The investment strategy followed can be summarized as ‘Growth at Reasonable Prices’ (GARP). As India is a growing economy, we believe considering Value based investing may not yield good results. However, growth is looked at carefully for its sustainability and it is attempted that we do not chase growth at any price.

Key ingredients for contemplating investment into the stock of a company include strong financial parameters including attractive growth rates, high profitability, low gearing and high return ratios. Further, high quality of management is a must for a company to be considered as an investment alternative. Quality of management is evaluated based on the vision and execution capabilities of the top management, its integrity and reputation as well as the demonstrated attitude towards minority shareholders.

The attempt is to find good quality businesses run by honest and competent people, which are growing earnings in the mid to late teens and are available at single digit or low double digit forward p/e ratios. Mostly, in normal market conditions, such companies are in the non-index ‘second tier’ of the markets with market capitalizations between US$ 500 million to US$ 2 billion.

We believe such smaller companies have the headroom to grow for the next many years as they keep increasing their market share vs. large leaders. Also, with a lower base, earnings growth can be at more aggressive rates for such companies. Thirdly, as institutional interest in this segment of the market is generally low, due to relatively low liquidity of stocks, the stocks are more often cheaper than their intrinsic value, providing reasonable margin of safety.

5Rivers does not trade stocks frequently or indulge in buying and selling based on short term price movements of stocks. Thus, current fancy and fads which are either sector or theme related are avoided.