Centrum Good to Great
Centrum PMS is rebuilding following the departure of its previous CIO. While they have employed a senior resource (Anil Sarin) to help build the business, he recently arrived in 2018, and it may take some time for Centrum to establish itself as a stronger PMS competitor. Another aspect we dislike is the fact that there are too many diverse tactics for a tiny fund company. Their execution and skill in concentrated mid- and small-cap strategies based on their research methodology, on the other hand, are quite good.
|Year of Inception
|Number of Stocks
Quality picks from mid and small-cap
- To gain substantial long-term outperformance by investing in high-quality mid- and small-cap firms.
- Earnings Growth (E): driven by criteria such as minimum ~15% EBITDA growth and ~15% ROCE | High cash to EBITDA ratio (65% and above) | Low leverage (<2x)
- Deep Dive Research (D): driven by factors like the size of the opportunity, competitive advantage, scalability, and channel checks
- Governance (G): evaluated based on accounting quality, past capital allocation, past related party transactions, and dividend policy
- Execution (E): past track record and promise vs delivery historically
The above-mentioned EDGE framework is used to identify leaders.
Leadership traits are defined as
- Market Share
- Promoter/Management Pedigree
- Operating Margins and Return Ratios
- Brand/Distribution Strength
- Business Growth and Pricing Power
- R&D and Technology Differentiators