The first tip worth sharing with every investor is that the investment business is not an easy business and there is no recipe for quick bucks to be made, Sameer Kaul, MD & CEO, TrustPlutus Wealth Managers (India), said in an interview with Moneycontrol’s Kshitij Anand.
Q) How would you describe the last six months of 2020 in one word?
A) They say that equity investments are not for the faint-hearted and the past six months have provided testimony to the thought. Since September 2018, investors, as well as capital market participants, have seen one crisis after another and just when you think it cannot get any worse, there is a new shock to the system.
The Indian economy was already slowing down and faces an uphill climb given the limited fiscal space available for generating fresh stimulus.
Q) Where do you see markets, earnings heading for the rest of 2020? Your outlook for the markets.
A) As we had stated earlier, we see this financial year to be very challenging for the economy as a whole. There is little confidence in consumers around discretionary expenditure and such concerns are placing a lid on demand that will continue to be weak this year.
Demand is a function of consumption and consumption is driven by confidence in employment/business prospects. So unless the prospects improve, demand is not likely to come back in a hurry.
Q) In the first six months of 2020 we saw plenty of buybacks as well as companies announcing delisting. What is the rationale behind it, and do you think this trend would extend in the next six months as well?
A) The rationale for a buyback is largely driven by valuations; if the promoters think that the valuation is cheap, they can offer to minority shareholders a buyback and the shareholders can decide to tender their shares.
As of now, very few companies have cash on their balance sheet outside of what they may need in their business and hence one may not see many instances of buybacks in the next few months
Q) Which sectors are likely to turn out to be leaders and laggards in the next six months?
A) We advise on two long-only portfolios where we have concentrated positions on select private banks and NBFC’s, consumer staple and discretionary companies, domestic and MNC pharma, gas utilities, life insurance companies, and some conglomerates.
Other than real estate, where we do not have any exposure, we like established companies in all other sectors that can generate free cash flow, and their returns on equity are above acceptable thresholds with little or no leverage.
Q) Many new investors joined the party on D-Street in the first six months to start their journey of becoming a millionaire if they remain invested for the long term. But, as we head into the next six months – which are the survival tips you would like to share with them to keep them afloat amid volatility?
A) The first tip worth sharing with every investor is that the investment business is not an easy business and there is no recipe for quick bucks to be made.
Secondly, investors will make mistakes and they must learn from their mistakes.
Thirdly, all investments should be made in such a way that if the investor wants liquidity, the liquidity can be created at short notice.
Fourthly, investors should only invest in instruments where they understand the risks and the returns. Investors should shun leverage and only invest what is their own capital.
Last but not the least, investors should review their portfolios periodically and assess the performance of the portfolio.
Q) Gold hit a fresh record high in the week gone by. Do you think it could again outperform equities in 2020? What is your outlook on the yellow metal for the next six-12 months?
A) We have been bullish on gold since early 2019. We believe that inflation will rear its head eventually and with all the money printing going on in the world, the currencies will weaken and gold will Be left as a hedge against inflation. We advise clients to have a five percent allocation to gold in their portfolios
Q) You key 3-5 stock recommendations (value picks) to investors for 1-year perspective?
A) We would recommend our Portfolio strategy – Plutus Legacy; focused on investing in businesses with established leadership, operating in industries with a large addressable opportunity that presents an opportunity for sustainable, profitable growth. This is a portfolio comprising Large Cap stocks.
Plutus Opportunities is a strategy focused on investing in established businesses operating in industries with large addressable opportunities that present an opportunity for profitable growth. The portfolio predominantly comprises of large-cap stocks with some exposure to high-quality mid-cap names.
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