Coronavirus or not, this top midcap fund manager bets on consumers
Consumer-related stocks accounted for about a third of the fund’s $270 million in assets.
By Bloomberg | Updated:
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AU Small Finance Bank Ltd., the fund’s biggest holding, has more than doubled in the past year.
By Ronojoy Mazumdar
The coronavirus scare that sent stocks plunging is doing nothing to waver the confidence Akash Singhania has in his stocks. His big bet lies on India’s consumers.
“We are bullish on consumption,” said Singhania. He oversees Motilal Oswal AMC’s Midcap 30 Fund, which has beaten 93 per cent of peers in the past year, data compiled by Bloomberg show. “Most companies in our portfolio are gaining market share at the expense of smaller and unorganized players that face liquidity challenges.”
With India’s economic expansion at an almost seven-year low, Mumbai-based Singhania looks for consumer-linked companies whose earnings stand to increase even in a gloomy growth environment or that have high return on capital and low levels of debt. Those include lenders who help finance consumption as well as consumer-discretionary and staples shares, such as fast-food chain operator Jubilant Foodworks Ltd. and shoemaker Bata India Ltd.
Consumer-related stocks accounted for about a third of the fund’s $270 million in assets as of the end of January.
AU Small Finance Bank Ltd., the fund’s biggest holding, has more than doubled in the past year. It moved quickly to fill the space left by non-bank finance companies hit by a credit squeeze, Singhania said. Astral Poly Technik Ltd., which makes plumbing systems, is another of his favorites. Sales volume could grow 25 per cent in the coming quarter as it grabs market share from regional and unorganized rivals struggling to secure funds, its chief financial officer said in a call with analysts last month.
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Stocks have suffered recently as the coronavirus spread outside of China, raising concerns over its impact on the global economy and profit growth. The S&P BSE MidCap Index tumbled 7 per cent last week, matching the drop in the benchmark S&P BSE Sensex Index. The Motilal Oswal mid-cap fund fared a bit better, falling only 5 per cent.
Singhania sees the virus hit as a short-term hiccup that won’t affect earnings of the companies he owns. But if any of them fails to deliver strong profit growth, he’ll sell.
“If growth in profit-after-tax goes haywire -- below our target of 10 per cent-12 per cent -- nine times out of 10 that’s why we would sell a stock,” Singhania said.
Rate cuts won’t lead to pickup in consumer activity: Ray Dalio
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Reactions to the coronavirus will probably cause a big short-term economic decline followed by a rebound, says billionaire investor Ray Dalio. He, however, feels there won’t be a big sustained economic impact.
In his latest blog, he shared his thoughts on coronavirus and its impact on economy, market and investment. Here are the key highlights:
Reactions to the coronavirus will probably cause a big short-term economic decline followed by a rebound, says billionaire investor Ray Dalio. He, however, feels there won’t be a big sustained econom..
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History has shown that even big death tolls have been much bigger emotional affairs than sustained economic and market affairs. “My look into the Spanish flu case, which I’m treating as our worst-case scenario, conveys this view; so do the other cases,” he said.
History has shown that even big death tolls have been much bigger emotional affairs than sustained economic and market affairs. “My look into the Spanish flu case, which I’m treating as our worst-cas..
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The world is now leveraged long with a lot of cash still on the sidelines -- ie, most investors are long equities and other risky assets and the amount of leveraging that has taken place to support these positions has been large because low interest rates relative to expected returns on equities and the need to leverage up low returns to make them larger have led to this.
The world is now leveraged long with a lot of cash still on the sidelines -- ie, most investors are long equities and other risky assets and the amount of leveraging that has taken place to support t..
Read More
The actions taken to curtail business activities will certainly cut revenues until the virus and business activity reverse, which will lead to a rebound in revenue. That should (but won’t certainly) lead to V- or U-shaped financials for most companies. However, during the drop, the market impact on leveraged companies in the most severely affected economies will probably be significant.
The actions taken to curtail business activities will certainly cut revenues until the virus and business activity reverse, which will lead to a rebound in revenue. That should (but won’t certainly) ..
Read More
The markets will probably not distinguish well between those which can and cannot withstand well the temporary shock and will focus more on their temporary hit to revenues than they should and underweight the credit impact — eg, a company with plenty of cash and a big temporary economic hit will probably be exaggeratedly hit relative to one that is less economically hit but has a lot of short-term debt.
The markets will probably not distinguish well between those which can and cannot withstand well the temporary shock and will focus more on their temporary hit to revenues than they should and underw..
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It seems that this is one of those once in 100 years catastrophic events that annihilates those who provide insurance against it and those who don’t take insurance to protect themselves against it because they treat it as the exposed bet that they can take because it virtually never happens.
It seems that this is one of those once in 100 years catastrophic events that annihilates those who provide insurance against it and those who don’t take insurance to protect themselves against it be..
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Those who sold deep-out-of-the-money options planning to earn the premiums and cover their exposures through dynamic hedging if and when the prices get near in the money, etc. The markets are being, and will continue to be, affected by these sorts of market players getting squeezed and forced to make market moves because of cash-flow issues rather than because of thoughtful fundamental analysis.
Those who sold deep-out-of-the-money options planning to earn the premiums and cover their exposures through dynamic hedging if and when the prices get near in the money, etc. The markets are being, ..
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As far as central bank policies are concerned, interest-rate cuts and increased liquidity won’t lead to any material pickup in buying and activity from people who don’t want to go out and buy, though they can goose risky asset prices a bit at the cost of bringing rates closer to hitting ground zero.
As far as central bank policies are concerned, interest-rate cuts and increased liquidity won’t lead to any material pickup in buying and activity from people who don’t want to go out and buy, though..
Read More
The most important assets that you need to take good care of are you and your family. As with investing, you will imagine the worst-case scenario and protect yourself against it.
The most important assets that you need to take good care of are you and your family. As with investing, you will imagine the worst-case scenario and protect yourself against it.
