Samir Arora & Dinshaw Irani on elimination investing, on beating Nifty & more
Samir Arora, Founder and Dinshaw Irani, CIO, Helios Capital in conversation with Nikunj Dalmia of ET Now.
Arora says: “The difference between us and others is that while nobody will say that they buy bad factors like bad management or bad history or bad themes, they do trade off. That means they will accept high valuation by saying it has good management or they will accept poor quality management by saying it is very cheap and discounted. We have understood that there is no need to make these trade-offs. That is how the consistency has come. In fact, we are betting on it. If you see our tagline, it is for every term.”
What is elimination investing? Do fund managers need to take higher risk to beat the index?
Samir Arora: For any active fund manager, the attempt is always to do better than the index. But to do that, you have to basically sort the universe into stocks which are good or bad and eliminate the bad, which is why we call it elimination investing. Whether it pays off or not is something that you cannot promise because you yourself do not know. But historically, that has worked.
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Dinshaw Irani: Can I attempt something here? If you see the index, whichever index you take up, one third of the stocks do phenomenally well and one third do phenomenally badly. So our elimination investing process is trying to eliminate the one-third phenomenally bad. There will be stocks which attempt to reduce that one third, the bottom part of the index as such. So only if you avoid
