The last Financial Year (Apr 2022-Mar 2023) has been a very tough year for Indian equity markets, on the back of a couple of very good years following the deep correction in the markets in Mar 2020 (CoVid meltdown). Markets were expected to be tough and we had indicated these in our previous newsletters. Despite all this we have managed a 24% return, significantly beating the benchmarks (explained in the charts below). We had calibrated our list of stocks in such a way to avoid big drawdowns and that is reflected from the fact that we currently have almost half of our stocks in largecaps from about 15% at the start of the year. We are fairly satisfied with the returns generated in our list of stocks.

1. Apr 01 2023
Aurum Capital Newsletter and Performance Report for FY2023
We are grateful to our subscribers at Aurum Capital as we complete FY2023. Aurum Capital will
complete 5 years of providing best in class research services in the Indian equity market in Aug 2023.
The last Financial Year (Apr 2022-Mar 2023) has been a very tough year for Indian equity markets, on
the back of a couple of very good years following the deep correction in the markets in Mar 2020
(CoVid meltdown). Markets were expected to be tough and we had indicated these in our previous
newsletters. Despite all this we have managed a 24% return, significantly beating the benchmarks
(explained in the charts below). We had calibrated our list of stocks in such a way to avoid big
drawdowns and that is reflected from the fact that we currently have almost half of our stocks in
largecaps from about 15% at the start of the year. We are fairly satisfied with the returns generated
in our list of stocks.
We also have to understand that we cannot be immune to corrections and we will also have negative
returns in short periods of time. We must focus on long-term, have patience and not panic during
these drawdowns. What we try to do in these periods is to avoid big drawdowns and try to not fall
higher than the comparable indices. And during up markets we try to outperform. Till now we have
been successful doing this, right from inception during almost all periods. Our goal and endeavor will
be to continue doing this.
Our Focus & Process
Aurum Capital uses a very process-oriented approach in selecting the stocks under recommendation.
A very comprehensive subjective and objective check-list is adhered to, when selecting stocks. We try
to achieve this by focusing on our core competency of value investing, understanding business cycles,
avoiding BAAP (Buy At Any Price) investing, trying to do GARP (Growth At Reasonable Price), betting
on the right sectors, avoiding sectors where there is too much interest and hence fully priced or over-
valued, look at sector which are out of favor and where we have an understanding of Business Cycles
and valuations are in favor. The important tool in doing this is the behavioral aspect of patience, as in
stock markets returns are never linear.
We might see no performance or underperformance for some periods in these sectors/stocks and
then went there is a change in cycle and we may see quick runup. This has happened many a times
in our history.
We advise all subscribers to exercise patience and not panic in these periods or corrections.
Remember correction in the market is a friend of long-term patient investor and any FOMO (Fear of
Missing Out) buying during euphoria is an enemy.
What we avoid?
During last few years we have been able to avoid sectors/areas where we believed valuations were
too high/unrealistic or where we believed there is a downcycle, e.g., we completely avoided IT services
during last FY. We completely avoided the grossly expensive new age IPOs. We have still not initiated
any stock despite big corrections in this space. We like to make informed decisions. Some of these will
become great companies in the future, but we believe we need to buy only when we are sure of path
to profitability and if available at reasonable valuations. We also believe in history in the listed markets
to judge management. We had no financials in our list of stocks for almost 2 years, when we believed

2. that sector is going to be in a downcycle. Once we could see things improving we quickly added a few
stocks in the list.
Can we go wrong?
Each stock recommended by us is given a lot of thought, with a process, with a checklist of factors like
valuation, sector analysis, stock analysis, annual reports, deep-dive into the financials, corporate
governance, management depth, positioning vis-à-vis peers, past history, scuttlebutt research,
forensic accounting, and so on. Despite all these, we will go wrong a few times, and we have always
acknowledged that. The idea is to keep the failure rate low, which we have been able to achieve at
a low of 15% (of stocks exited till date). Always remember, a loss is not a loss till it is booked. With
patience, and where we thought business fundamentals are intact, we have seen many stocks we had
recommended and which were negative for periods, the final outcome was positive. Whenever we
make mistakes, and when we realize it, we will not hesitate to book at even a loss. That is a quality
which an investor must have. Loss aversion is a trait which many investors have, and one must
overcome it to be a successful investor.
We try to guide investors to the best of our ability with ethics, honesty and integrity. Our goal is to
work towards financial freedom of our subscribers.
We are providing a detailed overview of our performance and views on various sectors that we are
currently invested in.
Our Investment Philosophy
The core philosophy of investing at Aurum Capital is Value Investing. Within the ambit of this we invest
in GARP, Cycles, Special Situations. We have always tried to have a contrarian approach in our
investing and stayed clear of herd investing. We tend to look at forgotten sectors and where there is
no interest (and hence valuations are very favorable). At the same time, we often exit when sector is
under intense focus, a slew of research reports come, many companies want to meet managements,
when stock is heavily discussed in social media, etc. That’s when we get the exit valuations we want.
Sometimes we are early in our exits, but we always have to understand that we can never consistently
exit at the top nor enter at the bottom. We don’t mind leaving something on the table, for the
investors who buy from us, as long as we are satisfied with our returns. Many a times in these
scenarios better risk-rewards maybe available in other stocks. We don’t mind taking those relative
calls. Risk-adjusted returns is what we believe in. We always benchmark ourselves on this parameter.
This becomes evident during falls/corrections as the one we are seeing now. Our exits are always
under focus due to recency bias. But we try to stick to our philosophy.
We like to take pride in being amongst the first ones to identify cycle change in many sectors, the
examples of which we are giving in the sector analysis below. At the same time maintaining the
humility where we have been wrong. We are bottom up investors and prefer to look at individual
stocks and sectors and avoid index gazing. We believe India is in a growth phase and if we have
patience to ride out these corrections, we will do well. We believe investors with a long-term bent of
mind will be rewarded handsomely. It’s important to stay invested, manage risk, bet on right sectors
and focus on behavioral aspects. Use greed and fear to an advantage.

3. Performance of our offerings
Aurum Capital offers two products
 Value Investing Research Services on Aurum Capital website and smallcase
 Cyclical Bets Smallcase on smallcase website
Value Investing Research Service: This product has completed almost 5 years and is our first product.
This product has weathered challenges in the markets like economic slowdown, extreme polarization
of 2018-2019, CoVid19 disruption, Ukraine-Russia war, current interest rate hikes and slowdowns in
Europe, US and China. Despite all these challenges, and with minimal drawdowns, it has returned
almost 179% (absolute) with a CAGR of 25% since inception. The benchmark returns are as mentioned
below. During a challenging year when most indices struggled the Value Investing Research Services
has returned 24% which is a big outperformance*. The drawdown from the top of Dec 13, 2021 date
is 7% as against benchmark BSE Smallcap drawdown of 10.5%. With humility we thank the
managements of the companies which performed well helping us beat the benchmarks. We have
provided the 1 year, 2 year, 3 year, and since inception performance in the table below.
Max drawdown in this product has been about 35% during the Covid19 fall of Mar 2020.
Subscribe (website): https://aurumcapital.in/services
Subscribe (Smallcase): https://www.smallcase.com/smallcase/value-investing-portfolio-AURMO_0002
Cyclical Bets Smallcase: This product was launched on Mar 20, 2021 on the smallcase platform and
has completed 2 years recently. Till date this product has returned 94% (absolute) with a CAGR of
39.69% since inception as against the Equity Smallcap benchmark returns of 9.56% (absolute) and
CAGR of ~4.5%. The drawdown from the top of Dec 13, 2022 date is 11% as against benchmark
drawdown of 12%. In periods when markets have done well the product has performed well above
the benchmarks which resulted in the big outperformance as against the benchmarks.
During the last one year, Cyclical Bets Smallcase has returned ~20% while during the same period
the benchmark (Equity Smallcap) index has returned (-)14%.
Subscribe: https://www.smallcase.com/smallcase/cyclical-bets-portfolio-AURMO_0001

4. Performance of Cyclical Bets (since inception):
Performance of Cyclical Bets (FY2023):

5. Views on some of the key sectors that are under coverage
Capital Goods/Manufacturing
We took a contra call on this sector in 2021. We are happy to say that we were amongst the first ones
to take a bet in this sector and we recommended many stocks in this sector at very attractive
valuations. We have exited one at almost 5X (purely from profit booking perspective and better risk-
reward in the stock which was replaced with this). We still have a decent number of stocks in this
sector across the 2 different strategies. Only 1 stock has underperformed for us in the sector, but we
continue to have conviction in this stock. Overall, we continue to remain positive on this sector.
Banking and Finance
This is one sector which has highest weightage in the indices. But we had no stocks in this sector until
Mar 2022 as we could gauge a downcycle. We waited for a change in the business cycle and we
initiated coverage and made recommendations in the sector. Sector has done well for us and we have
taken 1 exit due to big runup and risk-reward not in favor (subsequently entered the same stock as it
corrected quite a bit and risk-reward again became favorable). We continue to remain positive on the
sector.
Infra
We have a few stocks from this sector across our strategies. This is a difficult sector and hence we
have gone with what we believe are the top companies in the sector. Luckily valuations are still in
favor in these companies. We believe this sector will continue to grow very well due the
unprecedented focus of the governments (central and state) towards infra building. The companies
we have looked at are companies which have a long history of operations, excellent track record of
execution and have survived different business cycles, have manageable debt and a book-to-bill ratio
of 2.5-3.
Cement
We continue to like this sector and we believe cycle and valuations are in favor. During a long cycle in
this sector, we always have mini-cycles which gives us opportunities to exit and enter. In the past, we
have exited 2 stocks from this sector with handsome returns. The recent corrections in this sector due
to the headwinds faced, presents a good opportunity to invest in the sector, primarily based on
valuations. Many companies are trading at 30 to 50% of replacement cost, and where we believe
OPMs (Operating Margins) are set to rise in FY24.
Telecom
We are invested in the Telecom sector for a while and seeing decent returns. We continue to remain
positive on the sector. This sector has become an oligopoly and it has a long tailwind. We will obviously
keep evaluating the risks as this is a capital intensive sector.
Chemicals
Chemical sector falls in the short-term headwinds, long-term tailwinds category. We have few
investments from this sector across our strategies. A couple of ideas have corrected from our entry
and in hindsight it can be said we could have timed it better. But we believe this sector should do well
for many years. We have to patiently wait for the headwinds to subside. Our belief is that FY24 will be
a better year than FY23.

6. Paper and Paper Products
We recommended stocks from this sector during Covid downturn. We have been tracking this sector
for a very long time. We have taken few exits in this specific to companies which had higher exposure
to paperboard, etc. as there has been a good correction in the prices in that segment and demand
also has been lower. We continue to hold companies where W&P (Writing & Printing Paper) is a major
chunk of revenue and this segment prices have held up well. Also, there is a change in the Curriculum
with New Education Policy to get implemented during next few years. This may continue to keep the
demand for W&P paper elevated. In some companies, there are big efficiency gains too due to
debottlenecking, starting of pulp mills, etc. We continue to keep monitoring closely. We will continue
to take decisions based on valuations and risk-reward.
Auto/Auto ancillaries – We have a few recommendations in this sector. We believe this will do well
for sometime. As last 5 years the growth has been quiet tepid. With improvements in infra, and with
disposable income rising this sector should do well for some time. We have stayed clear of 2W
segment as we believe the disruption in this sector from EVs will only accelerate. We have an
investment in an EV company and we will monitor it closely as this is a difficult space. The company
also has a legacy business where it has a leadership position which provides cushion. We believe
management is doing the right things. Valuations are in favor and hence we continue to stay invested.
About Us
The founders have a combined experience of 5 decades in the market and well-known in the industry
for providing investor education through different mediums like business channel interviews and
newspaper articles, various forums like CFA institute, management education institutions of repute
and various educational webinars, seminars, podcasts.
We thank you again for your continued support and confidence in us. Wishing you best and Happy
Investing.
Regards,
Research Analyst
Aurum Capital
SEBI Registration No: INH000008118
The founders’ contribution to equity investing is chronicled here.
(These are not recommendations)
https://aurumcapital.in/blogs/category/knowledge-series/