FC Special Situation Strategy
This strategy aims to generate long-term capital appreciation by investing in mis-priced stocks facing SS like Corporate action (M&A, Delisting, Demerger, Reverse Merger etc), regulatory/policy changes, management restructuring etc
This is a strategy that will be market neutral to a large extent and will depend upon the events likely to happen in the future. These are corporate events that create shareholder value and are also a function of the behavioral finance of the business owners. The distressed situations are an interesting piece that happens every 6-8 years in cyclical industries and offer decent upside. These strategies are not linked to the market movements but are dependent on the likelihood of corporate events happening in the future.
How we do it?
This strategy is close to behavioral finance, basically the behavioral aspect of businesses and their owners. The investment approach and stock selection for the strategy will have the following core principles: (1) In-depth research with proper documentation on the company and the key monitorable. (2) Focus on corporate events that have been announced by the Company (3) Adequate margin of safety. (4) Concentrated portfolio leading to 10-15 Stocks (5) Key catalysts in the near term that should help the company create value
Our Focus
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This strategy is volatile and expected returns will be lumpy in nature. The delay in getting approvals for the corporate event, due to procedural and regulatory process delays, is the single biggest risk in this strategy. The delay in the timeline also
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There is no fixed investment tenure of the stocks chosen in the Special Situation Strategy as they are dependent on the happening of the event that requires a lot of regulatory and legal approvals. As long as the certainty of the event is there, the stocks
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Each stock in the portfolio follows a ‘special situation’ or event-based criterion, it will be moved to 'SELL' rating once the event has unfolded. If the event fails to materialize for any fundamental reason, stock will be exited. We may hold on to the sto