Decoding Siddharth Bothra's knack for quality stock picks

Siddharth Bothra is a deeply religious man. His religion: capital protection. His credo: long term capital appreciation. His choice of gurus is eclectic: Warren Buffet and his associate Charlie Munger, Geroge Soros, Michael Porter, Howard Marks.

Bothra, Fund Manager at Motilal Oswal Asset Management Company, is known for his keen nose for stock picking. Born in a business family, understanding business cycles and stocks came almost naturally to Bothra. The focus of equity research, which he started in the first year of college, was to spot stocks that offer growth and longevity at a reasonable price. No wonder the Focused 25 Fund managed by him has outperformed the benchmark index Sensex by 111 basis points.

Money9 spoke to Bothra to understand the quality, growth, longevity and price philosophy.

Q: What is the investment philosophy of Motilal Oswal Asset Management Company?

Bothra: At the core of our investment philosophy is capital protection and long-term wealth creation. We believe, that to create long term wealth one needs to understand the power of compounding & patience and treat capital protection as a religion. Hence, we have an obsession with quality businesses and management teams, as we believe being business and management quality is one of the biggest risk-mitigant. We acronym our philosophy as ‘QGLP’ which stands for Quality, Growth, Longevity and Price. Our investing style is bottom-up focused. Essentially, we look for a set of characteristics in our stocks, which we try and identify through both quantitative and qualitative analysis. Hence, we start with ranking a large universe of stocks across the key parameters we have identified and then narrow down on specific sectors and stocks based on our ranking methodology. We then run them through the price and expected return filters and build our concentrated portfolio of 20-24 stocks based on the respective fund’s mandate.

Q: Do you believe in the philosophy that certain blue-chips are to be held for a lifetime?

Bothra: Yes and no. There are certain stocks that have multiple and expanding Moats. Often with a successful history of decades and in some exceptional cases even of century-plus. The Lindy effect in such companies is so strong that the sell evaluation criteria for such companies need to be definitely more evolved. However, even in these companies, one needs to still re-evaluate the price-value equation periodically, for position sizing and in extreme cases even re-evaluate the ownership decision, depending on various other key factors.

Q: Who is your investment guru and which books are you reading currently?

Bothra: While there have been several investors and investment books, which has greatly influenced me as an investor. The most significant influence has been of Buffett and Munger, through their writings, letters and various books on them. They have helped shape my thoughts on how to determine quality of business and management. I have also been greatly influenced by writings on 1) Behavioural Finance by Daniel Kahneman and Soros, Uunderstanding Risks from Howard Marks and Annie Duke, Valuations by Ashwat Damodaran and Business Strategies by Michael Porter.

I am currently reading: The Holy Grail of Macro Economics by Richard C Koo and Alchemy by Rory Sutherland.

Q: What would be your advice to investors?

Bothra: Retail and individual investors have evolved a lot in the last few years. Today many of them are highly sophisticated investors with high awareness and knowledge on investing. This transformation has been primarily led by technology and increased access to information and research. If there are few aspects where I feel they could work on is 1) having a quality and long-term business ownership orientation, 2) more patience and 3) appreciation of the power of compounding.