“The broader theme is that the capex cycle is coming back and industrials and capital goods stocks may do well,” says Varun Daga, Founder & Fund Manager, Girik Capital
If the starting point is today, what could be the return expectation range on a 3-5-year basis?
We did that exercise with our own fund and every time the market falls 10% to 15%, it opens up a lot of opportunities and the key question is going to be where do you allocate money? It is going to be a very stock picker’s market and if that is done well, one can easily make money in the 12-18% range but it will rely on how you pick stocks.
There is a holding of
in the portfolio and the Street seems to be rather unnerved by Adani’s entry in the 5G spectrum auction space. The stock price of Bharti Airtel is under a bit of pressure as Adani entry could lead to a potential round of disruption in the market. Are you worried?
It is too early to say because the news just flashed yesterday and these days the stocks react very fast but I do not think fundamentals have really changed. We have to wait and watch. We have to understand what businesses of the incumbents they can disrupt and the market always gives you time to react. There is no point in just reacting to the news. One needs to understand, get into the nitty-gritties of things and then take a call.
I would say it is still too early and we will have to wait and watch. But am I worried? Not really but we will have to see how it goes and we will take the appropriate actions if required.
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I have compared your holdings and the stocks you are holding with May versus the latest presentation that we have. I see you have increased your holding when it comes to Bharti Airtel but what also really struck out was the way you reacted when it comes to IT services. It seems you have sold a lot of IT in the last couple of weeks?
A good observation. We took cues from the whole meltdown in the US and IT was one of the leaders of the past rally, especially in the last two, two and a half years. I think a lot of these companies already had the best times in terms of earnings and a lot of rerating has happened. It had also become very over owned and it had become the darling of the market. So we thought that it is probably coming to an end. Still, these are great companies, earnings will still be decent but we have downgraded it significantly because we feel that the leadership which was there in the last three years, may not sustain for the coming years. I have also seen a change when it comes to Reliance; not so much but you have sold . Are you likely to continue to do that?
We just balanced it. It was a large position for us. We just balanced it. We just took a call because it had done well for us. We have been holding this stock for quite some time but we are still confident about the story and the view has not changed at all.
What is standing out for me is
. It is a great company, an expensive stock; has phenomenal engineering skill but is expensive, and are also not cheap. Now the general view in the market is that interest rates will move higher and the high PE stocks will get crushed but your holdings are not reflecting that. Explain why?
Absolutely. The PE multiples look elevated but one has to go beyond the PE multiples both in ABB and Blue Dart. I do not want to go into the specifics but the general thesis in ABB, which is a capital goods company, is we have not seen a capex cycle for such a long time.
The last time India was doing capex was in 2009-10-11. After that, we have seen a lull for almost 11-12 years. So there has been a clear shift with the capex cycle coming back and a lot of managements are all gearing up for a capex cycle. This could be very interesting in terms of the earnings acceleration that we could see over the next three to five years.
We like that theme. ABB being a leader, we have backed it but the broader theme is that the capex cycle is coming back and industrials and capital goods stocks may do well. The point of ABB and Hitachi being in our portfolio is really the capex theme.
On the other hand, Blue Dart is more of a company specific play. We have seen in the last many years because of many of the online guys and companies like Delhivery and other delivery companies have taken the pricing down substantially for many of these players but in the whole logistics sector, pricing is coming back and which is very interesting for a company and leader like Blue Dart because when that happens, you are playing in a level playing field and adding to that, growth has come back and there has been a lot of growth on ground and a lot of demand on ground. Some of these companies could surprise over the 3-5 years.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)