Why Top Fund Manager Kenneth Andrade Is Optimistic About 2019
This year didn't live up to expectations but Kenneth Andrade sees a better 2019.
“We went into 2018 with a lot of expectations,” Andrade, founder of portfolio manager Old Bridge Capital, said on BloombergQuint's special series Alpha Moguls. “One way to describe 2018 was that there was no alpha,” he said referring to lack of opportunities to beat benchmarks.
Indian equities remained volatile due to threat of a global tariffs and rising crude this year. Selloff by foreign investors and a credit crunch after IL&FS defaults aggravated the rout. Easing oil prices and liquidity helped benchmark Nifty 50 erase losses but the broader indices have fallen the most in seven years.
Andrade said he would like to be a lot more optimistic than 2018. “Things are not looking so bad. 2019 has a lot more to offer.”
His optimism stems from what he called a solid foundation for earnings recovery.
“While there might be a hiccup in Q3, but if things settle down after that and elections don't cause any major market disruptions, then things would materialise quite differently for the remainder of the year 2019,” he said.
Profits moving up with leverage moving down would mean that corporate balance sheets have space to expand if there is a growth opportunity, according to Andrade. He expects a 9-10 percent sales growth in the current context to results in 15-20 percent profit growth.
“That's the first element of a recovery. You need equity to leverage, and profit growth brings in equity valuation,” Andrade said. “Hence, we don't need disproportionate amount of growth for earnings to pick up.”