Solidarity Prudence

Solidarity Prudence – Investment Strategy

Solidarity Prudence is a multi-cap strategy focused on investing in businesses benefiting from structural growth tailwinds, expanding competitive moats, increasing market share, and improving return on equity. The strategy seeks to build long-term compounding portfolios by backing companies where growth is broadly predictable, competitive advantages are strengthening, and management teams demonstrate disciplined capital allocation across cycles.

Investment Philosophy

The philosophy is anchored in identifying businesses that Solidarity would be comfortable owning as long-term business owners. The strategy prioritises companies operating in large addressable markets with durable industry tailwinds, improving industry structures, and the ability to deploy incremental capital at attractive returns while maintaining balance sheet discipline.

• Broadly Predictable Growth: Companies with long-term structural tailwinds and large opportunity sizes that provide visibility into sustained earnings growth.
• Improving Competitive Edge: Preference for sector or niche leaders with expanding moats, favourable industry structures, and the ability to compound capital at ROEs above 15%.
• Disciplined Management: Management teams focused on core business lines, prudent leverage, and consistent, thoughtful capital allocation.

Valuation sensitivity is explicitly linked to the stage of a company’s growth lifecycle, with greater emphasis on valuation discipline as businesses mature. The strategy does not follow model portfolios and avoids cash calls based on macro events, choosing instead to allocate capital to the most attractive bottom-up opportunities available at prevailing prices.

Portfolio Construction

Portfolio construction follows a private equity-style classification framework, balancing established leaders, emerging leaders, and selective special situations to optimise risk-adjusted returns.

• Clear Leaders (40–50% allocation): Market leaders in growing industries with dominant profit pool share, strong balance sheets, and robust business models, targeting ~15–18% IRR.
• Emerging Leaders (40–50% allocation): Businesses on the path to leadership within specific niches, offering higher growth potential and IRR expectations of 18%+.
• Special Situations (~10% allocation): High-quality businesses experiencing temporary uncertainty, where price–value divergence offers the potential for ~25% IRR.
• Concentration: Typically 15–20 companies, with minimum position sizes of ~3% and position sizes ranging up to 15%.
• Risk Management: Strong avoidance of poor governance and excessive leverage, with volatility viewed as a consequence of ownership rather than a measure of risk.
• Sell Discipline: Positions are exited when valuations become euphoric or when new information materially alters the original investment thesis.

Themes of Interest

• Market share gains in global supply chains across manufacturing and services
• Private sector banks gaining share within the financial system
• Life insurance driven by trusted brands and strong distribution
• General insurance, with a preference for health insurance adoption
• Digital business models and enablers of digitisation
• Solutions aimed at mitigation of inequality
• Discretionary consumption, particularly “affordable luxury”
• Financialisation of household savings
• Formalisation of the economy
• Structural thrust on clean and renewable energy

AMC Background

Solidarity PMS was founded in 2014 by Manish Gupta, a seasoned private equity professional who previously managed private equity investments for Rakesh Jhunjhunwala and has a strong background in corporate strategy from his stints at BCG and Honeywell. Solidarity brings a private equity mindset to listed equity investing, with Manish Gupta serving as Founder and CIO and retaining full control over investment decisions. While his experience in private equity and corporate strategy is deep, the listed equity track record of the PMS remains relatively nascent.

Investment Philosophy

Solidarity’s investment philosophy is guided by a simple but rigorous question: “Is this a company we would like to own as long-term business owners?” The strategy seeks to identify compounding businesses with predictable growth, improving competitive advantages, and disciplined management teams capable of deploying capital at attractive returns over long periods.

Core Philosophy Pillars

• Broadly Predictable Growth: Focus on companies operating in large addressable markets with structural industry tailwinds that support long-term earnings visibility.
• Improving Competitive Edge: Preference for favourable industry structures, sector or niche leadership, expanding moats, and the ability to deploy incremental capital at ROEs exceeding 15%.
• Disciplined Management: Emphasis on focused business models, prudent leverage, disciplined capital allocation, and management teams that continuously learn and adapt.

Valuation sensitivity is explicitly linked to the company’s stage in its growth lifecycle, with greater valuation discipline applied as businesses mature. Solidarity does not follow model portfolios and invests based on the best opportunities available at prevailing valuations. The strategy also avoids making cash calls driven by macro events, instead remaining anchored to bottom-up fundamentals.

Portfolio Construction

The portfolio is constructed using a private equity-style classification framework, with capital allocated based on leadership position, growth potential, and risk-reward asymmetry.

• Clear Leaders (40–50% allocation): Market leaders in growing industries with dominant profit pool share, robust business models, and strong balance sheets, targeting ~15–18% IRR.
• Emerging Leaders (40–50% allocation): Businesses on the path to leadership, often within defined niches, with higher growth potential and IRR expectations of 18%+.
• Special Situations (~10% allocation): High-quality businesses undergoing temporary uncertainty, where valuation dislocation creates the potential for ~25% IRR.
• Concentration: Portfolio typically holds 15–20 companies, with position sizes ranging from 3% to 15%.
• Risk Management: Strong avoidance of poor governance and excessive leverage, with the belief that volatility itself is not risk.
• Sell Discipline: Positions are exited when valuations become euphoric or when new facts materially alter the original investment thesis.

Suitable For

Investors seeking a private equity-style approach applied to listed equities, with a focus on long-term compounding businesses, disciplined capital allocation, and the ability to tolerate periods of volatility in pursuit of superior long-term returns.