Abakkus PMS

AMC Background

Abakkus Asset Manager is a relatively new AMC in India established in 2018. The AMC was set up by Sunil Singhania, ex-CIO of Reliance Nippon AMC, with 2 decades of experience in the market with a focus on small-caps.  The AMC has since scaled up very well on the back of the established track record of the team at Abakkus including Sunil Singhania, and the performance of the funds at the current firm. 

Strong AMC with Highly Respected Veterans in the Investment Team Abakkus is still a young AMC. However, the strong pedigree of its founding team combined with very strong initial funds performance in the 3 founding years, make it a credible AMC to invest with. Backed by Sunil Singhania (the ex-CIO of Reliance AMC) & Aman Chowhan (another Reliance veteran), Abakkus's core investment team has over 5 decades of investment experience.

Investment Philosophy

The philosophy is driven by a bottom-up approach with a very strong focus on balance sheets and earnings. Each investment opportunity is based on individual merit rather than the theme or style.

Tenets of Investment Philosophy

• Focus on Alpha Generators: Abakkus focuses on three aspects to generate alpha. Identify 'growth companies', where profitability is higher than the market average, value defined as fundamentally under-priced with reasonable growth expectations, and mid-cap with scalable businesses that have the potential to become large-cap in nature.
• Contrarian in nature: prefers to the first, early and/or only investors in the identified companies.
• Buy-and-hold: Invest in businesses as a partner than a stock-picker
• Risk-reward: focus on the price and value derived by looking at 'what is in the price?'

Abakkus's MEETS Framework

• Management (M): Evaluation based on capital allocation track record and fairness to minority shareholders
• Earnings (E): Quality of earnings, cyclical or structural in nature and ability to double profits in 4 years or less or where EV/EBITDA can half in 4 years
• Events/Trends (E): Evaluation of events on the horizon or disruptive trends/new themes
• Timing (T): driven by the principle of 'good company is not necessarily a good investment if the price is not right'. Focus on 'what is the price discounting' and time horizon of the investment.
• Structural (S): Size of the opportunity, competitive moat and consistent growth in profits.

Avoid the Four C's

• Chase Momentum: let fundamentals drive our investment decision rather than price movements
• Churn unnecessarily: No trading. No needless churning of the portfolio
• Copy and Mimic: will not be influenced by 'herd mentality'.
• Credit Risk - Fractured Balance Sheet: very difficult to rebuild a broken balance sheet and these stocks eventually turn value traps and hence, are best avoided

Exit Strategy

• Fundamentals don't pan out as expected due to sector deterioration, company-specific issues, and governance issues.
• Stocks may do much better than expected.
• Position becomes insignificant and can't /don't want to add.
• New investment idea better than existing holding in terms of risk-reward.

Contrarian Approach with focus on Earnings Growth The core investment philosophy focused around the 15:15:15 strategy does enforce a certain amount of rigour in terms of ensuring that investments are either made in attractively valued companies (<15 PE) or in more expensive companies that have to meet a high-quality test (both ROEs & Earnings growth of above 15%). Abakkus invests predominantly in companies qualifying in at least 2 out of 3 criteria. Suitable For Investors seeking diversified strategies, run by a stable high quality investment team.