We always say that management quality is an important determinant of whether a company is worth investing in, but such a portfolio would have to go beyond management and focus on service.
While talking to an industry colleague a few days ago, an interesting idea came up — a consumption fund that invests in industries that you consume from or hope to consume from.
So if you love, say, Mercedes Benz cars or hope to own one someday and you believe a lot of people think the same way, the company is going to do well. So why not own Daimler AG stocks? Of course, it cannot be a mutual fund scheme, as each person's favourite vendors may vary, but personal portfolios could be built around that concept.
We always say that management quality is an important determinant of whether a company is worth investing in, but such a portfolio would have to go beyond management and focus on service. In fact in any chosen company, “service culture” should be the key determinant; it is the best gauge for management quality and sustainability.
This led me to wonder about listed companies versus multinational companies not listed in India but provide products and services to us. Would a portfolio of “i-Like” stocks be complete without companies that can't be bought by us? Actually the $200,000 route and the international feeder funds give us a limited option to do so.
Hyundai, for instance, makes immense sense. So does Honda and Toyota. LG and Samsung should lead the international white goods pack and we have probably forgotten that Sony is not Indian. In infrastructure, I'd look for at least some of the global majors.
But are all global majors that sell aspirational products delivering quality? Or are we merely recipients of leftovers, and slogans without delivery?
Let's take an example. European and American cars launched in India have the left-hand drive configuration while Japanese and Korean car-makers take the trouble to change the side for indicators, wipers, petrol-tank openings and so on. I also see that dealers and local offices of European and American automobile companies practically act as though they are doing you a favour by talking to you, while Asian ones are far better at this. Or take the example of a pizza chain that promises on-time delivery. They vigorously advertise their 30-minute delivery deadline and I understand that in the US they adhere to it. In India, this deadline is shelved for rainy days and busy days. If the delivery boy gets delayed on an ordinary day, is trained to smilingly refuse payment? No.
I recently reviewed the portfolio of a person who had built a savings pool of about Rs 1 crore, and therefore qualifies for advice from his multinational banker. On their advice, he has invested Rs 50 lakh in a real estate portfolio management scheme, Rs 40 lakh in ULIPs and just about Rs 7 lakh in other investment products. The bank may have made a lot of commissions, but are they right investments for a 55-year-old who hopes to retire next year? That bank's stock would be a sure “sell” for me.
Increasingly, Asian companies seem to deliver better customer care and commitment than western companies that bring products and services to India. Does that mean our hypothetical “i-Like” portfolio would be heavily biased towards Asian stocks? That is a very real possibility.
So what would be the key criteria for building an “i-Like” portfolio? Consumption would be what we call the “first filter”. The second filter should be service and customer care.
This would determine if these “brands” are really worth the premium.
The rest of the selection process … well that is just boring fund management stuff.
(The author is the MD and CEO of IDBI Asset Management. The views are personal.)