How Sunil Singhania picks and exits stocks

In the world of investing, stock selection is just one piece of the puzzle. For Sunil Singhania, founder of Abakkus Asset Manager, the true edge lies in developing a clear-headed framework—one that guides not just what to buy, but how to think. His approach weaves together valuation discipline, sector agnosticism, process-driven exits, and a healthy scepticism of market fads. In this piece, we move beyond balance sheets and ratios to decode the investing philosophy that underpins Singhania's decision-making.

Value and growth: A false divide

Singhania challenges the traditional view that value and growth investing are opposing camps. "They always converge," he says. A stock with no growth trading at a P/E of 5x may seem cheap, but it can remain at 5x for years, providing little return. Conversely, a high-PE stock with consistent, compounding growth can create meaningful long-term wealth.

In other words, he is comfortable paying up for growth—if the company can sustain it. "If a company is growing at 20-25 per cent, it can still make money even at 40 P/E," he notes. The key is longevity. FMCG companies, for instance, trade at rich valuations not because of historical growth, but because of their predictable cash flows and capital efficiency.

Look past labels, focus on capital efficiency

Singhania warns against pigeonholing sectors as 'value' or 'growth'. Good businesses exist in every sector, he believes, urging investors to focus instead on return on capital. At Abakkus, companies are filtered by their ability to consistently generate a minimum ROCE of 14-15 per cent. In other words, the business model matters more than the industry label.

This discipline has helped Singhania sidestep crowd-driven sector biases and find fundamentally sound companies.

A structured framework for review and knowing when to exit

Investing, for Singhania, isn't static. A stock doesn't deserve a place in the portfolio just because it once did. That's where his MEETS framework becomes critical. It provides a checklist to reassess holdings periodically and stay objective to prevent emotions or past gains cloud judgment.

M - Management: Is capital being allocated prudently?
E - Earnings: Are results in line with expectations?
E - Events/perception/trends: Have market dynamics or sentiment shifted on the holding?
T - Timing: Is the macro or sectoral context still supportive?
S - Structural/size of opportunity: Does the original investment thesis about market potential still hold?

This framework isn't just theoretical—it's applied rigorously. He recalls an investment in a paper company that initially looked like a winner. "The company had a great balance sheet, it was available at Rs 30-40 and reached Rs 100. We expected it to leap to Rs 300-400," he says. But the company's capital allocation started raising red flags. "The management started buying assets that didn't make sense, reducing return ratios. We exited."

Exits, Singhania thus notes, often demand more discipline than entries. "Most multibaggers happen when you forget the investment," he says, underscoring the role of patience and time. Yet he is quick to add that exits must be triggered when red flags appear—be it governance lapses, stagnating earnings, or a shrinking addressable market. His advice: let the thesis—not emotions—drive your decision to sell.

Resetting expectations

In a market flush with past performance charts and bull-market optimism, Singhania offers a dose of realism. "Expect 12-14 per cent returns from equity mutual funds in the long run. That's what the Indian economy can offer." With valuations already elevated, future returns will increasingly track earnings growth, not P/E re-rating. The takeaway: don't expect yesterday's returns to repeat tomorrow.

Say no without regret

Singhania is especially wary of bull-market euphoria, where investors chase hot stocks or mimic marquee names. His advice is blunt: "Nahi leke rona, leke rone se achha hai." It's better to regret missing out than to suffer by participating in the wrong opportunity.

He recalls receiving a private investment pitch with a Rs 1,500 crore valuation. The numbers looked decent, but the valuation already priced in aggressive growth, so he passed it up. "There's no harm in not participating in everything," he says.

In short

Singhania's investing wisdom is rooted in clarity of thought, not complexity of models. He doesn't chase labels or noise. Instead, he applies a repeatable framework, respects valuation, and waits patiently for the market to catch up. "In the long term," he says, "simple works."

Also read: How to spot multibaggers like Abakkus' Sunil Singhania

This article was originally published on May 07, 2025.