Observations On Asset Allocation
Enclosed note contains our perspectives on broader asset allocation.
Read MorePositioning portfolios in context of the Corona Virus (4)
A salute to our doctors, nurses, police forces and sanitation workers who are at the forefront of this battle. A salute also to the Indian state – we are always criticized by the West, but we show our best when our backs our against the wall. And we have done a far better job than the developed world so far.
I am writing to share a few thoughts
1. Be careful how you interpret the news you are reading
Read MoreInterpreting news flow
We have witnessed a black swan event. We need to wait out the storm. We will not panic and sell unless we believe the fundamental 3-5 year prospects of a company have been significantly challenged. Selling now – just because there is short term uncertainty – will crystallize a temporary loss and make it permanent.
Read MorePositioning portfolios in context of the Corona Virus (3)
It has been a really tough month for all of us. Portfolios will be down about ~25-30% in a month. This is a speed of decline which I have never encountered as a Fund Manager.
Solidarity believes that following a disciplined process will result in good outcomes over the medium term, even if we get the occasional bad break that we are experiencing at present.
Read MorePositioning portfolios in context of the Corona Virus (2)
Markets have been on a continuous sell-off mode since then. A draw down of 20% from peak in a year is not an uncommon occurrence. However, we have all been surprised because we have not experienced it for a while. And, unlike other corrections, we have all been surprised at the speed of the decline as it has come in less than 3 weeks.
Read MoreStrategic implications of SBI- Yes Bank Bailout for Banking sector
We 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.
Read MorePositioning portfolios in context of the Corona Virus (1)
The Corona Virus has given the markets a scare with the benchmark indices ending ~7% lower last week. The large number of cases in Italy has understandably made participants nervous whether this is another normal correction or the start of something deeper and bigger.
I am writing to share with you our perspectives.
Read MoreWhy do we not own any Mid Sized Banks
A question that remained unaddressed in the last Q letter to Partners was “Why do we not own any Mid-sized Banks?”
Banks can be attractive businesses to own as they enjoy natural growth tail winds of growth while delivering 15-18% ROE. However, over the last decade, only 3 Banks (representing < 15% of Industry Assets) have delivered over 15% PAT growth or above 15% ROE consistently.
Read MoreINVESTMENT THESIS ON GARWARE TECHNICAL FIBRES LTD
Garware manufactures highly specialized Technical Textile catering to fishing, aquaculture, sports, agriculture etc
Company is a core part of our portfolio and enclosed is a brief note to explain our thought process underlying this investment.
Read MoreOur perspective on the Bharat Bond ETF
We see two roles for “Debt” in any portfolio
- Yield – if the regular income is required to fund expenses.
- Optionality – if a debt instrument is liquid, it not only provides you a coupon, but also serves as a free Call Option to deploy additional capital in Equity markets/other Asset Classes if a very attractive opportunity came by. Most investors rue having no Cash to deploy during a crisis when Equities are available at very attractive valuations. Having access to Cash (ability to sell the Bond) + courage (ability to redeploy into Equities) are invaluable during a crisis.