Series 73 – Understanding Cycles and Importance of ROE

A synopsis of the highlights of our quarterly call was provided last week, and the call recording was made available for your listening. This week, we’re taking a brief excerpt from the quarterly call that covers our process for validating cycles and portfolio construction decisions.

How can we be sure that we are selecting the right sectors in the right cycles? An important aspect of identifying a strong cycle is the accretive effect of RoE on market leaders in the cycle. We could say that a strong cycle is one where more than 75% of the companies in the sector show an expanding RoE. This also suggests that the sector is experiencing a broad-based growth and not isolated success stories of businesses.

Below we have highlighted a chart which shows the 10-year trend of ROE’s of favourable sectors this cycle and how they are expanding. You would see ITUS positioned towards sectors that are favourable in this cycle like Auto, Auto Components, Oil & Gas, and Telecom, which have demonstrated ROE expansion. Typically, higher ROE companies tend to perform better during an upcycle; more importantly, higher ROE companies tend to protect the portfolio during downcycles.

We are sending you the link to listen to our Quarterly Call –

Itus Capital 2Q Investor Call 2024 – ITUS Capital

We will come back with more interesting information on the portfolio and outlook on the market in the following weeks.

Also, we keep writing to you about our SIP program that presents investors with a convenient avenue to regularly infuse capital into the client’s portfolios. Feel free to check out the benefits for your clients. If you need more info, reach out to your dedicated relationship manager at [email protected].

These weekly episodes are now available in our website for your quick read and you may access the same in the below link.

Weekly Enlightenment Archives – ITUS Capital