We continue to stick to our investment philosophy to invest in superior and reasonably-valued businesses and hold them till the business fundamentals confirm to our thesis, Sharad Pachisiya, CEO at SageOne Investment Advisors LLP, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q) Latest microdata suggests some green shoots. What are your views?
A) After a dismal micro-data in the last 2 quarters owing to the COVID-19 impact, the Q2 FY21 micro-data (high-frequency indicators like auto sales, freight traffic, GST collections, & capacity utilisation) has given some positive indication that the economy activity is trying to come back in pockets.
However, the credit environment and offtake is yet to see some encouraging signs which is the backbone of the economy.
Unless the credit offtake improves, it is difficult to extrapolate the economy's normalcy and growth. From an investment perspective, one should stick to owning quality businesses that are less correlated to the economy, become all the more stronger, larger, and resilient in COVID times.
One should avoid going down the quality curve just because a company is available cheap.
Q) A little about yourself – at what age you fell in love with equities or it just happened? A brief background of your education and work experience?
A) Born in a Marwari business family, I grew up in Kolkata where I did my schooling (Birla High School, 1988 -2000) and graduation in commerce (St. Xavier’s College, 2000 -2003).
I also contribute to the famous cult of Kal – Madu - St. Xavier’s. I followed my deep interest in finance and completed CFA (MS Finance) course of ICFAI, Hyderabad along with my graduation.
I am also an MBA from NMIMS, Mumbai (2004 -2006). The real start to my professional career began at Edelweiss Financial Services (in 2007) investment banking division.
My exposure & learning on Indian capital markets was immense right from the start. In the process of working on ECM origination and deals (IPOs, QIPs etc.), I fell in love with Indian equity markets.
In 2010, I responded to my calling and made a lateral move to the direct equity division of Edelweiss Private Wealth Management.
Here, I went on to build and head a differentiated direct equity platform (Professional Investors Desk) for our clients – Proprietary funds, Investment Managers, Family Offices.
I was fortunate to cater to and build relations with the evolved and smartest equity brains in the country. In 2019, after serving the organisation for 12 years, I got the opportunity to spearhead SageOne Investment Managers and work full time with Samit Vartak (Founder & CIO) whom I have known closely for over 10 years.
Q) A brief overview of the funds managed by SageOne?
A) Since Inception (2012), our core and passion is to identify high growth businesses available at reasonable valuations. We identify such companies predominantly in mid/small/micro-cap space (Rs 500 cr to Rs 30,000 cr market-cap range).
There is an active monitoring of portfolio companies by our investment management team. We hold on these businesses through our actively managed portfolios- SCP, SDP, and SSP (details available on the SageOne website).
All the portfolios have delivered significant alpha to relevant benchmarks (Nifty Mid Cap 100, Nifty Small Cap 100) consistently across time periods beyond 1-year and especially during turbulent market cycles.
Recently, we also launched our passively managed Large-Cap portfolio (SLP) to complete our offering across market-caps.
We strongly believe this portfolio of the best 16 businesses (identified from top 100 companies by market cap) is a superior alternative to clients’ allocation in ETFs, Large Cap MFs and actively managed Large Cap PMSs, both in terms of cost and returns.
Standing today, we manage or advice ~ Rs 1,100 cr across our long-only portfolios through our SEBI registered PMS/AIF structure.
Q) SageOne was named India's topmost wealth creator for the last decade. What is the investment philosophy at SageOne?
A) At SageOne, we always strive to build and maintain a portfolio of superior businesses with high earnings growth (20%+ CAGR) available at a cheap or fair valuation.
Earnings growth is the key driver to portfolio returns in the long run. When you look at a business and if you get a feeling “I wish I owned this business”, we look for those kinds of businesses.
Investing in the right sectors and leaders within those sectors with long term competitive advantage is very crucial for superior long-term wealth creation.
This requires an in-depth understanding of the industry dynamics and business drivers to pick the right sectors and companies.
Our years of rigorous and disciplined investing approach helped us deliver superior returns for our investors. Our flagship SageOne Core Portfolio (SCP) has been recognised as the best performing fund of the last decade (24.7% CAGR) across all Indian equity-focused Mutual Funds and Portfolio Management Services (PMS) across categories by performance aggregator PMS AIF World.
Q) Has your investment philosophy changed after COVID-19 as it has changed the way investments are being done?
A) In the business of investment management, a disciplined approach to investing and operating within the ‘circle of competence’ is of utmost importance.
At SageOne, we continue to stick to our investment philosophy to invest in superior and reasonably valued businesses and holding them till the business fundamentals confirming our thesis.
This is what we understand best and it has worked for us across market cycles. The COVID-19 event has helped us sharpen our investing framework and made us more agile.
Q) Which are the key themes SageOne has identified for wealth creation?
A) SageOne has a proven track record of identifying and owning resilient B to B businesses meeting our investment parameters. We were one of the early identifiers of the contract manufacturing and export theme across auto, chemical, and pharma space.
We are invested in sectors & companies which should continue to benefit significantly from the emerging themes in India - export-led opportunities, contract manufacturing, import-substitution, consolidation.
We also believe that financialization of savings will grow exponentially in India and therefore have exposure in some niche financial services leaders.
Q) What is the vision you have for SageOne any new products lined up in the near future?
A) Standing today, SageOne has a complete banquet of offering for clients’ long term investment needs in large Cap, Mid/Small/Micro-Cap.
We will continue to focus and manage these portfolios for the foreseeable future and generate superior returns for our investors. SageOne and Samit Vartak over the years have gained a very respectable position in the investor community.
Every team member of SageOne endeavours and contributes to maintain our lineage as a client-centric organisation, high on integrity, and one the most entrusted advisors to our investors.
Q) What are the investment mantras which investors should follow while making a buy or sell decision?
A) Investors should only buy into businesses they are able to understand deeply. Always prefer the sequence of great business fundamentals, reasonable valuations in your buy decision making and not the other way around.
One should refrain from buying into borrowed conviction or consensus. Investors should stay invested for the long-term and in businesses dispassionately without any biases or emotions.
Selling decisions should not be driven by greed or fear rather only when the business fundamentals have deteriorated or the investment hypothesis has not materialised.
If one doesn’t have the above skills or bandwidth, I would recommend them to allocate their investable surplus with specialists like MFs or PMS’ wherever they find their comfort in.
Q) The first trade which you remember? And, any trade which went sideways for you?
A) I have never been good at trading neither I have the skills :). I firmly believe in the long term (3 to 5 years) investments and the power of compounding.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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