Thursday, June 20, 2024

Proprietary idea generation

This is an “ideas” business. At its core, good investing is about generating good ideas. Ideas that are popular or are followed by every investor cannot remain good for too long. Over time, it is only by following up on ideas that are proprietary (and potentially unpopular) that any investment team can create value.

Nalanda focuses on generating and implementing its own ideas, and shies away from ideas that are already popular or have been made popular by bankers or analysts. This idea generation broadly has two sources – proprietary analysis, and friends of Nalanda.

  • Proprietary Analysis – This involves reading annual reports, analyzing industry reports, generating deal screens, reading and analyzing the business press, deep diving into stocks that are out of favor or have sell recommendations, and attending seminars and conferences, especially those that are focused on an industry or on small and mid-cap companies.
  • Friends of the Fund – Over time, the team at Nalanda Capital has built many relationships in India with intermediaries, accountants, lawyers, entrepreneurs, and senior professionals. These relationships have been a very good source of ideas in the past, and will continue to be mined in a focused manner in the future.

To date, almost all the Nalanda investments have been through the “proprietary analysis” route.