KAF Capital

Investment philosophy

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Investment philosophy

As an investor in stocks, my weapon of choice is research. I firmly believe that one cannot make sound investment decisions without properly understanding the company’s value. My encounter with the works of Benjamin Graham, as repeatedly advocated by Warren Buffett, was a turning point. The concept of value investing resonated with me on a profound level, as if I had found my true calling.

Since then, all my stock-picking decisions are based entirely on the principle of a margin of safety, a concept introduced in the book “Security Analysis,” which Graham coauthored with David Dodd. While I have my own version of Graham’s techniques, my objective remains the same: to protect my downside to prevent permanent loss of capital. I firmly believe that specific, known catalysts are not necessary for successful investing. The sheer, outrageous value of a company is enough to justify my investment.

The investment landscape if approached in a global way, offers a range of opportunities in great businesses at fair prices and by tapping into different market cycles. However, In India, we are constrained by restricting ourselves to the domestic market.

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Our investment philosophy entails buying and holding a few great businesses indefinitely, allowing the power of compounding to manifest over extended periods. However, we recognize that this approach is constrained by the rarity of great businesses at fair prices worldwide, particularly when accounting for our restriction of Indian business alone. Furthermore, buying these businesses at a reasonable price presents as an opportunity infrequently, since they are typically overpriced. Given that constraint, we don’t mind buying value stocks that are underpriced in the market and sell them when they have reached their fair value. I mention them as stocks, as I am simply looking at the valuation front rather than the business in total. Our investment philosophy is rooted in the belief that it’s better to own a few great businesses and reap their benefits over an extended period than to hold a larger portfolio of average businesses, yielding lesser returns.