Date: Sunday , October 27, 2002
WHO: RAJESH CHELAPURATH, investment analyst at Stark Capital, a division of Burnham Asset Management ($700 million in assets). Chelapurath is part of a four-member investment management team in Houston, TX, that manages $100 million in assets. His responsibilities primarily include buy-side investment research and portfolio management for a range of clients. Chelapurath holds an MBA in Finance from Tulane University, New Orleans, and dual degrees of M.Sc (Physics) & B.E. (Hons), Electrical & Electronics from BITS, Pilani. He is also Series 7 and Series 63 registered.
STRATEGY: We follow what the industry calls GAARP: Growth At A Reasonable Price. We study four issues before investing in a company: the market the company is in, the management, the financials and the valuation. Do we understand the markets and the business? The long-term growth prospects are viewed very conservatively. Is the management share-holder friendly? Are they paying themselves out of the business or are they paying up dividends or share repurchases? Insider trading is also a good pointer. We look at the trend in debt control within the company financials. We compare profit margins and return on capital. The EPS averages of the past few years is also critical. We also put up a monitor board, to track companies.
PORTFOLIO: “We have about 80 percent in equity, and 20 percent in cash. Healthcare, technology, financial and some consumer verticals add up our portfolio mix.” says Chelapurath. “For example, Automatic Data Systems, (ADS) has been having good double digit growth. It is not doing well now, but we believe in its value.
ADVICE: “If you are a hardcore, long-term investor, this is a very good time to buy good businesses at very reasonable prices,” says Chelapurath. “Investors need to understand the risk of investment: the financials, the management, the valuation, all need to be thoroughly analyzed.” He likens this to purchasing a car. “Do you buy a car just by its name? No. You go looking at ten different models, and look at various options, prices and offers before you buy one. Why should your investing method be any different? One needs to examine even the biggest of the names, keenly and closely, before investing.” Chelapurath feels that short-term volatility is a self-balancing act.