Q. What’s your opinion of the efficient markets hypothesis and practitioners of technical analysis?
A. I believe that the efficient market hypothesis in the various avatars (strong, semi-strong and weak) is not correct. Sometimes prices deviate far away from intrinsic valuesand it is possible to earn high risk adjusted returns. In fact, the lower the downside risk,the higher can be the upside reward. I do not know anything about technical analysis.
Q. Tells us about your approach to fundamental analysis-what is your focus? Howdo you search for your investment ideas? Where do most of these ideas come from?Describe your evaluation process (both quantitative & qualitative)? How long doyou hold on to your positions?
A. My firm, Jeetay, principally invests in publicly traded Indian securities and seeks tomaximize investors’ capital by buying securities trading at values materially lower thantheir true business value.Jeetay aims to achieve high absolute rates of return while minimizing risk of capital loss.Jeetay combines the analytical vigour of determining the fair value of a security with adeep understanding of the Indian markets. Jeetay will invest in securities where it canascertain the reasons for the market’s mispricing and the likelihood of the mispricing being corrected.Jeetay follows the value investment philosophy, which means that the objective is to buya security trading at a significant discount to its intrinsic value. Since the focus is ondiscovering undervalued stocks, the fund doesn’t base its investments on macro-economic factors like GDP growth.Jeetay determines intrinsic value as the present value of the future cash flows of acompany discounted at a rate that properly reflects the time value of the money and therisks associated with the cash flows. In other cases Jeetay invests in “Special Situations”which involve the following:
Repositioning assets to higher uses
Mergers and acquisitions / open offers
Restructuring troubled companies
BuybacksThe fund invests in a company if the market price is quoting at a discount of at least 60%to the intrinsic value. It sells when the market value approaches intrinsic value or it findsa security trading at a steeper discount to intrinsic value.Jeetay believes that while in the long term, a company is valued by its fundamentals,short term mispricing occurs due to investor psychology, liquidity and macroeconomic