Series 10 – Key Takeaways of Q1’ 2023 Investor Call

1. Key takeaways from our previous quarterly call in December 2022 (1:28 minutes):
   1. While portfolio fundamentals are strong, valuation and liquidity are not.
   2. Risk-reward is on the downside, if we get it right, we will deploy capital aggressively.
   3. Expectation of volatility in 2023, which can be used as an opportunity to buy businesses.
2. Snapshot of our portfolio performance since inception in January 2017 to March 2023 (4:26 minutes):

2. 1. SEBI mandates PMS to choose one of three benchmarks; ours is benchmarked against Nifty 50, the best-performing index in the country.
   2. Rs. 1 crore invested in our fund would be worth Rs. 2.85 crores today, compared to Rs. 2.10 crores in Nifty (IRR of 18.25% against 12.8% on the benchmark).

3. What benchmark means to us (5:58 minutes):

3. 1. We have analysed ITUS portfolio and Nifty.
   2. Emphasized that we are active managers and do not track the index at any point.
   3. Our performance is measured against the index over a three-year horizon.
   4. We are not buy-and-hold investors; our churn rate is 20% YoY.

4. Highlighting our three-year rolling returns (8:38 minutes):

4. 1. We have consistently outperformed the index over a three-year period.
   2. Importance of capital calls in creating alpha in the portfolio.
   3. Health check of our portfolio

5. Discussion on measuring companies’ pricing power through gross margins (11:25 minutes):

5. 1. Gross margins are used as a measure of pricing power.
   2. We prefer companies that can maintain or increase their gross margins.

6. Our rationale for adding IndusInd Bank to our portfolio and our outlook on the bank for the next three years (13:50 minutes).
7. Explanation of why we maintain cash, the difference between investing in mutual funds and ITUS, and why we do not invest if valuations are not in our favour (12:14 minutes):

7. 1. We do not have a model portfolio.
   2. We differentiate ourselves from mutual funds.
   3. We do not invest if valuations are not favourable.
   4. Emphasis of why we do capital calls during bear markets

8. Our Portfolio Level IRR expectations

8. 1. Valuation represents a range of outcomes in bear, base, and bull case scenarios

9. Sectorial earnings update- IT and Auto (30:34 Minutes)
10. Why we continue to be Cautious on the US market this cycle- because the risk reward is not favourable (34:40 Minutes)
11. What is the outlook on India (37:44 Minutes)
12. Valuation Comparisons with rest of the world (40:15 Minutes)
13. Our View on Inflation (40:40 Minutes)
14. Our Portfolio Expectation–

14. 1. We are growth investors
    2. We look at buying at the right valuation
    3. We want to be long term Owners of Businesses with a focus on Promoter/Management Quality
    4. We expect to outperform Nifty in 3 Year cycles
    5. We will be fully invested only when the portfolio IRR can be closer to 20%

Attached below is the link of the recording. You may forward the same to the clients too.

https://youtu.be/TKQeDY2qQfA

 

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Weekly Enlightenment Archives – ITUS Capital

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