Hi all, I’m Arvind Kothari, founder of Niveshaay. We invest in promising small to mid-cap companies that offer the potential for significant long-term returns. To gain valuable business insights across a wide range of industries and sectors, I have established a close-knit network of entrepreneurs, fostering a collaborative environment that allows for a holistic approach to investment.
My investment strategy revolves around Scuttlebutt Investing, which involves employing proxy and second-order thinking to identify companies operating in niche markets with a competitive edge, thereby minimizing disruption risks.
On this AMA thread I’ll be answering everything you need to know about investing in SmallCap and much more.
What are the key factors you consider when you are investing on the capability of management? Is it gut based or are there any quantitative methods to assess their credibility?
Is there any specific approach you follow for diversification in small cap? Probably to balance concentration risk?
Also, how do you assess the growth potential of these companies?
It’s commendable to see the success that you have achieved and the name you have created for yourself in a niché field of spotting good small cap companies.
I would love to know your thoughts on your lessons from bear markets in small caps and how to navigate through those down cycles and what your lessons have been so far in the down cycles that you have experienced in the small cap space?
Hi, measures aimed at curbing volatility in micro-cap companies are beneficial for retail investors. However, I believe that additional criteria related to valuation should be implemented as well.
First and foremost, the most important aspect for me is evaluating the capital allocation decisions made by the management in the past. It is not just about considering the outcomes of those decisions; we also analyze how things unfolded subsequent to those decisions. Sometimes, even good decisions may not yield the desired results, possibly due to external factors. Therefore, in every scenario, it is crucial to thoroughly examine this aspect.
Additionally, for the purpose of credibility, we thoroughly examine the remuneration of the management and scrutinize any related party transactions.
We engage in extensive Scuttlebutt, which entails meeting with various distributors, creditors, customers, and other relevant parties of the company to gain deeper insights into the management.
With big companies getting bigger and the advantages that they enjoy due to economies of scale. Is it correct to say that picking smallcaps is getting tougher as time passes? Thanks in advance
Small-cap stocks tend to exhibit higher volatility. As a general guideline for long-term investments, a well-diversified portfolio should consist of around 15-20 stocks spread across 6-8 industries.
When assessing the growth potential of small companies, it is crucial to consider the industry’s growth trajectory and the company’s position within that industry. In certain cases, when a particular sector is performing favorably, we may adopt a basket approach by selecting 3-4 companies within that sector. This approach not only capitalizes on sector-wide growth but also contributes to portfolio diversification.
Having a great management team is crucial for small-cap companies.
I seek your views how and which companies will take advantage of global fear of distruption in supply chains account of probability of China and Taiwan conflict. Supply lines has to shift partially to India
Recently I purchased your Mid and smallcap smallcase.
Most of the portfolio stocks have run a lot in the recent few months.
Though I’m a long term investor i just would like to know What would you advice on investing in the smallcase at this point in time?
“Doing it yourself” is always a good option, but if you are new to investing, you should avoid taking large capital risks. It is better to seek professional services and remain involved in the investment process.
How to reduce slippage when trying to buy a small cap stock (around 1000 mkt cap)?
Should I play limit order with full quantity at once at a slightly higher price (buy order)? And should I use disclosed quantity with it? Should I place multiple buy order with X minute gap?
Indian manufacturing is currently performing well, and we hold a bullish outlook on India’s manufacturing sector. There are a few sectors that particularly interest us, namely Green Energy, Capital Goods, and Electronic Manufacturing.
However, it is important to note that a buy and forget strategy does not work effectively for small-cap companies. It is necessary to monitor their performance on a continuous basis.
