At White Oak Capital, Aashish Somaiyaa says, it is always a stock specific trade and that they have had significant overweight to Pharma in their portfolios for over 2 years now.
"It's best that investors study the issue (IPO) or seek appropriate advice and become investors intentionally rather than unintentionally," said Aashish Somaiyaa.
Stock markets in recent months have seen a flurry of initial public offerings (IPO) and a few more could be in the offing before the year ends. While some IPOs have helped investors pocket healthy gains, some have seen abysmal listing and then recovered losses. In such a scenario it’s best that investors study the issue or seek appropriate advice and become investors intentionally rather than unintentionally, said Aashish Somaiyaa, CEO – White Oak Capital in an interview with Kshitij Bhargava of Financial Express Online. Aashish Somaiyaa, who recently took over his new position, also shared some advice for retail investors from his two-decade long experience. Here are the edited excerpts.
We have seen a lot of IPOs in the recent months and there could be a few more in the pipeline. What is your word of advice to small investors, be in it for listing gains or for the long haul?
When markets go through prolonged indifferent phases good companies and promoters which plan to access markets also get blocked out. When normalcy is returning and the landscape becomes slightly conducive in the early days it’s only the best companies that imbue confidence in investors are able to access markets and raise capital. The big mistakes happen towards the end of the party and not when the party begins. Buying for listing gains is more a technical calculation; a lot of times when buying for listing gains goes wrong, those buyers become investors. It’s best that investors study the issue or seek appropriate advice and become investors intentionally rather than unintentionally.
Stock markets are also witnessing increased participation from retail investors now, if you could give them some advice out of your experience, what would it be?
Avoid recency bias — don’t extrapolate recent experience — good or bad — into the future and don’t jump to conclusions. We human beings love closure after every minor market event — we love to judge and pronounce a verdict and act on good or bad, black or white, right or wrong. Equity is a journey, there are no permanent conclusions. Same way, there is no good or bad, black or white, right or wrong. There is only context and perspective and one needs to stay put instead of demanding for conclusions and judgements at frequent intervals. Keep observing and keep evolving. Secondly, creating wealth in equities is a lot about discipline and faith. I am sure our investors know this. But I see that a lot of investors show discipline and faith when NAVs and stock prices are going up. Actually, discipline and faith is needed when NAVs and stocks prices are headed down or stay down for some time.
Whoever wins in the US Elections, what should investors watch out for?
In 2016 markets fell because Mr Trump won the election, now I am told markets will tank because Mr Trump may lose the election. That tells you nothing or well maybe actually that tells you a lot about what investors should or shouldn’t fear. Either way, my sense is that a rotation is around the corner and India and select emerging markets basis individual fundamentals are likely to witness huge flows in coming times.
Now, we see that the fear of the virus has come down and markets are back to pre-virus levels but the movement was so far range-bound, what do you think equities need as a trigger now?
I think after many years we are now seeing a quarter as result season pans out (Q2FY21) where the analysts and the street estimates are way behind actual corporate performance. Expecting gains from markets is not really about triggers, we need the economy to get back on track and we need companies to deliver. I believe we are finally entering a new economic cycle. There is a lot of disbelief given that we have had a few false starts. I am not in the disbelief camp.
Pharma space has been talked about a lot in recent months and their performance has not disappointed, where do you see the Pharma space headed? Is it a stock specific trade now?
At White Oak Capital, it is always a stock specific trade and we have had significant overweight to Pharma in our portfolios for over 2 years now. COVID was clearly not known back then. Now, wherever the valuations have run up a lot we have trimmed some exposure in recent times and re-allocated monies to relatively more deserving opportunities. This is an ongoing process and doesn’t take anything away from our belief that Indian Pharma is critical to global healthcare.
What’s your views on the midcap and smallcap space? Could they be turning a corner now after a rather clumsy performance since 2018?
All White Oak portfolios have consistently been 30-60% invested in the small and midcap space since White Oak was founded in 2017. Across our offshore funds and domestically in AIFs and PMS we have a multicap construct. Broadly speaking slowing economy, tight liquidity, credit squeeze starting IL&FS default and prior over-valuation, all these issues dented the small and midcap space in a big way but there again stock selection has worked; despite high exposure the small and midcap picks at White Oak have delivered a large outperformance vis-à-vis the small and midcap indices and peers. I believe they have already turned the corner and past experience shows that if there is an economic uptick small and midcaps tend to outperform.
What sectors are you closely watching from an investment perspective?
White Oak Capital has stock specific exposure across pretty much all sectors and we do not follow a sectoral or thematic or macro approach to investing. Having said so, in recent times one thing that comes to mind is that the markets surely over-reacted to COVID impact on banks especially the stronger private sector banks. The strong ones will show disproportionate gains in credit market share in the new cycle from hereon. Also the recent realization of shifting supply chains in a China plus manner accompanied by India’s local market which has always been there will stand to benefit Electronic Manufacturing Services, Speciality Chemicals and the like. There are gains to be made in multiple sectors in the next 3-5 years.