Today, we are launching a new service called Super Investor. This service is free to join with zero upfront cost. The fee structure is post-paid in nature where we charge a performance fee based on the profit made at the closure of each recommendation. If you make no profit, we also make no money. So our interests are aligned. In this post, you will find the details of this service & what it takes to join it.
Super Investor: What & Why
Super Investor is a curated service which is specifically designed based on the feedback from high net worth clients. Many investor prefer not to commit any upfront fee but are happy to share a small fraction of profit as a performance fee.
In this service there is no portfolio instead individual stocks are recommended. So there is no diversification. However, investing in a single best stock increases the chances of making more profit immensely. To mitigate additional risk which comes with under-diversification, we have developed a framework to recommend only stable & quality stocks under this service. Stock quality is paramount as we have to ensure our clients make money in order for us to get any returns. This is not a trading service. All recommendations will be backed by fundamental study. We may not recommend anything for months if margin of safety is not there or market is not conducive. Similar to test cricket, we will wait for the bad balls to score while leave everything else. By combining real patience with fundamentally backed stock picks, there risk of under-diversification will be reduced. On top of this, we have done an extensive backtesting to further fine tune our framework by eliminating any of our own biases. So, overall we are taking a very scientific approach, along-with behavioral aspects to beat the risks and secure profit.
How it works?
Very simple. We will recommend you a stock where you need to invest your committed capital as indicated during on-boarding process. We wait for the profit booking in next 3-6-9 months (depends). Once profit booking is done, we raise bill for the performance fee. This cycle gets repeated till anyone of us decides to opt-out.
Committed capital is the amount of money investor will need to commit to this service. They need to keep it handy for investment. It is upto investor’s discretion to invest higher or lesser than committed capital, enter or exit stock at a higher or lower price. These things are beyond our control. We will not seek any screenshots or proofs. Simply, our performance fee calculations will run on the committed capital & the stock price (entry & exit) as indicated in the recommendation notification sent over both email & whatsapp.
Back Testing Results
Conceptualizing this service was one thing, we still needed to test our framework by doing a backtesting analysis. This is where data driven approach helps to remove our own biases in a framework. We did that rigorously on past two decades of the data for over two and half months. Each results were analysed and the framework was made more robust before conducting next round of tests. Based on lessons learnt, we established our revised framework based on three important pillars:
- Business Strength: To isolate, weak business from the strong once. It includes parameters such as product pricing, demand depth, debt considerations, capacity utilization & expansion plans, nature of the business (cyclical or structural), Asset turnover. We even invented a new ratio which calculates relative m-cap vs the revenue generated by a company within the same industry. Haven’t given it any name. All these are factored in to strengthen our chances.
- Forensic Accounting: We deploy forensic tools to identify mis-match between what is reported on the books vs reality. This helped us massively during backtesting as we avoided certain companies which were “growth-traps”.
- Special Situations: This is where situational awareness, helps to generate gains over shot or medium term. As a research firm, we have premium access to multiple platforms, connectivity with top analysts globally, collaboration with research teams. All these help us to zero down on developing trends earlier than a normal investor.
Finally, we conducted back-testing of this framework on recent bear market from 2017-2020. The results were a hair raising 295% vs Sensex 19%. Looks great for period of 3.5 years. However, have a close look. This was not all smooth. There were periods when there were flat to negative returns (Jul-18 to Jul-19). Followed by sharp contractions (Oct-19 to Jan-20). But all of this was negated by period of bursts (Jan-17 to Apr-18) & (Feb-20 to May-20). Infact graph was up only 50% of the times, for rest of the time we were sitting in cash or our stocks did not move at all. This gives a very good example of what to expect from this service.
- Upfront Fee: ₹0
- Performance Fee: 20% above 6% watermark.
Zero starting charges. There is only one fee which is based on performance. No other fees. Since, it is a post-paid service, where fee will be payable after making profit, trust between us is utmost important.
- For example, if we make a profit of let’s say 20% on ₹100,000
- Total Profit: ₹20,000
- Performance Fee Schedule: 20% above 6% of the profit
- Profit made over 6%: 14% (20%-6%)
- Fee Payable: ₹2,800 (₹14000*20%)
How to get enrolled
Anyone who is aligned with this service can join us. Below are the steps to get yourself enrolled:
- Fully understand this service. Ensure you are KYC verified.
- Send an acknowledgement over email to firstname.lastname@example.org with your pan details, whatsapp enabled number & preferred email id to be registered.
- Indicate your preferred committed capital amount in the same email. It can be a minimum of ₹3 Lakhs & onwards. Please be transparent with your committed capital since we will use it to determine liquidity requirements in the stock.
- We verify your KYC & confirm you onboard this service.
- The charges are calculated based on entry & exit price as indicted in the recommendation email. Since stock prices change every second. It may happen that by the time you buy, the stock price has moved little up or down. This is beyond out control. In our calculations, we will not be factoring it. Recommendation will be shared when stock market is closed so the price remains unchanged until the next day.
- Fee will be calculated on the announced committed capital by the investor. In reality, one may invest more or less. That risk will be at investor’s own discretion. Please announce the correct committed capital as much as possible. We need to match stock’s liquidity with your investment amount. So, it is important to be transparent on it. Remember trust is one the main aspect of this service, since it is post-paid in nature.
- To ensure we make a profit, we will not bound ourselves to any fixed frequency of recommendation or any particular market capital. It may happen that we do not recommend anything for months. During periods of no action, you may choose to park your money in a liquid fund or FD and enjoy those profits.
- We expect you to act on our recommendation as soon as possible when the market opens so there is minimal deviation in our calculations.
- A single pager report will be given during the time of recommendation which will essentially focus on the reasons why a stock under recommendation should go well in the future. At times due to operational reasons, we may choose to send just a simple email & whatsapp text to notify you about the recommendation. The focus of recommendation will be to ensure we enter into the stock at the right time in a swift manner rather than to decorate the presentation. Documentation / procedural delays will take a second priority.
- All notifications will be sent on both email & whatsapp.
- In case of any breach of trust, like non-payment of fee after profit booking, we reserve rights to blacklist that pan number.
We have tried to explain this service in details. However, in case of any other queries, feel free to connect over whatsapp +919958092336