PMS Bazaar recently organised a webinar featuring Arum Subrahmanyam, Founder and Managing Partner, of Ampersand Capital. Here is a summarised version

The webinar titled “Uncovering High Growth Opportunities as Market Scales New Height,” featured Arun Subrahmanyam, Founder and Managing Partner, Ampersand Capital who shared insights on Ampersand Capital's investment philosophy, their multi-cap fund, and market outlook. He also covered other pointers including various aspects of investing, portfolio management, and emerging trends.

Ampersand Capital's investment philosophy and strategy 

Ampersand's multi-cap scheme is designed for growth and offers investors liquidity and tax benefits. It stands out for being open-ended, unlike many funds launched in 2017, which were closed-ended. The fund includes a mix of large, mid, and small-cap stocks. Additionally, as an Alternative Investment Fund (AIF), returns are tax-free for investors.

The company's core investment philosophy revolves around "buying the right stocks at the right time and in the right quantity". This involves: 

• Selecting companies with strong management, operating in attractive markets with growth potential

• Timing investments to buy at the bottom of market cycles and exit near the peak 

• Optimising investment size to balance expected returns with risks

Market view and case studies

Ampersand prioritised a shallow rate cut, viewing it as beneficial for market stability. While acknowledging the potential impact of US elections and the Federal Reserve’s actions on global markets, Subrahmanyam emphasised the importance of focusing on economic factors and market fundamentals. He cautioned against relying heavily on election polls.

The fund favours large-cap stocks, particularly those that have transitioned from mid-cap status, indicating high growth potential. Trent, a recent addition to the Nifty 50, exemplified this strategy. Subrahmanyam highlighted their investment in Trent during the COVID-19 pandemic, capitalising on the reopening theme and the company's expansion plans, which led to remarkable returns. 

Another key holding is Zomato, a company that has garnered significant investor interest. Subrahmanyam emphasised the fund’s strategic entry into Zomato, driven by the company's clear business strategy, growth plans, and successful expansion into new areas like quick commerce and ticketing. While acknowledging Zomato's potential to become a multi-bagger, he explained the importance of a long-term investment horizon.

Investing Focus: Building a resilient portfolio 

While categorised as a multi-cap fund, Ampersand avoids investing in micro-cap companies due to factors like management track records, liquidity concerns, and inherent risks. The fund maintains a balance across small, mid, and large-cap stocks. Typically the fund has allocation of 40% towards large cap, 40% in mid cap, and 20% small cap, with flexibility based on market performance.

He also stated that the fund generally avoids investing in Public Sector Undertakings (PSUs) and pure commodity companies, favouring private companies, particularly those aligned with themes like energy transition or defence. While recognising the past value proposition of public sector banks, Subrahmanyam expressed his preference towards private sector banks due to their growth potential and more attractive valuations. However, the fund invests in non-lending financial companies, like wealth management companies and asset managers.

Subrahmanyam acknowledged the complexities of valuing new-age companies like Zomato due to the lack of benchmarks. Such valuations relied on assessing potential market opportunities and growth prospects, unlike traditional companies with established track records and historical data.

When to invest? 

He advised against timing the market and recommended staying invested, adding more during dips if possible. He highlighted India's favourable macroeconomic conditions, stable political environment, and healthy corporate balance sheets as factors that make the market investment-worthy. He emphasised the importance of seizing opportunities and not postponing investment decisions. 

Subrahmanyam acknowledged the scarcity of traditional value stocks in the current market, leading to a preference for growth stocks bought at reasonable valuations. He emphasised adjusting strategies based on market corrections. 

He anticipated a stronger second half of the year for India, driven by government spending and favourable monsoon conditions, despite challenges faced in the first half. Subrahmanyam highlighted his philosophy of timing investments based on business cycles, seeking opportunities in sectors or companies at the bottom of their cycles. 

He provided an example of exiting a railway company after significant gains, even though the company had strong long-term prospects, demonstrating his approach to managing investments based on market conditions.

Market outlook 

Subrahmanyam maintained a cautiously optimistic outlook for the Indian equity market over the next 5 to 10 years, acknowledging historical challenges but highlighting the relatively favourable current conditions compared to global scenarios. He stressed the importance of a long-term perspective for potential opportunities. He also shared how the fund has navigated periods of underperformance, citing adjustments made in 2022, including reducing exposure to IT stocks and shifting to better-performing industries. 

Sector views

Subrahmanyam valued consistency in returns and a robust methodology for capital allocation, considering it a significant milestone for Ampersand Capital. He believed that consumption trends, driven by increasing affluence and premiumisation in India, will continue to play a vital role in shaping long-term investment strategies. He remained optimistic about the pharmaceutical and IT sectors, acknowledging their structural importance and cyclicality. He maintained a clear preference for growth investing, aligning with his investment philosophy and the potential it offers.

You can watch the detailed video of this webinar from the video link appended below. Arun Subrahmanyam covered in-depth and answered questions from the audience towards the end of the session.

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Disclaimer: The stocks mentioned in this blog are for educational purposes only. This blog does not constitute financial advice. Please consult with a qualified financial advisor before making any investment decisions