Investment Philosophy Anil Tulsiram October 2014

• Key drivers behind investment philosophy. – Agree with Seth Klarman & Howard mark’s view on repetition of 2007 crisis. – Deep influence of Prof Sanjay Bakshi – Time diversification to hedge against my immaturity in investments.

• 180 degree change in investment style in last 12 months – Earlier focused exclusively on low PE & PB and wide diversification. – Now focus on high quality stocks .

Portfolio structure • Basis structure – 75% allocation to high quality stocks. [8-10 stocks with 5-10% allocation.] – 25% to expansion buckets or any situation with possibility of 3-5x returns in next 3- 5 years. Basically a testing lab for me. Restrict exposure to each situation to only 5%

• Surplus money – Delisting, Buy backs & Open offers.

Quality stocks – key factors • I look for long term trends eg. Affordable housing, Vacation & movement of credit from unorganized to organized sector [Ralph Wanger] • Prefer small & mid caps • Invest only if there is possibility of > 25% CAGR over next 5-10 years. • Till now focused on established moats, now exploring emerging moats [current low ROE but possibility of ROE increasing with scale]

Few elimination rule • Adverse impact of collapse of China • Any stock which I am not comfortable to hold for next 5 years, except when it provides possibility of 3-5x returns in 3-5 years. • Not comfortable holding for next five years. • Rapid change

Special situation • Delisting, Buy backs & Open offers [only excess funds]

• Delisting – seeking uncertainty on favorable terms & expected return > 10% factoring worse case scenario. • Uncertainty on favorable terms [Generally shareholding structure is quite dispersed here] – Valuation – Business fundamentals – Share holding structure

Key Learning over last 3 yrs • My personality makes me to do detailed research. I did mistake of spending too much time on cyclical & wide diversification. Lower return on per unit of time invested. • Buy right & sit tight. Buy only those cases where you will be comfortable to hold stock despite short term overvaluation. • Capital allocation is very important.

Learning Gaps • When to sell on valuation grounds [except when you find alternate opportunity] • Biggest return in emerging moats, but how to be sure that moat will be there even after 3-5 years. • Cash allocation – How much cash to hold.