Because, Technology, we believe, is in a ‘Permanent Super Cycle’.The Internet adds 3 new users EVERY SECOND.
15 Smartphones are sold globally EVERY SECOND.Google has not had a ‘Down’ quarter in over 10 years!
These stats prove that the world is changing, FAST. Digital adoption is a permanent trend my friends.
As Investors, we need to adapt and go with the flow.
What is best about Tech/IT names are that almost all of them are Debt free, they generate loads of Free Cash Flow, have considerable RoIC and best of all, they all have Growth. Now, if we as investors can identify a decently valued set of stocks in this sector, we would potentially be injecting ‘Structural Growth’ to our portfolio.
Structural Growth is very important because otherwise, in a bear market, most portfolios with cyclical stocks revert back to square 1 with significant losses. All the hard work of 2-3 years of Bull market gets lost in a few months of a Bear market with ‘Cyclical’ stocks. We need to avoid these losses in Bear markets. Hence, we at Negen Capital Smallcase think that Technology is our biggest weapon to counter cyclicality and volatility in our portfolio over long periods of time.
Why Special Situations?
Think of some of the biggest gainers that you know. HLE Glasscoat (20x+), Adani Green (40x), Adani Gas (12x+), Borosil Renewables, Suven Pharma, Greenpanel, Max Healthcare, Sequent, Berkshire Hathaway (Warren Buffett’s company) etc. What do these and many more have in common?
You guessed it!
They are all ‘Demergers’ or ‘Promoter Change’ companies.
Special Situations like Demergers or Promoter Change in our opinion, unlocks value in a big way.
Of course, these are complex investments and one needs to know what they are doing or else losses can also happen. But with the right research, you get to take home BIG VALUE!
Our Negen Opportunistic Smallcase is +29.33% since inception on January 4th, 2021. Why this is meaningful, is because the Nifty is +3.99% in this same period.
Our Negen Capital PMS was also the 2nd best performing PMS of India in FY21 with a +188.61% return.
Simply put, we focus on 2 things. Technology (both Indian & Global Tech stocks) and Special Situations (Demergers & Promoter Change). At the moment, according to us, no one in our peer group is following a pure strategy of Technology+Special Situations.