This PMS manager has contra view on market: Siddhartha Bhaiya reveals Aequitas’ best and worst bets

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Siddhartha Bhaiya, chief investment officer at Aequitas, believes the markets have become too overrated to feel at ease. The PMS, therefore, has halted new flows. He also believes there is a bubble building up in SME public issues. The Rs 4,500-crore fund house, which has returned an annualised 34 percent since inception, is waiting for a correction to restart investing.Siddhartha Bhaiya shares his investing thesis, secret sauce, best and worst bets, and much more in an all-encompassing interview with Moneycontrol. Here's how the conversation progressed:On how they invest, why they are not investing anymoreWhat is your investment thesis?We have a multi-bagger approach to investing. We buy the largest or the best-performing company in the worst-performing sector. We always want to buy stocks at a significant discount to their intrinsic value. We also want to buy growth but that is cyclical. When growth kicks in, it becomes a growth stock, people give high valuation to it. So, we typically look for industries which have not done well in the last 10 to 12 years, like infrastructure, and capital goods. We bought a lot of print companies.Also read: From return of FIIs to sustainable growth: 7 themes to ride on in 2024What are the filters that you run before selecting a stock? We run multiple screeners on a quarterly basis. Every quarter, we will run screeners on revenue growth, profitability growth, EBITDA, margin expansion. Then we do qualitative research - reading the annual report, going through conference calls, presentations, and management interviews.In 2020, most fund managers sold the stocks in their portfolios, but you didn’t do that. On the contrary, we held on to every single stock. Every smallcap fund manager had become a largecap fund manager in 2020. But for ten and a half years we’ve only focused on smallcaps and midcaps. I cannot add any value by buying Nifty 50 stocks. We’re better off in an ETF then.You recently suspended flows into PMS and AIF... Honestly, we feel the valuations have become very expensive right now. We have certain minimum thresholds for our clients. If we feel we cannot make those kinds of returns, then we won’t take money from our clients. The market is very overrated in our opinion. And that's why we've suspended flows temporarily and we will reopen when the markets correct.What about the companies that you still hold? We...

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