Portfolio Management Scheme, PMS – Consistent Compounders, are specialized investment vehicle for lump sum investments. The portfolio manager invests the money in shares and other securities and manages the portfolio on behalf of the client.
Consistent Compounders Portfolio uses a combination of a filter based approach and indepth bottom-up research of companies to build a portfolio that delivers such outperformance through compounding over long periods of time. The team creates a list of stocks using a twin-filter criteria of double digit YoY revenue growth and return on capital being in excess of cost of capital, each year for 10 years in a row. Next, they build a portfolio of such stocks each year and hold each of these annual iterations of portfolios for the subsequent 10 years (without any churn). The bar chart below shows the back testing performance of such filter based portfolio.
Source: BloombergSource: Bloomberg. Note: Only the Consistent Compounder Portfolios which have finished their 10 year run have been shown. Note:These are total shareholder returns.
There are two conclusions from this exercise:
