Focus On No Debt,Kenneth Andrade @KotakSecurities #KotakMidCapMeet15
December 11, 2015 4 Comments
If there is just any one tip Mr Kenneth Andrade would give a person investing in small -caps, its focus on small companies with no debt. This increases their chances of surviving the next 10 years.
He follows companies to ensure that over time the sum total of their equity, reserves and debt goes down, to ensure that these businesses are using capital efficiently and returning profits to investors. Equity investment according to him is about withdrawing money from the business.
And to Bhavikk Shah’s question, he says to focus on ensuring that the companies have no debt. Then there is no chance of them flaming out.
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About Keerthika Singaravel
What does this line mean specially this few words …equity, reserves and debt goes down
” equity, reserves and debt goes down, to ensure that these businesses are using capital efficiently and returning profits to investors.”
Thank You
Hari, all the investments in a business are either in the form of equity, debt or retained profits of previous years that are reinvested. Kenneth is interested in businesses that distribute a larger share of profits to shareholders, that don’t require too much reinvestment to grow the business, businesses where management doesn’t play round with other people’s money, businesses with large free cash flows once they reach scale etc.
Hari you missed the very important term “sum total”, that I use.
Wow that was so enlightening ..thanks for the question Maam and thanks Andrade sir
You’re welcome.