- Wealth PMS (50L+)
All our investing is via Model Portfolios – because we believe a portfolio approach is the best way to go about investing in equities. Yet, there are special situations in the market that offer a favorable risk/reward scenario. But they don’t fit into our model portfolios.
We bucket all such special and interesting opportunities in this portfolio and try to make the most from short-term market opportunities. We call these trades – Capitalmind Experimentals.
What are Experimental Trades?
Arbitrages, buybacks, value unlocking plays, macroeconomic plays, F&O opportunities, and anything else that offers value. These trades are sporadic and opportunistic because we want to only bet on trades that give us a good risk/reward payoff.
Value Unlocking: PowerIndia was dramatically undervalued given its massive scale in power distribution, footprint in railway projects, metro rail projects, E-busses, and having major industry players as their clients. Also, the company went through a demerger that indicated a value unlocking play was on the cards. We go into the stock at around 900 and exited with a cool 1400+ in 9 odd months locking in 45% profits.
Buybacks: Dividends are not tax-efficient given the dividend distribution taxes and promoters need to give back some of the profits to themselves and all other shareholders too. Share buybacks on the other hand are not taxed in the hands of the shareholder and hence are a tax-efficient way of distributing profits. Usually, buybacks are done at a price higher than the market price (obviously) so that excess cash can be distributed. However, there’s a 15% quota for retail investors to participate and this is where the opportunity lies. But, not each buyback makes sense and there are multiple variables that go into analyzing the arbitrage opportunity.
And then there are more such special situations that we try to exploit. Here’s a list of all such past trades:
Who should take these trades?
This portfolio strategy is useful because it adds a shorter-term flavor to Capitalmind Premium as well. These can be risky trades that are only suited to people who understand that such trades are low probability but high on return. We focus on explaining the rationale behind these trades through detailed posts and are open to questions about all these trades on our slack community.
The idea is to not just give the fish but also to teach how to fish.
If you are a subscriber to Capitalmind Premium, click here to access the open trades.