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Portfolio Update – YE 2024


A quick update of the portfolio that I have been managing since Aug 2024. The portfolio is primarily asset class agnostic and focuses on long-only investments with an occasional short bias, with a focus on holding long term compounders as well as event driven trades which offer generous yields on a post-tax basis


Marketable Securities

Details of marketable securities above the 5% position size threshold are as seen below: –

One may notice a generally high level concentration of securities in the Portfolio, which for the above 7 combine close to 70% of the portfolio. The intention is to acquire businesses which are trading at cheap valuations, and can be held for the long term. As mentioned above however, certain opportunistic adds such as Capri – which recently underwent a failed merger with Tapestry, are likely to be added as it has been yours truly’s observation that merger breaks often lead to exciting quotes for securities which otherwise should be trading at a premium.

VTI ETF

The decision to include the VTI US ETF has been taken into account owing to multiple reasons. Much like Mr. Buffett’s wisdom of not betting against America, I believe that the pull forward revenues and valuations caused by Covid-19, followed by a non-recessionary cleanse in the markets as far as valuations were concerned following interest rate hikes bode well for the long term health of the markets. Much like an athletics selection program, a systematic and timely shakeout is always good news as far as the general health of the team is concerned. In any case, I strongly believe that we are shaping up for next bull market run over the next 7 years or so. Whilst we may still be in the foundational stages – and these may carry on for a little longer than one would want, owing to the new administration coming in followed by persistent inflation, which may require a “higher for longer” regime – or at least the fact that going back to close to 0% rates is a long way off, holding exposure to the stock market through VTI US complements my current view of the markets and the present regime.

Boeing (BA)

A staple name for all things civil and military in the aerospace sector, the company has been plagued of late by various management oversights, which have led to manufacturing defects. Whilst the arguments have centered on the premise that unlike in the past the company is being run by bean-counting accountant and business types as compared to engineers and pilots of yore – a counter argument may be pursued to the effect that bean-counters are as necessary to the process as are engineers. Given the national importance of the company, the recent spate of issues whether on ground or in the air, to me are reminiscent of the issues which once plagued AmEx with its oil / water scandal. I strongly believe that with a $500B+ backlog, of which $60B is military there is revenue visibility over the next 5 years. If the company can solve its operational issues, some of which are engine issues which unfortunately get attached to Boeing (P&W engines), and streamline its costs, one can expect the business to do well. In either scenario, the holding represents a short term holding for the portfolio and may be replaced in the near future.

Capri (CPRI)

The recent whipsaw of a merger between Capri and Tapestry, led to the deal being blocked by the administrative authorities. Capri Holdings, which is a conglomerate of sorts of the accesible luxury brands of Michael Kors, Jimmy Choo, and Versace is presently trading at a market quote of close to $24 per equity share. Recent rumors indicate that the company is looking to sell the Versace and potentially its Jimmy Choo business. It is the author’s opinion that as a standalone entity Capri Holdings ex JC and VSC, is roughly to be valued at close to $24.50 per share basis. The addition of Versace and Jimmy Choo would throw in a kicker of $11 and $7 per share which would take the total value to $42 per share (Whilst one may extrapolate the average merger premium of 33% over the $42 share price to be close to the takeout price, the intention is to sell the security as it begins to trade close to its $42 fair value). It is to be noted that I strongly believe that we are in what I call a “retail-lull”, i.e. beaten down valuations in the retail luxury space (see my previous article Skirting My Way Up – Panorama Ridge Trail).

Portfolio Performance

The portfolio has presently returned close to 14% as compared to the index which is sitting at 9% or so. Given my belief that we are currently in the foundational stages of what is going to shape up to be a long term bull market, higher interest rates notwithstanding, I intend to continue my practice of sticking with high conviction and high concentration names, wherein volatility will not be considered as a measure of risk. Any attractive opportunities in arbitrage or otherwise on a post-tax basis may be looked at. Close to 25% of the holdings are presently in cash with 10% of it invested in short term treasuries. Whilst one may balk at the implied PE ratio of 80x on the treasuries if considered as a business, given the 0% rate on the cash holdings loss of liquidity was accounted for and the decision taken.

The target for this year remains the same, which will be 10% on a post-tax basis irrespective of the index performance. Any increment from the 10% hurdle rate are to be looked at as a bonus.

Feel free to post your comments or reach out to me with your thoughts or ideas using the comments page or my email.

Sincerely,

Sanket Karve

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