‘Bharosa Club’ is a financial advisory firm with a twist. Unlike other advisors, they don’t tell their clients what to do but empower them to make better decisions for themselves by teaching them how to use financial products effectively.
It turns out, the approach can generate far better outcomes. Personal Finance, as the name implies, is unique to the individual, and if we can empower them to understand financial products at a deep level, with the right guidance, they can generate superior outcomes for themselves.
There is plenty in their bouquet of services. Bharosa Club offers comparison tools, learning content, webinars, detailed research notes, and more.
Here is an excerpt of a conversation with Sahil Bhargav, Chairman & CEO at Bharosa Club:
Q) Tell us something about yourself and your experience with investing.
I have spent a bulk of my career in finance which was largely on the investing side. I was a top-performer at Apollo Global Management’s US Private Equity Fund, one of the best performing private equity funds in the world, and subsequently, at a fundamentals-driven hedge fund.
These experiences taught me how to do deep due diligence on a variety of companies and sectors that help me realize how critical it is to understand the fundamentals of a company in order to do successful investing.
Investing is an area where I see many individuals struggling, and as a result, it is one of our key focus areas at ‘Bharosa Club’.
Q) What is the rationale & criteria behind the Bharosa Top 150 smallcase?
Bharosa Club runs the ‘Bharosa Top 150’ smallcase, which aims to generate market-beating returns by selecting winners amongst large-cap stocks in India.
Our strategy revolves around combining momentum cues and top-down research with bottom-up deep due diligence.
We aim to deliver our investors the advantages of lower volatility, and the risk that comes from large-cap stock ownership, while at the same time generate above-market returns.
Our smallcase has recently completed its first full year post-launch and early results are encouraging. You can check out the smallcase here.
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Q) What is your view on the current market/economic trends and how your strategy is equipped to benefit from it?
We get a lot of questions from our clients about the contrast between the economy and the remarkably resilient stock markets. Frankly, I think our clients are right.
I have heard the arguments for why stock valuations are where they are, but I’m not convinced. India essentially saw 25 percent of the economy go offline in the second quarter.
I think that kind of loss triggered ripple effects in the form of lower incomes, excess leverage and excess capacity that will take years to work-off completely.
In the short-run, markets may run up on the back of positive news (vaccines, improving economic numbers, etc.), but we recommend caution.
Once the long-run impacts are recognized, you want to make sure you aren’t left holding the bag!
Q) While the strategy is sector-agnostic, what sector allocation does your current smallcase have and why?
We are taking a very defensive approach in our smallcase. We favour sectors that have stable demand, do not rely on consumers getting loans to sell their products, and where companies have relatively clean balance sheets.
Thus, we are under-exposed to consumer cyclical, financials, and are over-indexed to FMCG, Pharma, etc. Our strategy in today’s market is to keep a very careful eye on risk and avoid the temptation to chase short-term returns.
We are okay underperforming the index in the short-run if it means taking on too much risk for our investors!
Q) Name some winners that this strategy was able to identify?
UPL is definitely one of the winners but another stock that really was a good find for us was Britannia Industries. Britannia was trading at a significant discount to the larger MNC FMCG companies.
The interesting thing was that when we looked at Britannia’s product portfolio, we actually liked it much more than the MNC’s because it was focused on food.
While personal care is a good category, it isn’t benefiting from an increase in demand the way that packaged food is. One prime reason for that is – the trends are pointing towards a shift from eating out to eating at home.
So we saw very good value in the stock.
Q) How have you dealt with the volatility in the past few months and what is your suggestion for retail investors?
This is a great question. There are three things you need to do to ace volatility, in our opinion. Firstly, make sure that the money you are putting in equity markets is long-term money (time horizon of 10+ years).
I think a lot of investors forget that stocks are very long-duration assets. If you invest in equities at a 20x P/E, even factoring in earnings per share growth, it is like buying a 10 year + bond! You don’t want to buy long-term assets with short-term money.
Secondly, invest in a broad basket of stocks and don’t concentrate too much in a few stocks. The diversification will limit your principal risk and also reduce the portfolio’s volatility. Thirdly, keep your emotions in check and focus on the long-term.
Stock prices are driven by fear and greed in the short-run and logic in the long-run. If you can keep your cool, you will have an advantage. Our last video seminar with smallcase on Why Markets Crash deals a lot with this topic .
Bharosa Club is conducting a free webinar on the smallcase Youtube channel, which will focus on giving investors a flavour of the framework they use for their smallcase to source winning investments.
In this webinar Sahil will be discussing:
• The pros & cons of Top-Down thinking
• The pros & cons of Bottom-Up thinking
• How to combine the two to find winners
Sahil would also do a case study on the framework used to identify winners like UPL, and suggest resources you can use to help you research followed by a Q&A session.
You can register here
(This is a partnered post)