Steptrade's Portfolio Management Services offer tailored investment solutions for discerning investors. Our expert fund managers curate diversified portfolios focused on promising SMEs across sectors, prioritizing companies with strong fundamentals and growth potential. Through meticulous research and risk management, we invest in early and mid-stage companies with disruptive models and strong leadership, aiming to capitalize on opportunities in the SME space.
1. Steptrade SME Fund
Investment Objective
This fund targets high-growth, undervalued listed SME companies with market capitalizations ranging from ₹200 crore to ₹500 crore. We focus on companies in the inflection zone, poised for significant value unlocking through:
- Identifying companies undergoing transformative phases with the potential to migrate to the main board within 1-2 years.
- Capturing supernormal alpha during these value unlocking phases as the companies experience demand-driven growth.
- Capitalizing on the valuation expansion that often accompanies successful migration to the main board, allowing investors to capture the full potential of their investment
Basis Of Stock Selection
- Strong Fundamentals & Internal Financials: We scrutinize a company's financial health, analyzing profitability, cash flow, and debt levels to ensure sustainable growth potential.
- Robust Corporate Governance: We assess a company's commitment to ethical practices, transparency, and shareholder value creation.
- Strong Demand & Supply Chain: We evaluate the company's market position, competitive landscape, and operational efficiency to ensure they can meet future demand
- Future Order Book Growth: We analyze the company's order book and future contract visibility to gauge future revenue potential
DESCRIPTIONS OF TYPES OF SECURITIES
This fund invests in listed companies on SME exchanges with market capitalizations ranging from ₹200 crore to ₹500 crore
ALLOCATION
This strategy focuses on identifying and investing in established SME companies listed on SME exchanges. We target companies with strong fundamentals and clear visibility of future growth potential. Our goal is to invest in companies with the potential to double or triple their value (2x-3x) within a medium-to-long-term timeframe.
2. Steptrade Rising Star Fund
Investment Objective
This strategy aims to generate superior alpha by actively managing a portfolio of thoroughly vetted small and micro-cap listed equities. We focus on companies with market capitalizations ranging from ₹500 crore to ₹2,000 crore and possess the potential for significant future growth:
- Meticulous Selection: We conduct a rigorous analysis of each company, focusing on its future growth potential, competitive advantage, and management capabilities.
- Sector-Specific Approach: We target high-growth sectors like defense and green energy, aligning with future market trends and government initiatives.
- Focus on Experienced Players: We prioritize companies with 5-7 years of operation and strong promoter holding, indicating a committed and invested management team.
- Diversified Portfolio Construction: We build a diversified portfolio across secular growth, cyclical, and defensive sectors to mitigate risk and enhance long-term returns.
- Value Trap Avoidance: We employ a disciplined investment approach to avoid value traps and identify companies with intrinsic value.
Basis Of Stock Selection
- Market capitalization: Focus on companies within the specified range (e.g., ₹500 crore to ₹2000 crore).
- Financial performance: Analyze profitability (e.g., net profit margin, return on equity), growth (e.g., revenue growth, earnings growth), and solvency (e.g., debt-to-equity ratio) metrics to assess financial health and growth potential.
- Valuation: Evaluate Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and other valuation metrics to assess whether the company is fairly valued compared to peers or the industry average.
- Growth potential: Analyze the company's future growth prospects based on market trends, industry outlook, and its competitive advantage.
DESCRIPTIONS OF TYPES OF SECURITIES
ALLOCATION
This fund targets high-growth potential small and micro-cap companies poised to become the mid-cap leaders of tomorrow. We believe these companies offer a compelling dual advantage:
- Explosive Growth Potential: These companies are in early stages of their growth journey, with the potential to significantly increase their market capitalization over time.
- Attractive Valuations: Compared to larger, established companies, these undervalued gems offer the potential for greater returns on your investment.
Investment Philosophy
The investment philosophy revolves around two key aspects: Endeavour to preserve capital and generate long term returns. The Portfolio Manager endeavours at all times to preserve and then, grow the portfolio. The goal is not necessarily to outperform a rapidly rising market, but as far as possible, aim to avoid the troughs in a falling market such that over a longer term time horizon, the portfolios outperform the benchmarks.
- Investing comes down to – Making intelligent decisions consistently.
- Our investment philosophy entails buying and holding a few great businesses indefinitely, allowing the power of compounding to manifest over extended periods.
- However, we recognize that this approach is constrained by the rarity of great businesses at fair prices. Buying these businesses at a reasonable price presents as an opportunity infrequently, since they are typically overpriced. Given that constraint, we don’t mind buying value stocks that are underpriced in the market and sell them when they have reached their fair value. I mention them as stocks, as I am simply looking at the valuation front rather than the business in total.
- Our investment philosophy is rooted in the belief that it's better to own a few great businesses and reap their benefits over an extended period than to hold a larger portfolio of average businesses, yielding lesser returns.
Investment Process
- Financial Analysis and Screeners: We use financial screeners to identify companies that meet our investment criteria. These criteria include financial factors such as profitability, growth, valuation, and quality of earnings.
- Corporate Governance Checks: We conduct corporate governance checks to ensure that the companies we invest in have good management and ethical practices. We also assess the quality of the company's board of directors and its alignment with shareholder interests.
- Checklist: We have a detailed checklist for each company that we analyse. This checklist covers factors such as industry analysis, management, competitive landscape, risk/monitoring, and profitability/valuations
- Risk-Reward Evaluation: We evaluate the risk-reward profile of each company before making an investment decision. We consider both the potential upside and downside when making decision of any company.
- Meeting Notes: We keep detailed meeting notes of all of our interactions with companies and other industry participants. These notes help us to track developments over time and measure the accuracy of our estimates.
- Conferences and Analyst Meets: We attend conferences and analyst meets to learn about companies and industries. We also use these events to network with other investors and industry experts.
- Investor Presentations: We review investor presentations and update calls to better understand management capabilities and outlook. We also assess the quality of the company's interactions with the investment community.
