Articles
Quarterly Investor Calls
ITUS Long & Short
ITUS Snippets
Articles
Quarterly Investor Calls
ITUS Long & Short
ITUS Snippets
by Vidya Vydianathan
August 30, 2024
Investing in growth in the public markets
Study our investing style and process at length
Owner's Manual
We are a fiduciary of your capital. Your understanding of what we do and how we will approach it is a critical element in enabling us to attain our goal. The Owners Manual helps achieve this....
A brief from our quarterly letter- Last week we covered a topic on our Quarterly letter that talked about the GDP growth and market valuations in India and our go-to levers in portfolio construction in an inflationary market. This week we would like to highlight the brief update, a snapshot of our quarterly letter, which speaks about sectors of growth.
To read the complete letter please click on the below link –
Itus Capital 1Q Investor Letter – 2024
Talking previous cycles (2010-2020), Sectors like FMCG, Consumer, and Banking exhibited structural growth and margin expansion (2010-2020). They not only grew at a nominal 13% but also consistently protected or expanded their profit margins. Despite the GDP growing at a modest 3.6%, these sectors commanded significantly higher valuations due to their relatively higher growth rates. For instance, the FMCG sector’s valuation multiple increased from 28 in 2010 to a TTM multiple of 72 in 2020. Focusing solely on valuations would have led investors to miss the bigger picture of market microstructure and growth and could have resulted in poor returns.
Current Cycle Characteristics: In the present cycle, similar characteristics of growth and margins are observed in GDP-facing sectors. However, valuations are not cheap, especially from a 10-year historical perspective. The critical question to consider is whether the earnings growth in these sectors is sustainable. Monitoring this aspect is essential. Unlike the previous cycle, companies in these sectors are expected to have better pricing power to protect themselves. This factor was missing in the 2010-2020 cycle1. We continue to position the portfolio towards the sectors that are beneficiaries of this cycle. We will keep monitoring their margins and pricing power.
The quarterly letter will detail the sector allocation of the portfolio versus the benchmark and also our returns profile and portfolio health.
Also, we keep writing to you about our SIP program that presents investors with a convenient avenue to regularly infuse capital into their 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.