In our last communication on 5 May, we had shared that we need to be realistic in return expectations as monetary policy is reversing which will have an impact on multiples. We are seeing this play out as the market reprices risk. There is a higher probability vs the last few months that inflation will stay elevated and that developed world Central Banks will need to raise rates aggressively and that could push their economies into recession.
Read MoreConversations 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 have put together a brief note explaining why we don’t own commodities.
Read MoreDear Partners:
In order that we can share our thinking on the current situation in Ukraine with all partners, we have put together a brief note that summarizes trends we see, their implications, and how we intend to act. I hope you find it useful.
A caveat. The situation is evolving and we typically see first order effects at present, but there will be second and third order effects which only become clearer with time. Hence, this note is “work in process”.
It is now clear that a macro risk (Russia/Ukraine) has become a known event. Not surprisingly the markets are selling off as new information is factored into prices.
No one knows how this will end or its short term implications. If anyone tells you they do, it tells you more about them than their forecasting abilities.
Read MoreWe have put together a brief note to explain our thought process underlying this investment.
Read MoreWe believe Axis is amongst the 4 private Banks in India that has the right to win long term. It offers opportunity for long term compounding but where entry valuations are significantly in favour in a richly valued market.
Enclosed is a brief note to explain our thought process underlying this investment.
Read MoreTechnology 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 More“In life, the challenge is not so much to figure out how best to play the game; the challenge is to figure out what game you’re playing.” (Kwame Anthony Appiah http://appiah.net/)
CLSA is a reputed broking house. It published a report 2 days ago recommending investors book profit in India.
We agree with CLSAs that valuations in India, on aggregate, are stretched. In our last letter we mentioned, we were “cautious, but not bearish” and that because we have borrowed returns from the future, we could be in for a period of muted returns.
Read MoreWhile our core approach to investing is to buy “disciplined compounding stories at a fair price”, it is equally true that “at the right price, all assets are AAA” (except where one suspects governance issues).
We will buy companies in “Special Situations” when they trade at a meaningful discount to fair value.
ITC meets our Special Situations criteria.
Enclosed is a brief note to explain our thought process underlying this investment.