The document summarizes the analysis of a basket of 251 Indian consumer companies by Avant Garde Wealth Management. It finds that while consumer stocks have strong earnings growth and return on equity, their valuations are currently at historic highs relative to earnings. Historically, high valuations for consumer stocks have coincided with weaker future returns despite ongoing earnings growth. The document also discusses the impact of the US Federal Reserve's comments about tapering quantitative easing, which caused short-term turmoil in global asset markets. It questions whether the Fed will actually be able to normalize monetary policy and raise interest rates given its enormous balance sheet.
Pursuing a Better Investment Experience with Capital AssociatesRobUgiansky
This document outlines 10 key principles for improving the odds of investment success:
1) Embrace market pricing and the information incorporated into prices.
2) Don't try to outguess the market through stock picking or market timing as most funds do not outperform their benchmarks.
3) Resist chasing past performance as it does not predict future returns.
4) Let markets work for you through long-term investing as this has rewarded investors over time.
This document provides guidance on pursuing a better investment experience. It recommends embracing market pricing, not trying to outguess the market, resisting chasing past performance, letting markets work for you long-term, considering drivers of returns like company size and profitability, practicing smart diversification globally, avoiding market timing, managing emotions, focusing on long-term advice over entertainment, and controlling what you can like having a tailored plan.
The document provides disclosures and sources for several exhibits. Exhibit 1 discloses trading data sources for world equity trading volumes. Exhibit 2 describes the mutual fund sample and methodology used to determine "winner" funds that outperformed benchmarks. Exhibit 3 explains how the analysis was conducted to determine the percentage of top-ranked funds that maintained their ranking in subsequent years. The source for Exhibits 2 and 3 is also provided.
Faj jan feb_2003_surprise_higher_dividends_higher_earnings_growthSarayut Wanasin
The document investigates whether a company or market's dividend payout ratio can predict future earnings growth. It finds that historically, the highest expected future earnings growth occurs when current payout ratios are high, and the slowest growth occurs when payout ratios are low. This relationship holds even after accounting for other factors like mean reversion in earnings. The findings contradict the view that reinvesting more earnings will fuel faster growth, and instead support the idea that managers sometimes signal expectations or engage in inefficient behavior through dividends. The low payout ratios seen recently may not be a sign of strong future earnings growth as some predict, according to the historical relationship identified in the document.
The GIM Small Cap Focused Growth strategy composite outperformed the Russell 2000 Growth index in the second quarter, rising 3.0% compared to 2.0% for the index. Strong stock selection contributed to outperformance, particularly from Taser International and Paylocity in the Producer Durables sector. Some top contributors, such as 2U and IMAX, were trimmed as their share prices appreciated sharply. Constant Contact was a top detractor as its business transition faced setbacks. Looking ahead, the portfolio remains positioned in secular growth companies capable of sustaining 15%+ growth despite periodic volatility.
The document discusses the performance of various model investment portfolios from 1973-2010. It provides the annualized compound returns and annualized standard deviations for 5 model portfolios over this period. The model portfolios had varying allocations to US and international stocks, bonds, and emerging markets. Model portfolio 5, which had the most diversified allocation, achieved the highest annualized return of 11.65% and relatively low standard deviation of 11.26% compared to the other portfolios.
This document discusses pursuing a better investment experience by embracing principles such as embracing market pricing, not trying to outguess the market, resisting chasing past performance, letting markets work for investors, considering drivers of returns, practicing smart diversification, avoiding market timing, managing emotions, not confusing entertainment with advice, and focusing on what can be controlled. The key ideas are that following basic principles of prudent investing over long periods can help investors achieve better results than trying to beat the market through tactics like stock picking, market timing, or chasing past performance.
Aftermarket Support: How to Create a Liquid Public Stockkeatingcapital
Public companies can enjoy many benefits, particularly significantly higher
valuations and superior access to capital, compared to privately owned
businesses. These benefits are conditional on the existence of a “liquid” market
for the company’s shares. Illiquidity can prevent the stock of a smaller public
issuer from achieving the higher valuations enjoyed by its peers, thereby negating
one of the primary benefits of being public. The goal of any publicly traded
company, therefore, should be to have its stock become widely held, actively
traded, fully valued, and covered by at least one research analyst. But what
exactly do these things mean? This white paper creates a framework for
objectively defining and quantifying these terms and outlines a path to the holy
grail of liquidity.
Pursuing a Better Investment Experience with Capital AssociatesRobUgiansky
This document outlines 10 key principles for improving the odds of investment success:
1) Embrace market pricing and the information incorporated into prices.
2) Don't try to outguess the market through stock picking or market timing as most funds do not outperform their benchmarks.
3) Resist chasing past performance as it does not predict future returns.
4) Let markets work for you through long-term investing as this has rewarded investors over time.
This document provides guidance on pursuing a better investment experience. It recommends embracing market pricing, not trying to outguess the market, resisting chasing past performance, letting markets work for you long-term, considering drivers of returns like company size and profitability, practicing smart diversification globally, avoiding market timing, managing emotions, focusing on long-term advice over entertainment, and controlling what you can like having a tailored plan.
The document provides disclosures and sources for several exhibits. Exhibit 1 discloses trading data sources for world equity trading volumes. Exhibit 2 describes the mutual fund sample and methodology used to determine "winner" funds that outperformed benchmarks. Exhibit 3 explains how the analysis was conducted to determine the percentage of top-ranked funds that maintained their ranking in subsequent years. The source for Exhibits 2 and 3 is also provided.
Faj jan feb_2003_surprise_higher_dividends_higher_earnings_growthSarayut Wanasin
The document investigates whether a company or market's dividend payout ratio can predict future earnings growth. It finds that historically, the highest expected future earnings growth occurs when current payout ratios are high, and the slowest growth occurs when payout ratios are low. This relationship holds even after accounting for other factors like mean reversion in earnings. The findings contradict the view that reinvesting more earnings will fuel faster growth, and instead support the idea that managers sometimes signal expectations or engage in inefficient behavior through dividends. The low payout ratios seen recently may not be a sign of strong future earnings growth as some predict, according to the historical relationship identified in the document.
The GIM Small Cap Focused Growth strategy composite outperformed the Russell 2000 Growth index in the second quarter, rising 3.0% compared to 2.0% for the index. Strong stock selection contributed to outperformance, particularly from Taser International and Paylocity in the Producer Durables sector. Some top contributors, such as 2U and IMAX, were trimmed as their share prices appreciated sharply. Constant Contact was a top detractor as its business transition faced setbacks. Looking ahead, the portfolio remains positioned in secular growth companies capable of sustaining 15%+ growth despite periodic volatility.
The document discusses the performance of various model investment portfolios from 1973-2010. It provides the annualized compound returns and annualized standard deviations for 5 model portfolios over this period. The model portfolios had varying allocations to US and international stocks, bonds, and emerging markets. Model portfolio 5, which had the most diversified allocation, achieved the highest annualized return of 11.65% and relatively low standard deviation of 11.26% compared to the other portfolios.
This document discusses pursuing a better investment experience by embracing principles such as embracing market pricing, not trying to outguess the market, resisting chasing past performance, letting markets work for investors, considering drivers of returns, practicing smart diversification, avoiding market timing, managing emotions, not confusing entertainment with advice, and focusing on what can be controlled. The key ideas are that following basic principles of prudent investing over long periods can help investors achieve better results than trying to beat the market through tactics like stock picking, market timing, or chasing past performance.
Aftermarket Support: How to Create a Liquid Public Stockkeatingcapital
Public companies can enjoy many benefits, particularly significantly higher
valuations and superior access to capital, compared to privately owned
businesses. These benefits are conditional on the existence of a “liquid” market
for the company’s shares. Illiquidity can prevent the stock of a smaller public
issuer from achieving the higher valuations enjoyed by its peers, thereby negating
one of the primary benefits of being public. The goal of any publicly traded
company, therefore, should be to have its stock become widely held, actively
traded, fully valued, and covered by at least one research analyst. But what
exactly do these things mean? This white paper creates a framework for
objectively defining and quantifying these terms and outlines a path to the holy
grail of liquidity.
1. The Australian equity market has increased 24% from its March low but remains below levels from three years ago. The report predicts continued bull market conditions with the All Ordinaries index reaching 3,650, implying almost 15% total returns over the next 12 months.
2. Small cap stocks have outperformed recently but now appear relatively expensive. Overall, the market appears fairly valued based on the "rule of 20" and prospective earnings yield relative to bonds.
3. The consensus view is that stronger world growth may benefit resources over banks, but the report finds resource stocks trading at higher valuations and lower yields compared to the major banks. The portfolios recommended overweight banks and include only one major miner.
The document discusses strategies for creating an investment portfolio based on Nobel Prize-winning academic research. It recommends structuring portfolios to take advantage of factors like company size, relative price, and profitability that have been shown to increase returns. Specifically, it suggests investing more in small and value stocks, as both have higher returns than large or growth stocks over the long run. The document also provides examples of model portfolios that diversify across global stock and bond index funds targeting these factors.
Nestle is projected to perform in line with the overall market over the next 6-12 months based on an analysis of valuation, revenue growth, and return on equity. While revenues have decreased slightly and growth has been absent, equity has increased 12% through effective capital management. The stock is currently fairly priced based on historical valuation ranges.
- The document provides an analysis and outlook on the Indian stock market by Centrum Research.
- It upgrades the FY11 EPS target to Rs. 1,030 but remains defensive in the near term due to concerns about valuations of around 19x, which is higher than appropriate levels given GDP growth projections.
- It expects a 15% correction in markets and recommends buying value picks after the correction. Top sectors identified are retail, sugar, pharma, media, healthcare and real estate while views on other sectors vary.
Tobin's q theory suggests that the ratio of a firm's market value to replacement cost of capital (q) indicates whether a firm should invest. If q>1, the market values capital more than its cost, so firms should invest. However, investment does not immediately adjust to changes in q, as it takes time to plan, acquire assets, and install capital. While stock prices may accurately value firms relative to each other, overall market levels can depart from fundamentals through bubbles. Surveys find that firms cite expected demand, profitability, and availability of internal funds as more important determinants of investment than q or cost of capital.
- HBJ Capital is an equity research firm that provides stock recommendations to retail, high net worth, and institutional clients with the goal of identifying "hidden gem" multibagger stocks.
- Their flagship Multibagger Stock Package recommends 12 stocks per year with in-depth research reports and quarterly updates, focusing on mid-cap, small-cap, micro-cap, and other styles that could generate high returns.
- Their research process involves analyzing sectors, companies, management, and financials through primary and secondary research to identify undervalued stocks with strong growth potential.
The document provides an investment commentary for December 2019. It discusses the strong performance of the broader market in 2019 but notes increasing valuations. It summarizes the portfolio manager's long-standing optimistic yet cautious outlook. The commentary describes adjustments made to the portfolio in the fourth quarter, including reducing the technology sector weighting and selling Apple, to take profits and find less expensive opportunities. It reiterates the manager's commitment to its value investment process and focus on capital preservation over the short term while maintaining an optimistic long-term view.
Emerging markets can provide diversification benefits but have also experienced periods of volatility and performance differences compared to developed markets. Over the long-term from 1988 to 2019, emerging markets outperformed developed international markets with higher annualized returns but also higher risk. However, short-term performance has varied significantly, with emerging markets strongly outperforming or underperforming developed markets by over 30 percentage points in some years. Country-level returns within emerging markets also display wide dispersion, underscoring the importance of diversification. The composition and size of emerging markets has evolved significantly over time, with China now representing over 30% of the emerging market index.
This document provides stock recommendations and analysis from an investment strategy report. It recommends 10 stocks across sectors like banking, infrastructure, and automotive that are expected to outperform the market. The stocks are categorized as high return on equity and cheap relative to benchmarks, high return on equity and cheap relative to peers, value stocks, stocks with potential for value unlocking, stocks where promoters have increased stakes, and turnaround stocks. For each recommendation, it provides details on the company, industry drivers, financial projections, and rationale for upside potential. The overall view is bullish on Indian growth and attractiveness for foreign investment.
So how do you value the share price of stock for a given company? In other words, what is the intrinsic value of a given stock? Generally speaking, a stock is valued based on the company’s current financial state and what the market believes the company’s future financial state will look like. https://carnick.com/
Sourajit Aiyer - Finance Monthly Magazine, UK - Concentration and Volatility,...South Asia Fast Track
The document discusses a strategy called Consistent Dividends Consistent Fundamentals (CDCF) that focuses on investing in a concentrated portfolio of stocks that have shown consistent dividend payments and fundamental performance over the last three years. The strategy screens for companies with revenue growth over 10%, consistent profit margin growth, dividend payouts over 20% of profits, and low debt levels. Backtesting shows the portfolio outperformed benchmark indices from 2008-2012 while achieving similar volatility levels and positive returns in most years. However, the strategy also has risks such as overexposure to the banking sector and potential liquidity issues.
Ms Mayana Sobti Rajani, Vice President and Fund Manager, DSP BlackRock Mutual Fund shares her views on the equity market and discusses the positioning of DSP BlackRock Tax Saver Fund.
The document provides information about pursuing a better investment experience by discussing various fees associated with mutual fund investments and noting that mutual funds are not guaranteed and past performance is not indicative of future returns. It emphasizes embracing market pricing, avoiding attempts to outguess the market through stock picking or market timing, and resisting chasing past performance. The document advocates letting markets work for the investor through long-term, globally diversified investments.
Right Horizons market outlook for 2016 - stay investedRight Horizons
This document discusses India's economic outlook and the performance of various mutual fund portfolios. It notes that India is expected to grow at around 7-8% through 2020 according to Goldman Sachs. Several factors are positive for 2016, including lower commodity prices and higher infrastructure spending. The document highlights the performance of various mutual fund portfolios managed by the company, showing they have outperformed comparable funds over various time periods. It sets a target for the Sensex to end 2016 over 30,000, representing 22% upside from current levels.
Third point-q4-2014-investor-letter-tpoiFrank Ragol
This letter summarizes Third Point LLC's investment results and outlook for 2015. In 2014, Third Point achieved mid-single digit returns due to poor performance during market volatility and prematurely exiting some positions. Already in 2015, markets have been highly volatile. Third Point is focusing on companies with strong cash flows and consistent growth, and looking to take advantage of market dislocations. The letter discusses two of Third Point's largest equity positions - Amgen and Fanuc.
ICICI Prudential Growth Fund - Series 1 (Presentation)iciciprumf
This document provides an overview of the ICICI Prudential Growth Fund - Series 1, a close-ended equity fund. The fund aims to provide capital appreciation by investing in 40-60 stocks across market caps with a focus on mid and small caps as well as infrastructure and banking. It will identify companies with potential earnings growth over 3 years. The fund follows a high conviction approach and conducts rigorous research and risk management. It aims to outperform the CNX Nifty Index over the long run through investing in quality companies with strong fundamentals and earnings growth potential. Investors should be aware that the principal investment is of high risk.
Various leading indicators suggest a constructive backdrop for equities ahead. Improving economic fundamentals and positive leading indicators like the LEI and ISM Services Index signal further equity market gains. The author recommends an overweight position in equities over bonds, with a focus on cyclical sectors that have outperformed recently. On the fixed income side, the author advocates a "bear flattener" strategy of favoring corporate bonds over Treasuries and long-term bonds over short-term bonds.
The document discusses the DSP Healthcare Fund, which invests in Indian and overseas healthcare companies across sectors like pharmaceuticals, hospitals, diagnostics, and medical devices. It highlights secular growth drivers for the Indian healthcare industry like rising incomes, aging population, and government policies. The fund aims to benefit from increasing healthcare spending in India as well as export and global opportunities. Historical trends show the healthcare sector outperformed during periods of strong export growth and improving return ratios. The sector is currently positioned for growth as business cycles recover and valuations remain low. Investing in both Indian and US healthcare equities provides portfolio diversification benefits.
The document provides an overview of the DSP Value Fund including its investment philosophy, performance, portfolio characteristics, and current portfolio details. Some key points:
- The fund aims to generate steady long-term returns with lower volatility than the benchmark through a conservative approach focusing on quality companies at reasonable valuations.
- Over longer time periods the fund has outperformed several benchmarks with lower volatility and drawdowns.
- The current portfolio emphasizes sectors like IT, materials, industrials, and healthcare that are seen as reasonably valued. It underweights sectors like consumer goods and financials seen as overvalued.
- Portfolio characteristics include higher dividend yield and quality metrics than the benchmark alongside lower valuations.
- Top holdings
Avant Garde Wealth Mgmt - Quarterly letter - 1406 - AppendixGaurav Jalan
The document summarizes key points from the Bank of International Settlements' annual report regarding risks from extended periods of accommodative monetary policy by central banks. The BIS warns that easy money policies have increased risks of financial crisis by compressing term and risk premiums. They note signs of overvaluation in asset prices and complacency among investors. The BIS argues central banks need to pay attention to risks of exiting monetary stimulus too late or gradually to avoid damage from side effects and bubbles created by accommodative policies.
Steven Covici is an accomplished oculofacial plastic and reconstructive surgeon who completed his undergraduate education and fellowship at the University of Pennsylvania. He serves patients in Springfield, MA and Hartford, CT and has authored research papers and book chapters. Gravity, sun exposure, and other environmental and hereditary factors cause skin aging and sagging over time. However, cosmetic enhancements can modify the skin's appearance through minimally invasive techniques in some cases. Non-surgical options include facial fillers, Botox, and chemical peels, which can eliminate acne scars, shrink pores, or reduce wrinkles by using injections like Botox Cosmetic or fillers like Sculptra, Ju
1. The Australian equity market has increased 24% from its March low but remains below levels from three years ago. The report predicts continued bull market conditions with the All Ordinaries index reaching 3,650, implying almost 15% total returns over the next 12 months.
2. Small cap stocks have outperformed recently but now appear relatively expensive. Overall, the market appears fairly valued based on the "rule of 20" and prospective earnings yield relative to bonds.
3. The consensus view is that stronger world growth may benefit resources over banks, but the report finds resource stocks trading at higher valuations and lower yields compared to the major banks. The portfolios recommended overweight banks and include only one major miner.
The document discusses strategies for creating an investment portfolio based on Nobel Prize-winning academic research. It recommends structuring portfolios to take advantage of factors like company size, relative price, and profitability that have been shown to increase returns. Specifically, it suggests investing more in small and value stocks, as both have higher returns than large or growth stocks over the long run. The document also provides examples of model portfolios that diversify across global stock and bond index funds targeting these factors.
Nestle is projected to perform in line with the overall market over the next 6-12 months based on an analysis of valuation, revenue growth, and return on equity. While revenues have decreased slightly and growth has been absent, equity has increased 12% through effective capital management. The stock is currently fairly priced based on historical valuation ranges.
- The document provides an analysis and outlook on the Indian stock market by Centrum Research.
- It upgrades the FY11 EPS target to Rs. 1,030 but remains defensive in the near term due to concerns about valuations of around 19x, which is higher than appropriate levels given GDP growth projections.
- It expects a 15% correction in markets and recommends buying value picks after the correction. Top sectors identified are retail, sugar, pharma, media, healthcare and real estate while views on other sectors vary.
Tobin's q theory suggests that the ratio of a firm's market value to replacement cost of capital (q) indicates whether a firm should invest. If q>1, the market values capital more than its cost, so firms should invest. However, investment does not immediately adjust to changes in q, as it takes time to plan, acquire assets, and install capital. While stock prices may accurately value firms relative to each other, overall market levels can depart from fundamentals through bubbles. Surveys find that firms cite expected demand, profitability, and availability of internal funds as more important determinants of investment than q or cost of capital.
- HBJ Capital is an equity research firm that provides stock recommendations to retail, high net worth, and institutional clients with the goal of identifying "hidden gem" multibagger stocks.
- Their flagship Multibagger Stock Package recommends 12 stocks per year with in-depth research reports and quarterly updates, focusing on mid-cap, small-cap, micro-cap, and other styles that could generate high returns.
- Their research process involves analyzing sectors, companies, management, and financials through primary and secondary research to identify undervalued stocks with strong growth potential.
The document provides an investment commentary for December 2019. It discusses the strong performance of the broader market in 2019 but notes increasing valuations. It summarizes the portfolio manager's long-standing optimistic yet cautious outlook. The commentary describes adjustments made to the portfolio in the fourth quarter, including reducing the technology sector weighting and selling Apple, to take profits and find less expensive opportunities. It reiterates the manager's commitment to its value investment process and focus on capital preservation over the short term while maintaining an optimistic long-term view.
Emerging markets can provide diversification benefits but have also experienced periods of volatility and performance differences compared to developed markets. Over the long-term from 1988 to 2019, emerging markets outperformed developed international markets with higher annualized returns but also higher risk. However, short-term performance has varied significantly, with emerging markets strongly outperforming or underperforming developed markets by over 30 percentage points in some years. Country-level returns within emerging markets also display wide dispersion, underscoring the importance of diversification. The composition and size of emerging markets has evolved significantly over time, with China now representing over 30% of the emerging market index.
This document provides stock recommendations and analysis from an investment strategy report. It recommends 10 stocks across sectors like banking, infrastructure, and automotive that are expected to outperform the market. The stocks are categorized as high return on equity and cheap relative to benchmarks, high return on equity and cheap relative to peers, value stocks, stocks with potential for value unlocking, stocks where promoters have increased stakes, and turnaround stocks. For each recommendation, it provides details on the company, industry drivers, financial projections, and rationale for upside potential. The overall view is bullish on Indian growth and attractiveness for foreign investment.
So how do you value the share price of stock for a given company? In other words, what is the intrinsic value of a given stock? Generally speaking, a stock is valued based on the company’s current financial state and what the market believes the company’s future financial state will look like. https://carnick.com/
Sourajit Aiyer - Finance Monthly Magazine, UK - Concentration and Volatility,...South Asia Fast Track
The document discusses a strategy called Consistent Dividends Consistent Fundamentals (CDCF) that focuses on investing in a concentrated portfolio of stocks that have shown consistent dividend payments and fundamental performance over the last three years. The strategy screens for companies with revenue growth over 10%, consistent profit margin growth, dividend payouts over 20% of profits, and low debt levels. Backtesting shows the portfolio outperformed benchmark indices from 2008-2012 while achieving similar volatility levels and positive returns in most years. However, the strategy also has risks such as overexposure to the banking sector and potential liquidity issues.
Ms Mayana Sobti Rajani, Vice President and Fund Manager, DSP BlackRock Mutual Fund shares her views on the equity market and discusses the positioning of DSP BlackRock Tax Saver Fund.
The document provides information about pursuing a better investment experience by discussing various fees associated with mutual fund investments and noting that mutual funds are not guaranteed and past performance is not indicative of future returns. It emphasizes embracing market pricing, avoiding attempts to outguess the market through stock picking or market timing, and resisting chasing past performance. The document advocates letting markets work for the investor through long-term, globally diversified investments.
Right Horizons market outlook for 2016 - stay investedRight Horizons
This document discusses India's economic outlook and the performance of various mutual fund portfolios. It notes that India is expected to grow at around 7-8% through 2020 according to Goldman Sachs. Several factors are positive for 2016, including lower commodity prices and higher infrastructure spending. The document highlights the performance of various mutual fund portfolios managed by the company, showing they have outperformed comparable funds over various time periods. It sets a target for the Sensex to end 2016 over 30,000, representing 22% upside from current levels.
Third point-q4-2014-investor-letter-tpoiFrank Ragol
This letter summarizes Third Point LLC's investment results and outlook for 2015. In 2014, Third Point achieved mid-single digit returns due to poor performance during market volatility and prematurely exiting some positions. Already in 2015, markets have been highly volatile. Third Point is focusing on companies with strong cash flows and consistent growth, and looking to take advantage of market dislocations. The letter discusses two of Third Point's largest equity positions - Amgen and Fanuc.
ICICI Prudential Growth Fund - Series 1 (Presentation)iciciprumf
This document provides an overview of the ICICI Prudential Growth Fund - Series 1, a close-ended equity fund. The fund aims to provide capital appreciation by investing in 40-60 stocks across market caps with a focus on mid and small caps as well as infrastructure and banking. It will identify companies with potential earnings growth over 3 years. The fund follows a high conviction approach and conducts rigorous research and risk management. It aims to outperform the CNX Nifty Index over the long run through investing in quality companies with strong fundamentals and earnings growth potential. Investors should be aware that the principal investment is of high risk.
Various leading indicators suggest a constructive backdrop for equities ahead. Improving economic fundamentals and positive leading indicators like the LEI and ISM Services Index signal further equity market gains. The author recommends an overweight position in equities over bonds, with a focus on cyclical sectors that have outperformed recently. On the fixed income side, the author advocates a "bear flattener" strategy of favoring corporate bonds over Treasuries and long-term bonds over short-term bonds.
The document discusses the DSP Healthcare Fund, which invests in Indian and overseas healthcare companies across sectors like pharmaceuticals, hospitals, diagnostics, and medical devices. It highlights secular growth drivers for the Indian healthcare industry like rising incomes, aging population, and government policies. The fund aims to benefit from increasing healthcare spending in India as well as export and global opportunities. Historical trends show the healthcare sector outperformed during periods of strong export growth and improving return ratios. The sector is currently positioned for growth as business cycles recover and valuations remain low. Investing in both Indian and US healthcare equities provides portfolio diversification benefits.
The document provides an overview of the DSP Value Fund including its investment philosophy, performance, portfolio characteristics, and current portfolio details. Some key points:
- The fund aims to generate steady long-term returns with lower volatility than the benchmark through a conservative approach focusing on quality companies at reasonable valuations.
- Over longer time periods the fund has outperformed several benchmarks with lower volatility and drawdowns.
- The current portfolio emphasizes sectors like IT, materials, industrials, and healthcare that are seen as reasonably valued. It underweights sectors like consumer goods and financials seen as overvalued.
- Portfolio characteristics include higher dividend yield and quality metrics than the benchmark alongside lower valuations.
- Top holdings
Avant Garde Wealth Mgmt - Quarterly letter - 1406 - AppendixGaurav Jalan
The document summarizes key points from the Bank of International Settlements' annual report regarding risks from extended periods of accommodative monetary policy by central banks. The BIS warns that easy money policies have increased risks of financial crisis by compressing term and risk premiums. They note signs of overvaluation in asset prices and complacency among investors. The BIS argues central banks need to pay attention to risks of exiting monetary stimulus too late or gradually to avoid damage from side effects and bubbles created by accommodative policies.
Steven Covici is an accomplished oculofacial plastic and reconstructive surgeon who completed his undergraduate education and fellowship at the University of Pennsylvania. He serves patients in Springfield, MA and Hartford, CT and has authored research papers and book chapters. Gravity, sun exposure, and other environmental and hereditary factors cause skin aging and sagging over time. However, cosmetic enhancements can modify the skin's appearance through minimally invasive techniques in some cases. Non-surgical options include facial fillers, Botox, and chemical peels, which can eliminate acne scars, shrink pores, or reduce wrinkles by using injections like Botox Cosmetic or fillers like Sculptra, Ju
Avant garde wealth mgmt quarterly letter - 1212Gaurav Jalan
The document discusses the relationship between interest rates, equity markets, and corporate earnings/profits in India based on empirical evidence from 1998-2012. Three key points:
1) There is no meaningful correlation between interest rates and P/E ratios in India, and historically interest rates have been loosely positively correlated with P/E ratios.
2) There is no relationship between changes in interest rates and subsequent corporate earnings growth.
3) No correlation exists between changes in bond yields and future equity index returns.
Avant garde wealth mgmt - Quarterly letter - 1312Gaurav Jalan
The document provides an overview of emerging market turmoil and compares India's performance relative to its peers. It discusses various risks to the global economy that could impact financial markets, including high unemployment in Europe potentially leading to a shift in EU policymaking and a renewed sovereign debt crisis. The portfolio has taken a defensive posture by increasing its cash position and booking some stock profits. While India has fared better than peers on currency and bond yields, concerns remain around its high inflation, foreign capital inflows, and vulnerability to reversal in flows if global markets decline.
The Difference Between Botox and Juvederm Dr. Covici
Dr. Steven Covici is an accomplished plastic surgeon based in Massachusetts who has served the area for over 10 years and specializes in oculofacial and reconstructive surgery including Botox and Juvederm facial injections. Botox is a muscle relaxer that freezes muscle movement to smooth wrinkles, while Juvederm is a dermal filler that fills in hollow areas of the face using hyaluronic acid to promote skin hydration and volume. Both Botox and Juvederm are popular facial injection methods that produce similar results but through different mechanisms of action.
Administrative Professional with Keynote and Powerpoint Superpowers!LittleSally
This will be my first keynote/powerpoint resume. I am currently seeking employment here in Atlanta, GA. I was not aware that slideshare would not upload the animations in my presentation, so the video conversion will be posted shortly.
Avant garde wealth mgmt quarterly letter - 1206Gaurav Jalan
The document provides an update from Avant Garde Wealth Management on their portfolio and market insights. It discusses the sharp depreciation of the rupee against major currencies in the context of purchasing power parity. While the portfolio remains 41% long with limited changes, performance has been positive so far. Analysis of investment vs consumption growth suggests the recent divergence may correct. Ongoing searches find few true bargains, but holdings offer upside to intrinsic value with limited downside risk.
Avant Garde Wealth Mgmt quarterly letter - 1209Gaurav Jalan
The document discusses gold as an investment option in the current macroeconomic environment. It summarizes that central banks have significantly expanded their balance sheets since 2008, fueling asset inflation and raising gold prices. While gold does not generate cash flows, its limited supply growth supports its role as a store of value. The document recommends allocating some portion of investments to gold to hedge against risks from large-scale monetary policies. It also analyzes India's gold and stock market trends and where the current market cycle may be relative to past bear markets.
Avant Garde Wealth Mgmt - Quarterly letter - 1112Gaurav Jalan
(1) Avant Garde Wealth Management provides an update on market conditions and their portfolio positioning. (2) They have remained 36% invested with the rest in cash finding limited stocks that meet their valuation criteria. (3) Their portfolio has increased 1.8% while the market fell 19.6% since starting in June, though longer-term performance is needed to evaluate their ability.
Avant Garde wealth Mgmt - Quarterly letter - 1303Gaurav Jalan
- The document provides an analysis of investment trends, corporate profits, consumption patterns, and their impact on stock market valuations. It finds that declining new project announcements suggest a decline in capital expenditures and corporate profit growth over the next few years.
- It also discusses trends in the gold market, finding that recent price declines do not necessarily indicate the end of the secular bull market. Investor behavior and ongoing monetary easing by global central banks support ongoing gold demand and price appreciation over the long term.
- The portfolio has not changed much but individual stock positions are reexamined given recent sharp price moves. Returns have been subdued in the difficult market environment.
Dr. Steven Covici has over 20 years of experience as an oculofacial plastic surgeon based in Springfield, Massachusetts. Radiesse is an injectable dermal filler that adds volume to lines and wrinkles on the face through stimulation of natural collagen production, which causes treated areas to remain full even after the gel carrier is absorbed; it can last for over a year. The injections may be mixed with lidocaine to minimize discomfort.
The under-performing of value stocks and lowering of interest rates has compelled the investment managers to re-rate their strategies. Download the report by investment research experts at Aranca on value investing here!
This document discusses dividend investing strategies. It makes the following key points:
1) Dividend investing tends to outperform during periods of market volatility and below average returns, as dividend income provides downside protection.
2) Dividends have accounted for about one-third of the total return of the S&P 500 since the 1970s, so excluding dividend stocks puts investors at a disadvantage.
3) The best dividend strategies focus on high quality stocks with growing dividends, cash flows, and earnings, not just high yields, to identify opportunities with sustainable payouts.
The document provides an overview of the Indian macroeconomic environment and corporate performance. Some key points:
- Interest rates are expected to remain higher than the last decade, with implications for economic growth and asset valuations.
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The fund focuses on investing in companies with strong fundament
The document provides an overview of the Indian macroeconomic environment and corporate performance. Some key points:
- Interest rates are expected to remain higher than the last decade, with implications for economic growth and asset valuations.
- Indian corporate earnings growth has averaged around 11% annually over the last three decades, with periods of higher and lower growth. Sustaining 12-13% earnings growth over the next decade is possible given factors like government spending and economic reforms.
- Valuations of Indian equities have moderated and are at more reasonable levels currently compared to historical averages. Small and mid-cap stocks remain at a valuation discount to large caps.
The fund focuses on investing in companies with strong
The document provides an overview of the Indian macroeconomic environment and corporate performance. Some key points:
- Interest rates are expected to remain higher than the last decade, with implications for economic growth and asset valuations.
- Indian corporate earnings growth has averaged around 11% annually over the last three decades, with periods of higher and lower growth. Sustaining 12-13% earnings growth over the next decade is possible given factors like government spending and economic reforms.
- Valuations of Indian equities are high relative to history but have corrected and become more reasonable recently. Small and mid-cap stocks remain attractively valued relative to large caps.
- The fund focuses on investing in companies with strong
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Avant garde wealth mgmt - Quarterly letter - 1306
1. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
Contents
Consumer stocks – Quality vs. value conundrum
Asset market turmoil – Impact of central bank actions
Portfolio positioning – No change
Stocks in the portfolio – Some minor changes in position size
Portfolio performance – A tough six months
Dear investor,
While indices such as the Nifty and Sensex continue to oscillate within a narrow range for now, there
is increasingly large dispersion of returns from various sectors. Broadly, stocks in the consumer
sector, pharmaceuticals, IT, and until recently private banks, continue to perform well while most
others languish. In this letter we dig a little deeper into the history of the consumer sector for
insights into investment merits at current prices. In the backdrop of the US equity markets hitting
new highs we explore implications of the sharp, though ultimately short lived, negative reaction in
global asset markets to the comments of the Federal Reserve Chairman about “tapering”.
Consumer stocks – Quality vs. value conundrum
The data set for this analysis includes an unweighted basket of 251
consumer companies. Most of
these companies can be classified as consumer staples, while some are consumer discretionary. The
common characteristic is that these are high quality businesses with strong brands and pricing
power, which translates into the ability to earn high ROE (return on equity). The average ROE of this
basket over the last sixteen years is 32%. Due to their disproportionate size, on the most recent
figures, Hindustan Unilever and ITC together comprise 57% and 51% of the total PAT (profit after
tax) and Market Capitalization of the basket respectively.
The graph below shows that the basket currently trades at historically high valuations.
Source: Company Financials, Capital Line, BSE
1
Companies included in the basket are Hindustan Unilever, ITC, Marico, Nestle, Godrej Consumer, Dabur, Colgate, Agro
Tech Foods, Jubilant Foodworks, Castrol, Titan Industries, Bata, Asian Paints, Kansai Nerolac, Berger Paints, Page Industries,
Pidilitie, P&G Hygiene & Home, Gillette, United Breweries, United Spirits, TTK Prestige, Hawkins, GSK Consumer, Britannia.
Data series is from April 5, 1996 to July 19, 2013
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Apr-96 Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
ConsumerBasket - Trailing Twelve Month P/E
Median P/E = 29
?
2. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
The prevailing bull thesis on consumer stocks is that these are very high quality businesses that
deliver superior earnings growth over time. Therefore it is appropriate for these stocks to be valued
at very high P/E multiples.
The following graph shows that along with high ROE the basket has also delivered high profit growth.
The earnings CAGR (compound annual growth rate) from 1997 to 2013 is 17%. This compares with
earnings CAGR of only 9.4% for the Sensex over this period. So the first leg of the bull thesis is
supported by historical data.
Source: Company Financials, Capital Line, BSE
The historical P/E peaks in 1999 and 2006 have coincided with periods when earnings growth has
been strong at 20%+. Conversely the low valuations in 2002-2005 and in 2008-2009 coincided with
periods of sub-10% earnings growth. This observation is not surprising as P/E multiples are a
reflection of investor sentiment and generally tend to track earnings momentum. The more
interesting conclusion flows from the following graph which plots a time series of earnings versus
market capitalization. The key takeaway is that it is valuation and not earnings growth that is the
primary driver of equity returns.
Source: Company Financials, Capital Line, BSE
Following the P/E multiple peaks at high levels in 1999 and 2006, equity returns were poor in the
following years despite continuing earnings growth. After the P/E multiple peaked at 45x in 1999, in
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Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
ConsumerBasket - YoY PAT growth and ROE
YoYProfitAfter Taxgrowth PATCAGR('96-'13) Return on Equity
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Consumerbasket - Earnings vs. Market Cap
PAT(Rs.billion) LHS MarketCap (Rs.billion) RHS
Market cap change = -46%
Market cap CAGR = -15.4%
PAT change = 65%
PAT CAGR = 14.7%
Market cap change = -17%
Market cap CAGR = -4.9%
PAT change = 54%
PAT CAGR = 12.6%
3. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
the following 3.7 years market capitalization declined 47% even as earnings grew 65%. A similar
pattern followed the 2006 peak in valuation. Conversely, from valuation troughs the increase in
market capitalization has been far in excess of earnings growth.
The bull thesis on consumer stocks also highlights the relative attractiveness of these stocks. The
argument is that most other sectors are facing significant headwinds and so the positive and
relatively more certain earnings growth trajectory of consumer companies deserves a high valuation
relative to the market. The graph below shows that while relative P/E valuation for the basket
versus the market is not yet at the peak reached in 1998-99, it is getting close and is well above the
median value and other interim peaks.
*Includes Sensex data till Dec 31, 1998 and Nifty data from then on
Source: Company Financials, Capital Line, BSE
Again, the more interesting conclusion flows from the following graph by juxtaposing relative
earnings with relative market capitalization. Following the four peaks in relative valuation
(highlighted by circles in the above graph) the consumer basket has underperformed the index over
the following months or years despite earnings growth being higher than the market.
*Includes Sensex data till Dec 31, 1998 and Nifty data from then on
Source: Company Financials, Capital Line, BSE
Given that valuation, both absolute and relative, are now close to historic peak levels, there seems
little investment merit in the consumer basket in aggregate. This is not the same as saying that stock
0.8
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2.8
3.3
Apr-96 Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
ConsumerBasket - P/E relative to Index*
Median = 1.5
0.5
1.0
2.0
4.0
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1.0
2.0
4.0
Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
Consumerbasket vs. Index* - Relative EPS and Relative Price
EPS of Consumer Basket vs. Index Priceof Consumer Basket vs. Index
4. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
prices will start declining from here on. Valuations could keep heading higher before they eventually
turn down. Paradoxically, higher stock prices are being driven by improving sentiment as reflected in
higher P/E multiples. However, higher prices today merely pull forward future returns, thus making
the investment case progressively weaker even as sentiment gets progressively stronger. This
observation, which follows from simple math, often gets ignored when investors are cheering a
certain theme and driving prices skyward.
Asset market turmoil – Impact of central bank actions
Federal Reserve Chairman Ben Bernanke’s speech on June 19 2013, following the two-day FOMC
(Federal Open Market Committee) meeting, sent asset markets globally into a tailspin. Consider the
moves that took place over the following week. The US dollar appreciated significantly, with the
representative DXY Index up 2.4%. The S&P500 Index declined 4.8%. The MSCI World Index,
representing global equity markets, fell 5%. The US 10-year Treasury bond yield moved up 42 basis
points, a 19% increase. Yields also spiked up across other fixed income categories globally. Gold and
Silver fell 6.7% and 10% respectively. Indian equities as represented by the Nifty Index, already down
5.8% from their recent peak, fell another 3.5%.
So what exactly did the FOMC minutes and the Chairman say to cause such a reaction? To
summarize, they essentially said that if the economy improves enough, they may choose to reduce
the rate of asset purchases (also referred to as tapering) starting as early as late 2013. The ongoing
QE (quantitative easing) program has increased the Federal Reserve’s balance sheet from $0.9
trillion in Sep 2008 to $3.5 trillion in July 2013, which is a 4x increase. Based on the current run rate
of $85 billion purchases per month the balance sheet will continue to grow at $1 trillion annually.
The graph above illustrates how equity markets have reacted favourably to the Fed’s QE program
over the last few years. The recent negative investor reaction to the mere possibility of a reduction
5. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
in the rate of increase of asset purchases (note that there is no talk of actually reducing the size of
the balance sheet) highlights how dependent asset markets have become on liquidity provided by
central banks as opposed to underlying fundamentals. The following graph highlights that reported
earnings for the S&P500 have actually been flat over the last two years, even as the Index continues
to move up and hit new highs.
Note: Consensus EPS used for June 2013 quarter; Closing price as of July 26 2013 is used as closing price for June 2013 quarter
Source: Standard & Poors; Yahoo Finance
Neither can positive earnings surprises be the reason for optimism among equity investors. The
following graph highlights that consensus forward earnings estimates2
have been consistently
getting downgraded over the last two years as expectations have been ahead of reality.
Source: Morgan Stanley
An important part of the recent Federal Reserve communication was that a reduction in the rate of
asset purchases would happen only if various economic indicators were robust and in-line with the
Fed’s projections for improving economic growth. If the forecasts prove to be accurate, investors
would not be wrong in concluding that tapering would indeed begin later in 2013. However,
2
Consensus estimates are for operating EPS, which is adjusted to exclude one-time items. Over the last 25 years
cumulative S&P operating earnings has exceeded actual reported earnings by 17%
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S&P 500 - Price vs. EPS
Trailing TwelveMonth EPS (RHS) Closing Price (LHS)
6. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
historical data highlighted in the graph below shows that economists are very poor at forecasting
accurately.
The Federal Reserve economists have proven to be no exception. In June 2009 they projected 2011
GDP growth at 4.2% and the actual figure turned out to be close to 2%. In June 2010 they projected
2012 GDP growth at 4% and the actual figure came in sub 2%. So it seems fair to be sceptical when
the same set of economists forecast a sharply improving economy from 2013 onwards...
...especially when economic indicators continue to drop and remain in a declining trend since 2010.
Source: John Hussman (www.hussmanfunds.com)
7. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
To summarize the discussion till now, the Fed’s balance sheet will continue growing but may grow at
a slower rate starting late 2013 if the economy shows sufficient improvement. However, it is not at
all clear that economic improvement is imminent and hence tapering may not happen any time
soon. This narrative throws up a critical question. When will the fed actually “normalize” policy and
reduce the size of its balance sheet to much lower levels relative to the size of the economy. In an
interview on 60 Minutes in December 2010, Scott Pelley interviewed Fed Chairman Ben Bernanke
and asked him whether he would be able to do the right thing at the right time3
:
Pelley: Can you act quickly enough to prevent inflation from getting out of control?
Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no
problem with raising rates, tightening monetary policy, slowing the economy, reducing
inflation, at the appropriate time. Now, that time is not now.
Pelley: You have what degree of confidence in your ability to control this?
Bernanke: One hundred percent.
Leaving aside the fact that the Chairman’s response reflects a startling degree of over confidence,
the statement that “we could raise interest rates in 15 minutes if we had to” is extremely misleading
to put it mildly. Consider the graph below courtesy John Hussman4
.
Quoting from John’s commentary “...the Fed has now pushed the size of the monetary base to over
20 cents per dollar of nominal GDP. We know from a century of data that short-term interest rates
are tightly linked to the monetary base...it should be evident that the Fed would have to
dramatically reduce its portfolio simply to raise interest rates by a fraction of one percent... The Fed
3
Sourced via Thoughts from the Frontline (June 15 2013) by Mauldin Economics
4
Weekly Market Comment (June 17 2013) at www.hussmanfunds.com
8. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
would have to reduce its portfolio by well over half to raise interest rates to 2%. So even if the Fed
was to completely terminate new purchases of Treasury securities, that action would not be expected
to raise short-term interest rates. This underscores the fact that reducing the pace of quantitative
easing is not the same thing as raising the Fed’s policy rates. But it should also underscore how far
the Fed’s policy has already gone, and how difficult it will be to normalize over time.” (emphasis
mine).
We have been highlighting for some time that policies of central banks pose significant risks to the
outlook for economic growth and asset markets. Even a hint of a slight reduction in the rate of
liquidity injection causes significant volatility in asset markets. So it is unclear how policy makers will
be able to normalize policy without causing complete upheaval in asset markets and the real
economy. Even the most avid optimist will concede that monetary policy cannot remain so easy
forever, so tightening is only a question of timing. We remain nervous about potential negative
outcomes despite, or perhaps because of, the supreme confidence of policy makers in their ability to
guide the economy and investors through this environment.
Portfolio positioning – No change
As of quarter end June 2013 we were 55% net long (70% long, 15% short), with 30% of the portfolio
in cash and equivalents (the short positions are via futures).
We estimate that the long positions in aggregate have about 65% upside to their intrinsic value
under base assumptions. Even under stress scenarios the aggregate intrinsic value is marginally
higher than current prices, indicating limited risk of permanent capital loss. For our short positions
we estimate base case intrinsic values 20-30% below current prices and believe that the stocks are
currently trading at optimistic estimates of intrinsic value.
With a reasonably large cash holding and short positions, the portfolio continues to be positioned to
limit the drawdown in case of a significant correction in equity markets. At the same time we own
securities that we believe are undervalued so that we are able to capture the upside from corporate
earnings growth over the coming years. While this strategy means that returns may be mediocre if
the broader equity markets continue to trade in a range, it does help us sleep better at night. We
continue to expect that at some point in the not so distant future we will have the opportunity to
deploy cash to buy additional securities at attractive prices, such that the portfolio’s prospective
return profile is enhanced without increasing risk.
Stocks in the portfolio – Some minor changes in position size
The portfolio composition has not changed much. We increased our position in Noida Toll Bridge
during the quarter as prices remained far below our estimate of value (refer to March 2012 and
March 2013 letters for investment rationale). Piramal Enterprises and Gold remain the largest
positions in the portfolio, followed by SunTV and Noida Toll Bridge. The other positions of roughly
equivalent size are Manugraph, Blue Star, and Thangamayil Jewellery. DB Corp remains a relatively
small position in the portfolio.
9. Avant Garde Wealth Management Pvt. Ltd.
Note: “Portfolio” refers to the weighted average of all client portfolios managed by us over the relevant time period. Any metrics such as
returns or portfolio weighting similarly refer to the weighted average of all portfolios. Individual clients portfolios may defer materially
from the blended “Portfolio” and clients should refer to their portfolio statements for details on their portfolios
SunTV is a reasonably large bet in the portfolio as the stock is up significantly from our purchase
price and we have so far not sold any shares. The investment thesis at the time of investment (refer
to the June 2012 letter) was that the company has a dominant media franchise whose earnings
power will not be hurt materially even though the promoter is now on the wrong side of the political
spectrum. The market seemed to believe otherwise and had pummelled the stock to all time low
valuations. So far the thesis seems to be playing out with FY12-13 EPS growth of 2% in a relatively
weak economic backdrop, and on track to grow at a faster rate in FY14. The Return on Equity
remained high at 27% in FY13 and the trajectory should be higher in the coming years. Despite
proven earnings resilience the stock remains undervalued as the political troubles of the promoter
are still in the limelight. At 21x trailing P/E the stock does not reflect the value of the franchise and
trades at a discount to its own history and relative to its peer Zee Entertainment. We remain
invested at current prices as the discount to fair value persists, even though the valuation gap is
much smaller than when we initially built our position.
Portfolio performance – A tough six months
From inception in June 2011 till June 2013 the portfolio is up 9.1% while our benchmark, the BSE500
index, is down 0.3%. This translates into a CAGR of 4.3% for the portfolio vs. -0.2% for the
benchmark.
Note: During this period average cash balance is 47% and average net long position is 43%; Figures up to March 31, 2013 have been audited by KPMG
Portfolio returns are much lower than we would like. Over the past six months the portfolio has
declined in-line with the market, which is a disappointing outcome as we normally expect to
outperform during periods of market weakness. Returns were particularly hit by significant price
declines in Manugraph, SunTV, Thangamayil, and Gold. Given the increased undervaluation of these
holdings we anticipate that the portfolio will fare relatively better in future periods of market
weakness. We continue to expect to deliver significantly higher annualized returns over a full bull-
bear market cycle.
Gaurav Jalan
June 27, 2013
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Cumulativeportfolio returns vs. index
NAV (pre-fee) BSE500 Index