We are booking SOME profit!
Why ? Sector Tailwinds + Market Sentiment + Low Float = Unreasonbly High Valuations (In Our View)
We fashionably call ourselves decadal investors but share in this post that we are booking profit in some of our positions. Why? Let me share 1 example below
Company 1
In July 2023 we wrote about a company “A High Growth Potential AMC” which at that point was an under 20 Mil USD Marketcap asset management company, with a newly appointed veteran CXO, and part of a 8 Bil USD BFSI group.
The price has 4x’ed from then today & we have booked some profit, in stock market lingo we have taken out our cost.
What has the company done since then? (All public information)
Launch of 2 NFO’s & signficant growth in AUM
Improved performance across their funds using their new model
Multiple key new hires including a veteran CBO
In process of launching a PMS
These are all steps in a positive direction, then why did we partially sell? In our view the performance is yet to fully show even though positive actions have been taken, in our view its valuation today is running ahead of itself and given industry valuations it is significantly overvalued. It is a microcap but even then we believe its overvalued. Also we do believe that there is massive opportunity in the AMC / Wealth Management / Broking space but also do believe that given competition (including Jio Financial coming in), technology and AI margin profiles for all players will reduce in the long run.
Do we see anything negative in the company? No
Can it still become a 10x/20x/100 from our post date ? Yes
Can it massively correct in a downturn? Yes
Can it continue to be to overvalued and grow unreasonably in price? Yes
Can we decide to buy the stock again at lower/similar/higher valuations in the future if and when see positive triggers? Yes
Selling for us is the most complex decision, especially as we are microcap investors given every opportunity looks like at least a 10x if not 50x or 100x but yet in today’s market we have taken a call to partially book profits where we see what we believe is froth as of today.
In our next post we will highlight one more company where we are booking profits and also share a microcap where we are going to invest some of our sale proceeds from the above transaction. This microcap is in the financial services space and we have been tracking it for over a year with positive triggers hitting now!
Until Next Time!
We want to emphasize that this communication should not be misconstrued as a recommendation, as we are not SEBI RIAs. Readers must conduct their due diligence and exercise caution. Therefore, we urge all readers to approach this opportunity with prudence and carefully consider the potential risks involved. While the prospects appear promising, it is essential to maintain a cautious approach and stay informed of the inherent dynamics of the industry.
Happy to chat and discuss this in detail
About Us -
Govind Shorewala - Entrepreneur (Mining, Textiles) & Investor (Private & Public Markets) → Reach out at: govind.shorewala@gmail.com
Aaroah Mittal - Early Stage VC → Reach out at: aaroah.m@people-group.com