Investment Approach
Clockvine’s investment approach is defined by focus on: 1) growth, 2) long term sustainability of growth 3) good/clean and easy to understand balance sheets and cash flows, 4) businesses which can generate reasonable Return on Capital (>~15% post-tax) on a normalised basis.
1) Growth focus: We try to identify companies which can grow sales at more than 10- 12% CAGR in the long term (3-5 years) while maintaining stable margins.
2) Sustainability of growth: While we are focussed on growth, we don’t ignore the methods being used for generating growth. We avoid companies where growth is accompanied by deteriorating balance sheets/quality of business evidenced by: 1) high leverage, 2) reducing Return on capital and cash flow profile.
3) Good/clean and easy to understand balance sheets and cash flows: We believe in having a very simple approach towards investments. We invest in companies which are very easy to understand in terms of their P&L and balance sheet construct, even for a layman.
4) Businesses which can earn a reasonable return over cost of capital: We look for businesses which can generate >15% post-tax ROCE on a normalised basis.
We like to be 100% invested at all points of time; we take cash calls rarely.
Investment Horizon:
We invest with 3-5 years perspective. We understand that our investee companies will go through ups and downs, in terms of their performance and hence we don’t try to optimise our holdings by getting out from companies which are going through a bad phase and re-investing our money. We try to hold our investments through these cycles while at the same time keeping our eyes open to see if emerging data points are ominous signs for our long- term investment case for the company.
Investment process:
We follow a rigorous analytical process in which we don’t just pour over publicly available data but also try to do through analysis by interacting with mgmt. of competing companies, maybe important suppliers of the company, ex-employees etc.