Here’s how Satish Ramanathan picks his stocks

He has previously worked with Franklin Templeton AMC, Sundaram BNP Paribas (now separate- BNP Paribas and Sundaram) and then with Tattva Capital, his entrepreneurial venture.

Satish Ramanathan is the MD & Chief Investment Officer- Equity at JM Financial Asset Management Ltd. He has been in the markets for nearly three decades now.

Let’s understand how the market veteran picks stocks for the funds he manages:

In an interview with Value Research, Satish Ramanathan revealed that he looks for companies with high visibility, sustainable earnings and strong cash flow growth.

Usually, they (Satish Ramanathan and his team) prefer to stay invested in long-term growth stocks. Adding to this, he said that they may also consider some companies where they expect a change in fortunes for the medium term such as in metals.

During the selection process, their key focus areas are growth, sources and uses of cash flow, return on equity and NPLs for financials. Apart from these criteria, another key parameter that is looked at is corporate governance standards. The companies which are being considered for investment are expected to have high corporate governance standards.

Further, in the interview, the CIO revealed his key learnings during the three decades in the market, which are:

• One should focus on learning about new businesses and companies. The aspects that should be looked at while analyzing companies for investments are their valuations, growth potential, cash flows as well as return on equity.

• One should be prepared for sharp pullbacks in equity markets. Moreover, adequate liquidity should be maintained in anticipation of such times.

One of his key observations has been that equity builds remarkable wealth over time and the power of compounding is huge.

Another observation that fascinates him is that during his last three decades in the markets, he has seen companies grow several times during their course.

As investors in today’s markets, imbibing the learnings of the market veteran can surely take us a long way.