Strategy Series

Our articles specific to the six investment strategies we offer. Whether you invest with us or are looking to invest, these
articles can you give you an insight into why we make the decisions we make.

Consistent Compounders
Succession Planning is Critical for Disruptive Capital Allocation

Large businesses often face the risk of stagnating growth due to saturation of their core market or disruption from new innovators. One way to mitigate this risk is to invest in disruption, innovation & expansion of the business into adjacencies. However, successful execution of such capital allocation decisions is not dependent only on strategic decision-making […]

Consistent Compounders MAY 09 . 10 MIN READ
Wealth Compounding = High ROCEs + Reinvestment of Profits
Consistent Compounders APR 07 . 12 MIN READ
Optical Illusions in Equity Investing
Consistent Compounders
Succession Planning is Critical for Disruptive Capital Allocation

Large businesses often face the risk of stagnating growth due to saturation of their core market or disruption from new innovators. One way to mitigate this risk is to invest in disruption, innovation & expansion of the business into adjacencies. However, successful execution of such capital allocation decisions is not dependent only on strategic decision-making […]


Jul 10 . 16 MIN READ READ MORE
Consistent Compounders
Wealth Compounding = High ROCEs + Reinvestment of Profits

Starting this month, we are rolling out a joint newsletter across our four domestic PMS Products. In this edition, we revisit the basic principles underlying Marcellus’ investment philosophy i.e. a firm’s ability to generate Free Cashflows (FCF) and grow them at a healthy rate sustainably over the long term. We take a look at: a) […]


May 09 . 10 MIN READ READ MORE
Consistent Compounders
Optical Illusions in Equity Investing

Psychological biases tend to affect an investor’s decision making in subtle ways which are usually detrimental to long term investment returns. Several of these biases are better described as optical Illusions. Using the construct of the human brain as described by Nobel Laureate Daniel Kahneman in his book ‘Thinking, Fast and Slow’, we highlight a […]


Apr 07 . 12 MIN READ READ MORE
Consistent Compounders
CCP valuation multiples correct 30% whilst fundamentals continue to compound at over 20% per annum

CCP portfolio companies’ valuations have become 30-35% cheaper over the last 12 months. Given that Free Cashflows of these companies have compounded at 5-7% higher run-rate compared to their earnings consistently over the last 5-10 years, their current valuations (on a Price to Free Cashflow basis) are significantly cheaper than where they were 3 or […]


Mar 06 . 7 MIN READ READ MORE
Global Compounders
Unlocking Wealth Creation Through External Capital Allocation – An Underappreciated Phenomenon

Marcellus’ Global Compounders Portfolio (GCP) invests in 25-30 deeply moated global companies listed mostly in developed countries and other global markets. These companies have dominant franchises which benefit from global economic megatrends and rational capital allocation by the management teams running these firms. These elements help the GCP companies drive an annual increase of approximately […]

Global Compounders MAY 28 . 12 MIN READ
Making Money from Luxury Goods Manufacturers
Global Compounders APR 17 . 10 MIN READ
The ‘Pick & Shovel’ Strategy
Global Compounders
Unlocking Wealth Creation Through External Capital Allocation – An Underappreciated Phenomenon

Marcellus’ Global Compounders Portfolio (GCP) invests in 25-30 deeply moated global companies listed mostly in developed countries and other global markets. These companies have dominant franchises which benefit from global economic megatrends and rational capital allocation by the management teams running these firms. These elements help the GCP companies drive an annual increase of approximately […]


Aug 28 . 15 MIN READ READ MORE
Global Compounders
Modern Utilities Operating on a Global Scale Make for Lucrative Investments.

Marcellus’ Global Compounders Portfolio (GCP) focuses on investing in 25-30 highly fortified global companies listed mostly in developed markets. These companies align with global megatrends and possess robust moats built around process capability, research and development, and capital allocation. These factors play a pivotal role in driving the consistent compounding for GCP companies. Over time, […]


Jul 09 . 12 MIN READ READ MORE
Global Compounders
Making Money from Luxury Goods Manufacturers

Marcellus’ Global Compounders Portfolio (GCP) invests in 25-30 deeply moated global companies which are listed in developed countries. The nature of the products and services – which cater to global economic megatrends – and the moats developed around process capacity, R&D, and capital allocation, are the key factors that contribute to the consistency of free […]


May 28 . 12 MIN READ READ MORE
Global Compounders
The ‘Pick & Shovel’ Strategy

Marcellus’ Global Compounders Portfolio (GCP) invests in 25-30 deeply moated global companies listed in North America and Developed Europe. We employ a bottom-up company selection methodology that includes conducting primary research on moats, capital allocation, longer-term opportunities, and risks in order to comprehend the growth of cash flows over the long term. The nature of […]


Apr 17 . 10 MIN READ READ MORE
Kings of Capital
Learning from history: Discounting in Financial Services is a bad strategy

History shows that competing only on the basis of price either as a lender or as an insurer has inevitably led to heavy losses and in some cases to bankruptcy. In this newsletter, we discuss how PSU general insurers in their quest to gain market share, cut pricing in group health insurance for 5+ years […]

Kings of Capital APR 29 . 10 MIN READ
A Simple Approach to Valuing Financial Services Companies
Kings of Capital MAR 27 . 10 MIN READ
What KCP Lenders Can Teach SVB’s Management
Kings of Capital FEB 26 . 7 MIN READ
Indian Lending: Gamblers versus Franchise Builders
Kings of Capital
Learning from history: Discounting in Financial Services is a bad strategy

History shows that competing only on the basis of price either as a lender or as an insurer has inevitably led to heavy losses and in some cases to bankruptcy. In this newsletter, we discuss how PSU general insurers in their quest to gain market share, cut pricing in group health insurance for 5+ years […]


Sep 07 . 11 MIN READ READ MORE
Kings of Capital
A Simple Approach to Valuing Financial Services Companies

Valuing lenders and insurance companies is tricky as the well accepted principle of discounting future cash flows does not work for Financial Services companies. These companies work under a regulatory framework which requires them to maintain a minimum capitalization level and also reinvest a large part of their earnings. Technically these firms have no/negative free […]


Apr 29 . 10 MIN READ READ MORE
Kings of Capital
What KCP Lenders Can Teach SVB’s Management

Even as the global financial system is reeling from the stress created by the sharp increase in interest rates over the past year, the Indian banking system is well placed to overcome this crisis owing to its granular liability franchisee, well matched asset-liability (ALM) schedules and more calibrated monetary policy conduct by the central bank. […]


Mar 27 . 10 MIN READ READ MORE
Kings of Capital
Indian Lending: Gamblers versus Franchise Builders

The Return on Equity (RoE) of lenders is driven by: (i) strong operating profitability (Return on Assets); or (ii) capital structure (high debt to equity). Recent euphoria in share prices notwithstanding, most PSU banks suffer from weak operational profitability (RoAs of 1% or lower) and high debt to equity ratios (15x+). This deadly combination is […]


Feb 26 . 7 MIN READ READ MORE
Little Champs
Invest in Dominant B2B Firms in Highly Profitable Industries

The industry in which B2B firms operate can have an outsized impact on their compounding potential. Over FY14-23, some sectors like IT, Light Industrials and Chemicals have generated twice as much RoCE and share price returns as compared to sectors like Energy and Metals & Mining (which struggle to return even cost of capital). This […]

Little Champs MAR 21 . 8 MIN READ
Rapidly Rising Profits Alongside Falling Share Prices
Little Champs JAN 31 . 10 MIN READ
Little Champs: Spotlighting Vijaya Diagnostic
Little Champs NOV 29 . 12 MIN READ
Powering Through the Slowdown
Little Champs
Invest in Dominant B2B Firms in Highly Profitable Industries

The industry in which B2B firms operate can have an outsized impact on their compounding potential. Over FY14-23, some sectors like IT, Light Industrials and Chemicals have generated twice as much RoCE and share price returns as compared to sectors like Energy and Metals & Mining (which struggle to return even cost of capital). This […]


Aug 07 . 10 MIN READ READ MORE
Little Champs
Rapidly Rising Profits Alongside Falling Share Prices

Over the last decade, while the BSE Small Cap index constituents have grown operating profits in low teens, the Little Champs constituents have consistently delivered 20%+ EBITDA growth. This has resulted in superior, consistent long term returns alongside sharper recoveries post drawdowns than the BSE SmallCap index. In recent quarters, while the fundamentals for Little […]


Mar 21 . 8 MIN READ READ MORE
Little Champs
Little Champs: Spotlighting Vijaya Diagnostic

This month we place the spotlight on Vijaya Diagnostic Centre Limited (Vijaya), a leading diagnostic player in Andhra Pradesh and Telangana, and one of the few organised players to offer an integrated offering of pathology (2/3rd revenue contribution) and radiology (1/3rd share of revenues). Vijaya has consistently outperformed its integrated diagnostic peers (FY18-22 average EBITDA margin nearly […]


Jan 31 . 10 MIN READ READ MORE
Little Champs
Powering Through the Slowdown

In 2QFY23, Little Champs Portfolio (LCP) witnessed median revenue growth of 24% and PBT growth of 14%.  However, some portfolio companies did face headwinds around revenues (Covid-19 related revenues  tapering off, impact from price hikes) and margins (raw material and energy costs up). However, these  headwinds have been abating in recent months which should aid […]


Nov 29 . 12 MIN READ READ MORE
Marcellus Erudite
Portfolio Performance and Update on Fundamentals August

Consistent Compounders Portfolio (CCP) Marcellus’ Consistent Compounders Portfolio companies reported, on a weighted average basis, 20% YoY growth in profit after tax for both 1QFY24 (over 1QFY23) as well as for FY23 (over FY22). Financials sector companies in CCP (three lenders and 2 insurance companies) reported healthy topline as well as bottomline growth, reflective of […]

Marcellus Erudite AUG 16 . 5 MIN READ
Portfolio Performance and Update on Fundamentals July
Marcellus Erudite JUL 27 . 8 MIN READ
Portfolio Performance and Update on Fundamentals
Marcellus Erudite JUN 06 . 10 MIN READ
The Consumerization of Credit in India
Marcellus Erudite
Portfolio Performance and Update on Fundamentals August

Consistent Compounders Portfolio (CCP) Marcellus’ Consistent Compounders Portfolio companies reported, on a weighted average basis, 20% YoY growth in profit after tax for both 1QFY24 (over 1QFY23) as well as for FY23 (over FY22). Financials sector companies in CCP (three lenders and 2 insurance companies) reported healthy topline as well as bottomline growth, reflective of […]


Sep 18 . 9 MIN READ READ MORE
Marcellus Erudite
Portfolio Performance and Update on Fundamentals July

  Consistent Compounders Portfolio (CCP) Fundamentals of CCP companies have delivered healthy progress in FY23, with weighted average PAT (profits after tax) growth of 20% YoY in FY23, backed by a revenue growth of 19% YoY in FY23. 1QFY24 results reported so far have exhibited exceptional strength, representative of market share gains from competitors and […]


Aug 16 . 5 MIN READ READ MORE
Marcellus Erudite
Portfolio Performance and Update on Fundamentals

  *For relative performance of particular Investment Approach to other Portfolio Managers within the selected strategy, please refer https://www.apmiindia.org/apmi/WSIAConsolidateReport.htm?action=showReportMenu Under PMS Provider Name please select Marcellus Investment Managers Private Limited and select your Investment Approach Name for viewing the stated disclosure Consistent Compounders Portfolio (CCP) Fundamentals of CCP companies continue to deliver healthy progress, as reflected in […]


Jul 27 . 8 MIN READ READ MORE
Marcellus Erudite
The Consumerization of Credit in India

In the last couple of years, India’s financial services sector has crossed a significant milestone – for the first time the size of retail credit (i.e. credit extended to consumers) is now larger than corporate credit. In this newsletter, we discuss reasons behind the success of high-quality lenders (like HDFC Bank, Chola Investment & Finance […]


Jun 06 . 10 MIN READ READ MORE
MeritorQ Advisory
Why MeritorQ has 30-45 stocks?

The terms ‘quantitative’, ‘systematic’, and ‘rules-based’ are often used interchangeably as representing an investment approach that is perceived to be in direct opposition to what a ‘fundamental’, ‘discretionary’ or ‘stock-picking’ approach may be. While both quantitative and discretionary strategies can pursue the same objective and both can be fundamentally oriented, quantitative strategies are different from their […]

MeritorQ Advisory JUL 25 . 8 MIN READ
Rebalancing is Often Misunderstood Yet Necessary
MeritorQ Advisory JUN 12 . 6 MIN READ
MeritorQ: The Value of Free Cash Flows
MeritorQ Advisory MAR 31 . 7 MIN READ
MeritorQ Advisory : The Moneyball of Quality Investing
MeritorQ Advisory
Why MeritorQ has 30-45 stocks?

The terms ‘quantitative’, ‘systematic’, and ‘rules-based’ are often used interchangeably as representing an investment approach that is perceived to be in direct opposition to what a ‘fundamental’, ‘discretionary’ or ‘stock-picking’ approach may be. While both quantitative and discretionary strategies can pursue the same objective and both can be fundamentally oriented, quantitative strategies are different from their […]


Aug 29 . 5 MIN READ READ MORE
MeritorQ Advisory
Rebalancing is Often Misunderstood Yet Necessary

Periodic rebalancing or re-alignment of the MeritorQ portfolio is as necessary as watering a plant periodically to help it grow – do it too often and the plant may rot; on the other hand, never do it and the plant dies. In MeritorQ we identify quality yet relatively undervalued companies (our newsletters Forensic Accounting Using Quant […]


Jul 25 . 8 MIN READ READ MORE
MeritorQ Advisory
MeritorQ: The Value of Free Cash Flows

In MeritorQ value is measured by comparing the free cash flow generation ability of a company versus its share price, a valuation measure known as P/FCF. We show that in India P/FCF is superior to other commonly used relative valuation measures like P/E, EV/EBITDA, and P/B. In fact, a free cash flow-based measure of relative value […]


Jun 12 . 6 MIN READ READ MORE
MeritorQ Advisory
MeritorQ Advisory : The Moneyball of Quality Investing

Just as the Moneyball approach in baseball (as explained by Michael Lewis in his book by the same name) helped a team of seemingly average players consistently win matches, in Marcellus’ MeritorQ, we select good quality and undervalued companies (rather than betting on singular ‘quality’ or ‘value’ investment opportunities) to deliver superior risk-adjusted returns. The […]


Mar 31 . 7 MIN READ READ MORE
MeritorQ PMS
MeritorQ: A Deeper In-Depth Look At MeritorQ’s Forensic Model

MeritorQ uses forensic ratios to evaluate the accounting quality of Indian companies. As we highlighted in our February newsletter – Forensic Accounting Using Quant Methods Boosts Returns – our accounting checks can identify accounting frauds well in advance of the actual drawdown event. Using the specific examples of two companies in this newsletter, we discuss how accounting […]

MeritorQ PMS JAN 11 . 10 MIN READ
MeritorQ: The Power of Checklists
MeritorQ PMS DEC 08 . 8 MIN READ
MeritorQ: Strength Lies in Numbers
MeritorQ PMS
MeritorQ: A Deeper In-Depth Look At MeritorQ’s Forensic Model

MeritorQ uses forensic ratios to evaluate the accounting quality of Indian companies. As we highlighted in our February newsletter – Forensic Accounting Using Quant Methods Boosts Returns – our accounting checks can identify accounting frauds well in advance of the actual drawdown event. Using the specific examples of two companies in this newsletter, we discuss how accounting […]


Mar 15 . 9 MIN READ READ MORE
MeritorQ PMS
MeritorQ: Forensic Accounting Using Quant Methods Boosts Returns

Over the past 16 years, the average return of market cap weighted BSE 500 index has been 10.3% p.a. on a 3-year rolling basis. But the story changes completely when we differentiate between the index constituents based on their accounting quality. There is a clear deterioration in returns and a rapid increase in risk and […]


Feb 13 . 11 MIN READ READ MORE
MeritorQ PMS
MeritorQ: The Power of Checklists

Most of us have used a checklist at some point. Humans need checklists because most of us have imperfect recall. Checklists provide a cognitive safety net. They prevent us from having to suffer due to our flaws —flaws of memory, attention, and thoroughness. Checklists have been found to be effective in performing complex tasks in varied […]


Jan 11 . 10 MIN READ READ MORE
MeritorQ PMS
MeritorQ: Strength Lies in Numbers

The operational efficiency of the quantitative approach we take in MeritorQ allows us to analyze and rank  stocks over a large investment universe on a consistent set of metrics. Ranking over a large peer group of  companies magnifiesthe power of statistical analysis and hence the reliability of the screening and selection  steps. Another benefit of […]


Dec 08 . 8 MIN READ READ MORE
Rising Giant
Invest in Dominant B2B Firms in Highly Profitable Industries

The industry in which B2B firms operate can have an outsized impact on their compounding potential. Over FY14-23, some sectors like IT, Light Industrials and Chemicals have generated twice as much RoCE and share price returns as compared to sectors like Energy and Metals & Mining (which struggle to return even cost of capital). This […]

Rising Giant FEB 20 . 6 MIN READ
Short Term Excitement vs Long Term Wealth Creation
Rising Giant JAN 18 . 9 MIN READ
The Cheaper They Get, The More We Buy
Rising Giant
Invest in Dominant B2B Firms in Highly Profitable Industries

The industry in which B2B firms operate can have an outsized impact on their compounding potential. Over FY14-23, some sectors like IT, Light Industrials and Chemicals have generated twice as much RoCE and share price returns as compared to sectors like Energy and Metals & Mining (which struggle to return even cost of capital). This […]


Aug 07 . 10 MIN READ READ MORE
Rising Giant
Outsized Earnings Growth Alongside Falling Share Prices

In this month’s newsletter, we ask whether the Rising Giants (RG) stocks were ‘richly’ valued when we bought them? Using an earnings growth of 20% (5% for the terminal year) and cost of capital of 12%, the median longevity implied by the then prevailing market prices for the RG portfolio rose from 8 years as at FY18-end […]


Apr 24 . 8 MIN READ READ MORE
Rising Giant
Short Term Excitement vs Long Term Wealth Creation

Every year there will be a couple of sectors and a handful of stocks that give outsized returns helped by short term earnings momentum and narratives around the same. However, such sectors and stocks are generally unable to replicate their short-term success over the medium to long-term. While chasing momentum can provide short term enrichment, […]


Feb 20 . 6 MIN READ READ MORE
Rising Giant
The Cheaper They Get, The More We Buy

The long-term valuation of a company is determined by the growth and longevity of its free cash flows (FCF). Its share price, on the other hand, is heavily influenced by near term earnings/events. This creates a disconnect between the intrinsic value of the company and its share price. This disconnect has been stark for the […]


Jan 18 . 9 MIN READ READ MORE

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