Lasting financial success not fleeting moments of greatness, Pankaj Tibrewal on his investment mantra

Tibrewal will be moving on from his position at Kotak AMC after 14 years to start his own independent firm.

Pankaj Tibrewal, who leaves Kotak Mutual Fund after 14 years, has said while investing, it is essential to focus on earnings capacity of the company rather than the earnings itself.

Sharing investment insights in his farewell note, Tiberwal, who plans to launch his own fund, said "One of the most important learnings over the last many years has been to invest in businesses which can generate superior returns on capital employed over sustainable periods and growth, which enables it to reinvest the cash flows back in the business at higher returns. This leads to compounding of the value of the business and resulting stock price."

Another important metric for a stock is the incremental change, either positive or negative.

The outgoing senior executive vice-president and fund manager said another learning was finding where one can make 2x-3x returns in the next 12-24 months, invert that and find situations where you can’t lose capital over the next few years.

Also read: Senior fund manager Pankaj Tibrewal quits Kotak Mutual Fund to start own fund  

These are usually anti-fragile companies that gains from disorder, he said. It is in these companies that he found the next compounders and multi-baggers.

In the Emerging Fund, for instance, the multi baggers with returns greater than 10x were around 18 percent and in the Small Cap Fund around 9 percent.

On the other hand, multi baggers with returns greater than 2 x but less than 10x were around 46 percent for both Small Cap Fund and the Emerging Fund.

Also read: Investing insights from a manager whose assets grew from Rs 113 crore to Rs 36,000 crore

At Kotak, Tibrewal said, an important investment philosophy has been consistency and protection over the pursuit of isolated greatness in any year.

In his decades of experience managing public market funds, Tibrewal said the "quest for top-decile performance every year is not just challenging but, frankly, an imprudent strategy". Instead, they follow a more measured approach where they focused on steadily achieving slightly better-than-average performance year after year while ensuring their relative position within the top two quartiles.

"This approach isn't about wild swings or chasing glory; it's about delivering stable, reliable results over time," he said.

Making fewer mistakes and avoiding big losers has to be the principle that "forms the bedrock of consistent, long-term performance”. While it could mean there would be moments when those taking bigger risks might outpace them, the veteran fund manager said their faith in "the steady pursuit of performance just above the average" actes as a protective shield during challenging times.

"We are dedicated to lasting financial success, not fleeting moments of greatness," he said.

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