Sharing the secret of generating great returns over the past three years, Quant Mutual Fund CEO Sandeep Tandon has said he relied on being active, absolute and unconstrained in his investment style.
In an interview to CNBC-TV18, Tandon described himself as an opportunistic investor, willing to dive into neglected territories rather than just going with the momentum.
Tandon said this decade will also mark a shift in investing styles, as money managers who are more active in their approach are likely to taste more success than their predecessors who focussed on passive investing.
"We believe that this decade belongs to active money managers, unlike the past 10 years which were dominated by passive investing," he said.
Here are a few snippets from Tandon’s approach to investments:
Active and always on the lookout
Tandon's mantra for investing revolves around being active, absolute and unconstrained. Being active here refers to managing many funds dynamically. "While the industry mostly offers passive products, we are highly active in our approach," he said.
He is also focussed on the concept of absolute returns. While others may look to achieve a certain IRR (internal rate of return) within a specific timeframe, Tandon strives to deliver positive performance regardless of market conditions.
"We approach it like managing a treasury income. Just like how a corporate entity expects their treasury returns to be positive at the end of the quarter, we too aim for positive returns," Tandon said.
To this end, he employs a multi-dimensional approach, considering the long, medium short and near-term views, hedge calls, cash calls and special situations. "By managing all these risks simultaneously, we not only protect our portfolio but also generate alpha," he said.
Tandon's investment thesis revolves around an unconstrained style. He does not limit himself to market caps but rather ventures out to seek opportunities.
"We are opportunistic investors and focus on risk-adjusted opportunities. We invest wherever we see the potential for better returns while managing risks effectively," he told Moneycontrol.
Diamonds in the rough
Tandon also said he is not momentum-driven. His strategy involves finding pockets of long-term potential, which have been neglected by others.
"Our strategy involves identifying stocks and sectors that are trading at extreme inflection points. These points can be characterised by either a euphoric move where a stock or sector peaks, or a capitulated move where it hits its lowest point," he highlighted.
Taking advantage of such shifts, he manoeuvres from pockets in the market that are getting a lot of attention to the neglected to capitalise on opportunities arising from a turnaround.
Also Read | Valuations alone do not provide all answers: Sandeep Tandon explains his churn strategy
For instance, in the early days of COVID the pharmaceutical sector was still largely being ignored. He seized the opportunity and built significant exposure in this sector. A similar case happened with the metals sector when it faced concerns about China and a rally in the dollar index.
"The advantage of hitting extreme inflection points is that it provides downside protection and limits the upside when stocks reach the most admired territory. When a stock or sector is in a neglected zone, the potential for significant upside becomes apparent," he said.
Tandon does warn that identifying and capitalising on these points is not easy, especially in a bull market where neglected zones are scarce.
Sectoral view
Tandon believes that the pharma sector is still in the early stages of its cycle and has the potential to go on for a few more years.
As for public sector enterprises, he said they have yet to reach the most admired zone, whereas public sector banks still have some momentum compared to their private sector counterparts.
The metals and mining sector is grossly under-owned and neglected, which makes it a promising prospect for a significant upside.
Also Read | Reserve 10-20% capital for experimentation: Quant’s Sandeep Tandon’s advice to retail investors
Disclaimer: The views and investment tips expressed by investment 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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
