Investors should look for resilience in a business as an investment criteria, according to PPFAS Mutual Fund’s Rajeev Thakkar, at a time the market is trying to make sense of the post-Covid world.
“Broadly as long as the company is not leveraged, as long as it has cash reserves and can see through 2020 and part of 2021, most of those companies will come out stronger and most probably gain market share,” he told BloombergQuint in an interview.
The fund’s 65% investments are in the Indian market, while the remaining are in global stocks such as Amazon Inc, Facebook Inc, Microsoft Corp. and Alphabet Inc. These are the companies, he said, that will benefit from staying-at-home culture.
Here are his views on various sectors:
IT
- People who don’t have in-depth knowledge should stick to larger IT names.
- Those who can do the research should look at smaller IT companies with specialised technology.
Pharma
- The opportunity is attractive, given the under-performance of these companies in India and given the current environment.
- Company-specific problems can come out of nowhere, for example U.S. FDA alerts on plants and price wars in a molecule’s market.
- Taking a basket approach to investing in pharma by investing 1.5-2% in a bunch of the well-managed firms.
Financials
- Financials will be most impacted because we don’t know what will happen to bad loans.
Hospitality
- Expect the fund’s one small position in the hospitality sector to be impacted.
While sectors such as hospitality and travel may look attractive, unfortunately most of the companies within are “very, very leveraged”, Thakkar said. But he does expect a mean reversal as normalcy is achieved.
“Once things normalise, we will get on an airplane, we will go for holidays, we will wear formal clothing and go to office instead of sitting at home in our tracksuits.”
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