The portfolio shall essentially target to invest in Value Opportunities and Special Situations in individual stocks and related instruments. The portfolio will be market capitalisation and sector agnostic.
These are ones, where in the opinion of the fund manager, the company’s Intrinsic Value is ‘X’, while the stock is trading at a discount to X. The discount should be such that it offers reasonable ‘Margin of Safety’ for an investment in the stock. This discount to Intrinsic Value is a result of multiple reasons i.e. temporary miss in performance, risk aversion at broad market level, regulation uncertainty, etc. As uncertainty regarding these aspects abates, the Intrinsic Value is expected to be realized.
These shall be investment opportunities dependent on the probability of occurrence of one or more corporate events, rather than market events. These situations can largely be classified as:
- Price related situations: Buybacks and Delisting
- Merger related situations: Mergers and Demergers
- Corporate Restructurings: Asset Sale, Special dividend, Change of management etc.