’s surge. Especially, the broader market is significantly outperforming the major indices.
During the last three months, Nifty Midcap and Small cap have risen ~17% and 27%, respectively, as against Nifty’s gain of 9%. However, we will take what the market gives us instead of trying to predict the future scenario.
We will follow our rule-based system, which helps us make investment decisions that are free from biases with proper risk management in place.
Following our CANSLIM methodology, we would like to bet on the stocks that have consistent sales and earnings growth, high return on equity, and rising institutional sponsorship.
Q) Retail investors gulped down Zomato IPO in the first 1-2 hours of opening -- a record of some sorts despite knowing what they are getting into. What is driving the optimism there? We saw record anchor investors, as well as MFs, subscribing to the issue? Is it like a Gold mine which investors will miss in case they don’t get an allotment?
A) Zomato has consistently gained market share over the last few years to become the leading player in its segment. Currently, the company is operating in a duopoly in the food delivery space in India.
The company has been growing faster than the industry in terms of GOV growth. Also, low penetration of food services and increasing reach of the internet and smartphone in India should work in favor of the company.
It saw record anchor investors, as well as MFs, subscribing to the issue. In case retail investors don’t get the allotment, we, at William O’Neil, have a set of rules to take entry into a newly listed company.
We usually advise investors not to buy a company’s shares on the day or during the week of its listing. For IPO stocks, there is no history of price-volume action, so it is difficult to gauge the top.
When it comes to investing in IPO stocks, new issues don't play by the usual rules. We advise looking for a base formation after a listing.
Firstly, there should be a massive gain as the stock goes public and before it runs down after hitting resistance. A classic IPO base is a short and shallow area of consolidation that occurs right after a company’s IPO. Let us look at the example of Easy Trip Planners below.
Disclaimer: This is for information purposes only and should not be construed as a buy/sell recommendation. Past performance never guarantees future results.
Q) Apart from Zomato many tech-based platforms might be hitting D-Street in H2 namely PayTM, Policy Bazaar, etc. among others. What is your view on them? Will they turn out to be the next wealth creators?
A) There is a lot of optimism surrounding the entry of PayTM and Policy Bazar into the listed space, with a change in consumer behavior and business models.
They are new-age businesses and hold huge growth potential. These companies are driven by cutting-edge technology and are powered by artificial intelligence.
They are also disruptive businesses to a certain extent. These companies adapt to the rate of change in business needs and customer preferences to deliver seamlessly across product categories.
The scope of reach through a digital medium has gone exponentially higher with a rise in internet/mobile penetration. This is a huge plus for these companies.
However, adapting to constant changes in the tech space and reaching scale will be the key amid huge competition that will ensure only leaders and best-managed companies shall sail through very strongly.
Q) You have recently launched O’Neil Quant Fund back in May which aims to generate market-beating alpha through statistical models that analyze market data in real-time. Tell us more about it and what is strategy you are following?
A) The quant fund aims at generating market-beating alpha using quantitative models that analyze market data in real-time using statistical techniques.
We follow a data-driven methodology to complement our distinctive research into the fundamentals and technicals of stocks.
The quant fund is a hedged aggressive growth equity long/short investment strategy implemented by a systematic quantitative algorithm developed based on the proven O’Neil proprietary factors.
It consists of an extensive portfolio with Indian equities that have growth characteristics and a short portfolio to hedge the long portfolio’s inherent volatility (i.e., high beta).
It also has a technical, event-driven market timing strategy that is implemented through a systematic quantitative algorithm and operates through a set of proprietary technical patterns that may occur at market inflection points.
Q) Manmohan Singh’s July 24, 1991, budget speech is considered as the harbinger of economic reforms in India. What is your take on that? Do you think the best of the reform years are already behind us and what this means for investors?
A) Reforms of 1991 were majorly focused on the liberalization of investment and trade regimes, and they helped in the expansion of the services sector, which in turn, has increased employment in the country.
Talking about reforms, it is a continuous process, and any reform takes a certain amount of time before influencing results.
The current government has also come up with reforms like the implementation of GST, corporate tax cut in 2019, and Insolvency and Bankruptcy Code in 2016, and financial support to various sectors during the pandemic.
These reforms shall take few years before resulting in substantial gains. India is a growing economy, and there's still a lot of room for reforms.
As our economy expands, investors can also participate in the growth by investing in quality and growing companies.
Q) Small & Midcaps seems to be surging ahead of the benchmark indices and are trading slight premium to large-caps which has not been the case for long. Does that make you cautious in this space? What is your view and what should investors do?
A) All three major indices – Nifty50, Nifty Midcap 100, and Smallcap 100 – are trading at their all-time highs. However, small-caps and midcaps have been rallying compared to the Nifty50. Nifty50 has been trading in a narrow range for the last three months.
Our investment methodology involves the idea of investing in growing companies with an RoE of over 17%. There is a lot of screening done both fundamentally and technically.
We have a threshold market cap of Rs 750 crore and an average trading value of Rs 1 crore. We do not discriminate stocks between large and smallcap stocks.
As the Nifty is trading at its all-time highs, most of the stocks are breaking out of their base patterns and giving fresh buy signals. Investors can watch out for stocks that are standing well on both fundamental and technical fronts.
Q) What is your investment mantra for wealth creation? When did you start investing, and a little bit about yourself?
A) I started investing at the age of 20, right when I started working. I tried my hand in different investment perspectives - from value investing to penny stocks to low-yield stocks. And, like any new investor, I, too, lost money at times and then earned some.
However, it was through the O'Neil methodology that I finally found my stronghold in the world of stock investments. I discovered that this methodology eliminates all decision-making biases, whether from an entry or an exit perspective.
The sound rules of CANSLIM ensure that the process-driven method is not based on individual emotions but rather on data and signals that the market indicates, guaranteeing a uniform and standard procedure that works wonderfully well through different market cycles.
Based on our market direction, this approach also assists us on a reasonable scale to identify market tops and bottoms. The O'Neil methodology has worked wonders over the past few decades and was captured brilliantly by William J. O'Neil himself in his book 'How to Make Money in Stocks'.
We find no reason why one should deviate from this set process which has worked superbly in the past and continues doing so even today.
As for my story, I joined William O'Neil India in 2013 and was the first employee to be appointed. I led the team towards making the India division a Centre of Excellence for all the William O'Neil companies, and together with my team, I overlooked the formulation and execution of the company's strategy in India.
We have launched multiple products for retail investors in India viz, MarketSmith India, SWINGTrader India, algosmith and Portfoliosmith, to help retails investors take informed investment decisions. Recently, we also have ventured into Asset Management Business and have launched our first fund in India.
Before joining William O'Neil India, I worked at Thomson Reuters for nine years on Data Research Operations in several key strategic positions.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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