The Art & Science of Multi-Sector Stock Rejection

Contents Overview

1. Via Negativa: The Power of Rejection

2. Enduring the Storm: Signs of Antifragility

3. Rejection Illusions

4. Why a Composite of Four Lenses?

5. Detailed Sector Illustration: Mobility-Tech

6. Companies selected: IT/Software

7. Companies selected: Textiles

8. Chemical Assets in the AT20

9. Disclaimers

Via Negativa: The Power of Rejection

Steer clear of fragile companies—especially those with a narrow, single-domain focus like pure-play agrochemicals or rubber chemicals, where volatility and the threat of aggressive Chinese dumping can disrupt fortunes overnight. Instead, seek out technology-driven, multi-domain chemical champions. Even if these businesses are struggling now, look for signs that their current pain is temporary, and their ability to adapt will reveal true strength in the next few years.

Enduring the Storm: Signs of Antifragility

Any company that has weathered prolonged Chinese or European dumping pressures and survived has the makings of a “Visha Kanya”—one that grows stronger from adversity. There’s a certain emerging antifragility in chemical companies that consistently ramp up R&D and push relentlessly toward new product development. These are the businesses building resilience, even as they absorb setbacks today.

Source: Framing Business Uncertainty

Rejection Reasons?

TAM Isn’t Enough

Be wary of companies where the Total Addressable Market (TAM) looks irresistible compared to their market cap, but R&D and innovation spending are minimal. If a business can’t evolve or pivot over decades, it doesn’t deserve a sales multiple above 1 or 2. Imagine if Laurus Labs had stayed confined to the ARV niche or Neuland Labs had grown complacent in their early wins. Invest in companies that reinvent themselves so radically, their future selves are barely recognisable—a transformation powered by deep research and bold spending on innovation. You’ll find this energy not just in a few next-gen chemical players but also in select IT, software, and auto-tech firms fit for the future.

Rejecting the Infants

Lastly, I steer clear of wild rides like Proventus Agro, where thin liquidity can send the stock swinging up by 20% in a single session. To keep things safe and sensible, any company considered must have a minimum market cap of INR 2500 crore. No matter the sector or story, if a stock falls below this threshold, it hasn’t matured enough to qualify for the next round of analysis. Today, these are just “too young” to make the cut.

Why a Composite of Four Lenses?

Investing is an uneasy marriage of art and science, but in practice, it leans far more toward art. To reflect this, I assign 75% weight to the intangibles—the qualitative, hard-to-quantify elements—and just 25% to the scientific side: numbers like margins and historic and projected cash flows.

That’s why my framework draws on three lenses for the ‘art’ of investing, leaving just one for the science. Still, discipline matters: I have little interest in paying 20x sales, even for a truly great asset. The sweet spot is finding solid businesses—good today, with the potential to be exceptional tomorrow—trading at prices that leave ample margin for error.

This discipline paid off with RPG Life and JB Pharma between 2014 and 2019, or Neuland Labs buying sub-1x sales before COVID, Deepak Nitrite in 2016, and Jubilant Lifesciences (later split into Ingrevia and Pharmova) back in 2013, when market indifference priced them at less than 0.5x sales. Those opportunities seemed unbelievable at the time, but that is what thoughtful, art-driven investing, disciplined by numbers, is all about.

Source: Custom Composite Lens of Convexity or Positive Asymmetry

Detailed Sector Illustration: Mobility Technology (API inside the formulation)

Lens 1 (More Than You Know)

Here is a summary of the key attributes that help companies keep their edge, inspired by “More Than You Know” and innovation strategy thinking:

• Stay nimble and ready to change: The best companies adapt quickly, even when change is uncomfortable. It’s about being the one that can turn and pivot fastest when the market shifts.

• Have a clear, focused strategy:Know what makes you different and stick to it. Make tough choices about what not to do, and use a set of simple rules to guide decisions—especially when things are changing fast.

• Focus on winning for the long haul: The real goal is to consistently make returns that beat the cost of capital. Run things more efficiently and always look to boost profitability so you’re ahead over the long term.

• Build a resilient team and organisation: Make sure there’s no bottleneck in leadership or organisation that holds back innovation or growth. Place top talent where it counts, and structure the team in a way that fits the situation—whether things are stable or constantly changing.

Here’s a concise comparison of the two companies in the “Auto and non-Auto Tech manufacturing” space, with all four lenses applied.

The best business doesn’t always mean the best stock, but both demonstrate strong innovation, strategic clarity, financial performance, and organisational resilience in line with More Than You Know principles.