Alpha-generating fund managers face off: Quick gains or long-term plays?

According to Subrahmanyam, who has seen various economic cycles such as the taper tantrum, the Nasdaq meltdown, etc., every new cycle springs a surprise. Even though an experienced investor may think that she has learnt to deal with such cycles successfully, she may tend to skip some of the basics.

This time around people were buying stocks randomly, and there were early warning signs (that a correction was due) in the kind of IPOs (initial public offers) and OFSs (offers for sale) that were coming to the market, with promoters selling their stake. While people did see this coming, the intensity of the correction has surprised them.
Only a few Nifty stocks were unaffected.

Subrahmanyam said that this time he was a little less worried because earlier downturns  were due to scams and also the banking sector was in a mess. This time the triggers are different, and the banking sector is much healthier.

Earnings focus

Jeswani, who had delivered 80 percent returns in 2024, said that it is not his stocks  that give him sleepless nights but his cash position, which is 20 percent of his portfolio. This is because he sees that as a missed opportunity. "The downside hereon may be 5 percent, but the upside for some stocks, if you make the right call, can be 100-200 percent," he said.

He explained that his strategy is earnings-focussed and a bull or bear market has little bearing on it since the time horizon is usually four quarters, not long term, like 10 years. The portfolio is changed not due to valuation concerns, but because of the change in the competitive intensity (which is a threat to earnings).

"This won't be a big year (in terms of returns) because we need low valuations and hefty earnings for that, and we have neither right now," added Jeswani.

Is a long-term strategy better? 

The question was asked of Murarka, who saw the lowest fall in returns in January (when the market saw a significant correction). While Jeswani and Subrahmanyam’s returns fell by 12 and 14 percent, respectively, over the month, Murarka’s fell only by 6 percent.

Murarka said that his fund does exactly the opposite of what Jeswani's does, i.e., it focuses on long-term investing with a time horizon of 5-10 years. "We don't take our cues from the market. We invest in businesses, we buy into them. The market might price or misprice these businesses, but we rely on our fundamental analysis," he said.

Responding to Jeswani's comment about getting sleepless nights because of his cash holdings, Murarka said that he doesn't get sleepless nights because their investing philosophy doesn't chase high returns, but instead focusses on long-term, sustainable, consistent returns that leverages the power of compounding.

He added that his approach to investing and his passion for running marathons are aligned, since both require a mindset that is long-term and consistent.

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