Conversations with partners over the past few days suggest some partners are not appreciating the change in monetary policy underway and what that means for future returns.
Hence, some points we have made earlier merit repetition.
Read MoreWe are investors in the Life Insurance space with ~20% allocation. These names have seen a steep price correction over the last 6 months with some leading large caps down over 25%.
We take this opportunity to explain
Technology buzzwords – “ML. AI. Blockchain. Platforms” are fueling investor delusions. We share 2 articles and also explain why we don’t own any “FinTech” as of now.
Technology buzzwords are fueling investor delusions
Read MoreA question we introspect on significantly is whether the next stage of value migration in Banking will be from Private Banks to Digital players.
Our working hypothesis at present: well-run Banks will grow aggregate profits; however, their valuations will drift downwards as ROEs will decline.
Read MoreSharpe ratio seeks to determine risk-adjusted returns, or “returns per unit of risk”. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted-performance.
Solidarity’s Sharpe ratio since inception is ~2x that of the NIFTY. This implies for the same level of risk, we have delivered twice the return.
Read MoreCommentators are wondering why the Indian stock market is “shockingly resilient” amidst the devastation caused by the Covid second wave. Their premise is that Covid’s second wave is causing significant devastation and death. 2021 GDP growth has been downgraded. Rising raw material prices will erode margins. The virus has spread across the country and will cause massive unemployment. Analysts have started downgrading estimates. Stock price valuations are 2X of China. So why has the market fallen only 5% since February?
Read MoreOver the last few years, traditionally defined “Value” stocks have continued to get cheaper while “Growth” oriented cos have done very well. The divergence is stark and is now prompting questions whether Value Investing is dead.
The categorization of stocks between “Growth” and “Value” is erroneous. Anything that is low PE multiple and out of favour with markets is typically labelled “Value” and anything with high multiples and fast growth is labelled “Growth”.
Read MoreSEBI came out with new guidelines last evening where Equity Multi-Cap Funds now compulsorily need to invest at least 25% of their corpus in “Mid Caps” (firms ranked between 101-250 in pecking order of Market Cap) and another 25% in “Small Caps (firms ranked 251 or higher in pecking order of Market Cap). This needs to be achieved by 31 Jan 2021.
In this note we want to address the following issues
a) How did SEBI get here?
b) Our view on this order
c) What this order means for Small and Mid-Caps in the short term?
Read MoreWe are in the midst of an economic shock. India has not been able to flatten the curve and the number of infections continues to rise. There is no visibility of a vaccine or a cure. SMEs are in distress. Neighbourhood shops are doing very little business, if any at all. Yet stock prices seem to ignore market conditions and have reached the levels of February 2020.
What is going on? Are markets ahead of themselves? Should Solidarity be taking a cash call at present to preserve some of the gains?
Read MoreWe had shared an earlier blog, ‘Why Mid-Sized Banks are strategically disadvantaged’ as they are forced to take on more risk in a business where success needs to be rooted in conservatism.
The collapse of Yes Bank will further widen the competitive gap between the leaders (SBI/HDFC/ICICI/Axis/Kotak) and the others.
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