Investing as a marathon

We wrote the following note to our subscribers

We are in the middle of the earning season. I wanted to share what we are seeing and how we are thinking about the portfolio.

The overall results have been patchy with single digit topline and profit growth for several companies. There are sub-sectors which have shown better performance, some of which we hold in our portfolio

Private sector banks/NBFC : This segment has shown mid teens (15-20%) growth in topline and profits. As the rate cycle turns, it should help the NIM in case of banks which have a strong liability profile. We have two positions in this segment

PSU banks: Several PSU banks such as Union bank, PSB bank have shown decent results

Healthcare/Diagnostics space: Several companies in the diagnostics space have delivered good performance. These companies are 100% domestic and have no impact from Geopolitical issues. Our holding in this space has delivered good results

Jewelery: Companies in this space have posted high growth driven by gold prices. Kalyan jewelers had 37% growth in sales and profit. Titan company posted around 19% growth in sales. Also the continued rise in price could impact the demand for gold in time

Hotels: This segment continues to perform well with an increasing ARR driven by increasing demand supply gap. Demand continues to outpace supply.

Pharma/CDMO space: The long term trend of outsourcing research, development and manufacturing of NCE continues. This trend is similar to the IT services business which leverages the capability and cost arbitrage across countries. We hold a few positions in this space

Diversified without concentration

We cap the size of our positions at 5% and around 15% for any sector. This allows us to manage risk.

At the same time, we are also diversified across sectors. The upside is that some part of our portfolio is always doing well. The flip side is that some parts of the portfolio is also doing badly. That is the point of diversification

If your portfolio is doing too well at a point of time, then your diversification is too low. There is nothing good or bad about it – it’s a personal risk preference

As we have shared in the past, we prefer above average returns with below average risk. That means we will never have mind blowing results, but then we will also avoid stomach churning losses

For us investing is a 20+ year marathon. If we want to be around doing this in 2045, then its important to keep our blood pressure low and sleep well. An above average results for a very long time, will work wonders as our past record shows