Trading/Investment Philosophy

The trading/investment philosophy behind the NART Model Portfolios has developed over the last 30+ years. Our founder’s three generations have been successfully investing in the stock market since 1972.

नेति-नेति (Neti Neti) is a Sanskrit expression found in Brihadaranyaka Upanishad (PDF), Rishi Yajnavalkya, the greatest Upanishadic philosopher, discusses the great doctrine of “neti-neti”, the view that truth can be found only through the negation of all thoughts about it.

Neti-Neti means "not this, not that", or "neither this, nor that". We found it to be an excellent analytical process for getting some sense of what something is by clearly seeing what it is not. You can arrive at the truth by knowing what falsehood and ignorance are.

By designing our trade and investment plans with “what not to do” or “why not to buy”, we ensure that our potential “buy/short” pool is carefully chosen list of attractive/absurd companies.

It is easier to reject stocks with conviction than to own stocks with conviction for it is easier to know what is bad than to know what is good. A single negative factor may be enough to know that an investment may be bad whereas even multiple positive factors may not be enough to get conviction that the investment may be good.

Beyond this, strong and consistent portfolio returns come from both good stock selection and good portfolio construction. Building a robust portfolio requires answering four fundamental questions:

1. Which stocks should we buy?

Analysis of corporate history, fundamentals, business economics, financials, industry & management, and corporate strategy

2. What is our time horizon?

We are of the opinion that there’s time to be a trader and there’s time to be an investor while keeping in mind that we get paid for being right, not for the activity.

3. How many stocks should we own at a time?

The function of the point in the market cycle and the level of conviction we have in our ideas at the time.

4. When to sell?

Four reasons: 1. We are wrong, 2. Facts have changed, 3. To pursue better opportunities, 4. Risk management

What we don’t do:

1. Chase momentum

2. Buy stories or believe in greater fool theory: We demand profitable businesses available at reasonable prices or completed business models with cashflow visibility within 3 years of our entry

3. Wishful thinking: Ruthless risk-control with positions on leverage, real-time risk management takes precedence over everything, period

Should you have any questions or if we have not been clear in any respect, our CIO desk would be very happy to hear from you.