Ideal Partner
As important as our investment objectives is the type of investor we seek. We seek Limited Partners who are:
- Qualified clients or institutions in the US as defined by the SEC and are willing to invest at least $1M in Dwaith Partners
- Indian-origin HNI Clients (RI/NRI/OCI) as defined by SEBI who are willing to invest at least Rs. 2Cr in Dwaith PMS
- Interested in preserving and growing wealth over the long term (preferably those who have a 5-year horizon) and are not looking at daily, weekly, or monthly stock prices
- Comfortable with the Fund rules and understand our capital allocation, growth, and value perspectives
What not to expect
Weekly or monthly reports and frequent calls or emails.
The investments made will take time to mature and yield results. No investments are made with immediate gains in mind with quick turns or frequent portfolio churning. Weekly and monthly reports will not be provided.
As our investments are made to reap long-term gains (5+ years in mind), frequent portfolio changes will be detrimental to our stated goal.
What to expect
Detailed annual letters, and quarterly reports giving an unbiased view of investments. High level of integrity and commitment from the Dwaith team.
Main area of Investments: We will invest funds mainly in India. We will not try to limit ourselves to preset sectors or stocks (small caps, large caps, or mid-caps). Our principal concern will be to invest in companies that have excellent management operating in areas with large growth potential.
Why India?
The first rule of fishing is - fish where the fish are.
India, as an economy in 2024 is at $3.8T. We feel it is at the start of a long growth cycle, as the economy moves towards $10T and beyond in the decade of 2020s. Doubling or tripling of an economy throws up lots of interesting opportunities and we would like to take advantage of them.
We feel India is ripe for long-term investments as the country is poised for structural long-term growth. With the median age of India being 28, education levels reaching an all-time high (percentage of educated at >70%); it is akin to the USA at the turn of the nineteenth century.
We feel all types of changes will occur in India over the next decade and we will have plenty of fish to fish.
Investment Categories
Growth at Reasonable Prices
These will likely form the bulk of our investments. Investments will be made for 3-5 years. The companies here will be in sectors that we understand and can easily point out what the valuation would be with a reasonable margin of safety.
Undervalued Companies
Sometimes, companies trade lower than intrinsic value – could be due to – the nature or size of businesses like mid-caps or small caps which are not actively looked into by larger funds or due to sectoral cyclicity. We love unloved companies run by right people.
Turn Arounds
Good company finds itself in a bad position for various reasons like debt, ineffective management, confused positioning, etc. They might be in inherently good sectors with huge tailwinds. When opportunities arise we will invest to take advantage.
What constitutes growth: An example here would be one of managing partner’s investments in a Pharma company, Caplin Point Lab. This company has been consistently growing at over 20% YoY along with excellent cash flow characteristics. Their principal markets are underserved in India and South America and they operate with excellent operating margins (30%+). This stock had been held by the managing partner in his portfolio for 5+ years (until 2018) and is an example under GARP.
What is a good growth company: A company that gushes cash, and has large current and untapped adjacent markets with limited or no competition is a reasonable candidate. We prefer companies that have strong shareholder structures – where the management (family management or professional management) holds a considerable portion of shares for fairly long periods.
The company should fall into our set of “circle of competence” – that which we easily and clearly understand. Those that do not fall into our circle of competence are passed over.
An under-valued company example: It would be something that we hold in Dwaith Partners today – Naspers. Naspers is a South African company, mainly involved in investment activities outside of South Africa. Their principal holding is Tencent – the largest technology company in China with varied interests from WeChat to online gaming to payment services. They hold ~30% of Tencent which is valued at >$200B. They also run a thriving media business in South Africa (the largest trading stock in Johannesburg). The valuation of Naspers in 2023 is ~$100B (effectively <50% of intrinsic value) and growing rapidly.
A company like Naspers has the uncanny ability to identify good digital plays: 12% ownership originally in Flipkart (Amazon competitor in India which was bought by Walmart for ~$16B), 39% ownership in Swiggy (online delivery platform in India which is valued at >$1B) and 43% ownership in Makemytrip (an Indian online travel enablement e-commerce player). Holding such investments which are available at a discount to their intrinsic value with long digital runways, run by honest management will likely give us good returns. The returns may not be satisfactory in any particular year, but over the long haul – they will likely be excellent.
Turn-around Example: The managing partner invested in Enphase (where he worked until 2021). He made his investment at the time of joining Enphase as he understood the power of the microinverters. The customers just loved the brand, though the company was reeling under heavy debt. When new management brought in operational rigor and focused attention, it was a no-brainer to buy and hold. One of his biggest errors in judgment was to sell that out after a 30X up-move only to miss out on the further 10X growth. The lessons of humility are well-etched and similar errors in selling out early will likely be minimized within Dwaith Funds.
These three strategies will form the principal basis of investments. The managing partner’s thoughts on investments in India, the psychology of holding onto investments, and his general outlook on sectors and markets are articulated in his annual letters that can be accessed under the Performance Summary.
Preferably, if there is nothing to do, our strategy will be to do nothing. Again, it is not our intent to act for the sake of acting. Hence, our bias toward selecting the right partners who have a long-term outlook.