“There are decades where nothing happens; and there are weeks where decades happen”-Vladimir Lenin
This is a new Trumpian world. Within 8 weeks of being sworn in, Trump has voted alongside Russia at the UN against historical allies, threatened to annex Greenland, to cut defence aid to Ukraine, to exit NATO, pulled the US out of the Paris climate change agreement, defied the US judiciary ….
Read MoreLast week, S Naren, CIO of ICICI Pru MF and a market veteran we respect immensely, warned investors about exuberance in Small and Mid-Caps. His statement “we think it is a clear time to take out lock, stock, and barrel from small and midcap” created quite a stir on social media. “With great power comes great responsibility” and we endorse the general warning that Naren is dispensing to the price agnostic retail investor.
However, our views on investing in Small and Mid-Caps today are more nuanced, and we share our specific stance on this subject below.
Read MoreWe have put together a brief note to discuss our outlook for future returns.
Read MoreLike most valuation-conscious investors at present, we too are grappling to deploy capital at acceptable valuations. In many new accounts opened since January 2023, we continue to hold 20%+ uninvested cash. While we are not accepting capital from new partners at present, if we did, we would be able to deploy only ~40% in Week 1, most of it in Large Caps.
Our uninvested cash prompted a partner to ask us recently whether we are missing “something”. Sentiment for India is very positive. There is a wall of FII money waiting to enter India. SIP flows continue to be strong. Hence can’t valuation multiples continue to climb higher? Is it different this time?
It is not different this time, just the behavioural cycle at play in Small caps and select sectors.
We have put together a brief note to explain our perspective on valuation in Small & Micro Caps
Read MoreThe enclosed blog discusses the power of Asymmetric outcomes, where to look for such returns, what it takes to achieve them, and how we think about what share of the portfolio we allocate to such ideas.
Read MoreThe purpose of our letters and occasional blogs is to provide transparency in how we are thinking with the goal of creating stronger alignment with partners who want to think and act long-term.
Two companies in our portfolio – STAR Health Insurance and Restaurants Brands Asia – have existing Private Equity (PE) shareholders looking to exit. Everstone is looking for a buyer for its stake in RBA. Similarly, there are a few PE investors in STAR who are looking to sell their stake.
PE funds have a finite life and need to return capital. The shadow of these exits often results in a weakness in stock prices till the exit is complete. For example, one of the PE investors in STAR sold a large stake via a block deal last Friday at a discount to the prevailing market price which resulted in a 8% drop in price.
Read MoreEnclosed note contains our perspectives on suitability of PMS structure versus other investment vehicles.
Read MoreStar Health has corrected significantly since our first purchase.
Enclosed is a note that explains why we have continued to buy Star at lower prices.
Silicon Valley Bank in the US has collapsed. SVB imploded as 3 risks collided
An article that explained what happened is enclosed.
Read More