The Covid-19 pandemic has come as a blessing in disguise for the value investor. Exorbitant money printing by central banks coupled with break-the-bank fiscal stimulus by developed countries have made hitherto ignored sectors like metals, capital goods and the like the darlings of the market.
For veteran asset manager Aashish Somaiyaa, the tussle for market dominance between the value and growth investors will most likely be amusing. The chief executive of White Oak Capital has spent years honing his skills under value investor S Naren and growth investor like Raamdeo Agrawal, and yet he doesn’t believe any one style can define investing.
“I, personally, think it is not about any style being superior. What is important is that one should have a process in place before entering the stock market,” Somaiyaa told ETMarkets.com in an interview.
“Ultimately, the style a fund manager practises is juxtaposed on a particular market and macro context. When the macros shift and the market context changes, investing styles will go in and out of favour,” Somaiyaa, who completed 21 years in the industry this May, said.
Somaiyaa, and the portfolio management service he now heads, do not believe in bending the way the wind blows. For the former CEO of Motilal Oswal AMC, the middle path may well be the secret to consistency not only in one’s conviction but also in alpha generation.
“At White Oak, we do not corner ourselves into a particular style. There is no bias between value versus growth, defensives versus cyclicals, or low beta versus high beta. We run a very balanced portfolio for each of these macro-determined parameters, which influence market behaviour and impinge upon portfolio performance,” Somaiyaa said.
White Oak’s India Pioneer Fund has returned 26 per cent annualised since its inception two years ago, comfortably beating the BSE500’s 14 per cent gains, data from PMS AIF World showed. Yet, it has lagged some of its peers in terms of performance.
Somaiyaa’s conviction comes from his belief that his clients would want to bet on a horse that can be counted on in all weathers, instead of blowing hot and cold depending on stock market cycles.
He is not in the game of predicting macro-economic cycles. Ask him for his views on the US Federal Reserve or India’s macro-economy, and he humbly submits he doesn’t pretend he knows anything about them.
Ask him about cash flow, and he perks up. Somaiyaa is part of a growing band of Indian asset managers who are revolting against traditional valuation metrics like price-to-earnings. For White Oak and Somaiyaa, cash is supreme, not earnings per share.
“Our framework values a company for what it is, rather than bunching it all up, because capital is opportunistic and should be valued in one way, irrespective of sector or company and the operating company,” he said.
As Somaiyaa gears up to launch a full-service mutual fund house for White Oak in India, he is convinced that India and India Inc have entered a new cycle of prosperity much like the golden years of 2003-07. At the same time, he is convinced not many believe in this.
“Unfortunately, I think the bulk of our market is youngsters in the age group of 30-35 years, and they have never seen an economic cycle. For them, it has been an unfortunate series of false starts so far. So, one is scared to hope that this time it’s different,” said Somaiyaa.
