What is Pankaj Tibrewal's Gorilla to King Kong strategy in stock selection?

A seasoned fund manager for more than 18 years, Tibrewal began his career as a credit analyst. He was with PNB Asset Management before joining Kotak Mutual in 2010.

When it comes to portfolio construction, Kotak Mutual Fund's Pankaj Tibrewal says that it is crucial to aim for a portfolio that can withstand  significant drawdowns and avoid permanent capital losses. In a note, as he moves on from his role at Kotak after 14 years, Tibrewal said that while he is still mastering the art of portfolio construction, his preferred approach is creating a diversified portfolio - the "Gorilla to King Kong Strategy."

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

Often, Tibrewal observed that during different market cycles such as the IT boom,  or  as a result of the allure of high PE and low-quality stocks, investors tend to become captivated by the prevailing theme and overlook associated risks.  But "when the music stops, the aftermath can be painful," he says.

To avoid such a situation, Tibrewal says that his philosophy involves investing in a diversified basket of 50-60 industry leading franchise names, aka the Gorillas, with the expectation that some will eventually evolve into large mega caps aka the King Kongs.

While managing public funds and constructing portfolios, he says that one needs to keep certain principles in mind such as  avoiding extreme portfolio allocations and monitoring sector/stock weights relative to the benchmark. He also suggest that one should prioritise valuation considerations and also refrain from chasing momentum or getting carried away by market narratives.

As a fund manager, Tibrewal also says that one should stay closely attuned to earnings capacity and earnings growth trends.

A seasoned fund manager for more than 18 years, Tibrewal began his career as a credit analyst. He was with PNB Asset Management before joining Kotak Mutual in 2010.

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