Stock market: Kenneth Andrade on where to make profit in this market

Higher growth, higher prices, more companies are likely to do nothing for a while and small companies or very traditional companies that have done nothing in the past two years are likely to come back in terms of profitability and performance. stock market. I don’t think this is such a bad place, but with it comes reasonable caution as to what we will choose in the short term, says Kenneth andrade, CIO, Capital management of the old bridge.

Where do valuations and ramping up make you a little uncomfortable and would you like to record profit?
It will be a very narrow market. I can go on talking about evaluation, but that’s what we’re seeing in the cycle right now. One place that is completely missing from the valuation board is the IPO market where everything seems completely out of whack.

Second, there is the digital infrastructure side of the market. I wouldn’t say we’re out of this industry, but we’re not keeping anything significant. As for the chemical business, while their long-term outlook improves over the quarters, there is too much fragmentation and too much noise in this particular industry.

Among the places that are doing well, have done nothing and still offer an opportunity, technology has obviously had a very good run. The pharmacy is another great opportunity, but it’s in a while. But he’s still pretty attractive and that keeps him on the radar. In the case of everything related to raw materials and capital goods, we believe that we are heading into the next round of investment not only in India but also around the world and we will fuel that part of the Evaluation.

Utility is the other where despite the rise in power, a few pockets of opportunity exist. The energy mix is ​​changing quite dramatically and there are a few companies that have practically monopoly footprints and so this is another place that attracts us quite a bit.

Bulk raw materials, fertilizers, etc. are there, although the cement is a bit rigid in terms of valuation, but Indian cement plants are probably the most expensive in the world right now. Bulk products are the other place, but there we’ll probably be a little more selective.

There was a 29% move on the midcap index alone. Small caps returned 37% against the Nifty move of 13%. Is the overall market outperformance here to stay?
It’s just a reversal for me. I have the impression that in 2018 and 2019, small and mid caps were penalized compared to larger indices. So this is just a trend reversal and if you think a new cycle of profit is being created then a lot of small businesses will go big in the next couple of years.

I don’t think it’s too much to ask that small cap or midcap indices match what large caps do. If the market enters a phase of consolidation, in the short to medium term, some of the valuation readjustments within the market will take place. Higher growth, higher prices, multiple companies probably won’t do anything for a while and small companies or very traditional companies that haven’t done anything in the last couple of years are likely to come back in terms of profitability and profitability. stock market performance. I don’t think it’s such a bad place, but with it comes a certain caution as to what we will choose in the short term.

How to get rich? What would be your advice to young investors?
We all want to get rich. First define your expectations. Over the past 12 to 15 months, the markets have returned almost 100% and above. So a lot of the portfolios have come back 100% and above, that’s basically not what you need to look at in terms of grossing out returns. If you look at the market cycle itself and go back to the 90s, the stock markets could probably have offered you a 25-30% return. The last decade and this return normalization has reached about 15%.

This decade, stock market returns could be even lower or lower. We must therefore define a reasonable level of expectation before entering the markets. Don’t look at what seems to be getting worse in the longer term, with a short term perspective and use whatever opportunities come along on the downside. This is where you earn the most money.

If we were to look at some sort of year-end goal, what is the reasonable return expectation given what we saw last year and given the type of landscape you described in the last year? today’s conversation?
From this year to next year, the indices may stay where they are but given the momentum that’s there in the cycle, I’m not sure where we’ll be next. But this year seems to be pretty good. Over the next two quarters of trading, I don’t think the macros are of any kind… except for the valuation part. Markets never crashed just because valuations were high, but this year looks to be pretty good and I don’t think any government or central bank around the world wants a weak asset market for a long time.

In 2023, when recovery trading occurs or when the economy starts to rebound, we will have a mix to support some of the market caps that remain there. But I think 2022 is good. 2023 will be slightly disappointing for anyone who expects the momentum to continue. If you got a double digit or double digit return next year, you would have done a great job. This is what I would expect, at least in the short term and that does not rule out the possibility that a correction may occur. It could be anything – the third wave, the economy not rebounding, not returning to normalization, inflation – which seems to be one of the biggest concerns around the world. Everyone can play a treat sport.

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