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Kenneth Andrade, chief investment officer (CIO) of Old Bridge Mutual Fund and founder director of Old Bridge Capital Management, who views investing as a journey where one pays ‘tuition fees’ through market cycles, believes that opportunities never really dry up.
“There’s always a stock or sector to be found,” he said.
He notes opportunities have become easier to spot recently, though that wasn’t the case in 2024 and early 2025. With valuations now normalised, he expects more modest returns, likely in the low teens over a longer cycle.
“I think most of the worst is already priced in. If a shock occurs, the opportunity will be much larger.”
He said this is a phase where it makes sense to put about 50% of capital to work upfront and stagger the rest over the year. This year and even part of early 2027 look like a good window to gradually build a portfolio.
It has been an eventful two or three years. First, the ongoing Russia-Ukraine conflict caused oil prices to spike. Then, US trade embargos and tariffs forced India to find new markets. Now, we have the situation in West Asia. These are small events in the longer horizon of time; in a year or two, we likely won't even be talking about them.
However, I believe this is transitional. No economy can handle such cost pressures indefinitely, and every economy is feeling it. We must bear some of this in the near term. Over the next few quarters—and I say quarters, not years—economies like India must absorb this price shock and inflation.
This will impact everything: government finances, corporate performance, rising costs, and slowing consumer demand due to underlying inflation.
I don't think one can expect too much this financial year. The recovery, if at all, will be towards the end of this financial year; for the rest of it, I think we will just plod along. We will have a difficult quarter or two, but I would just like to caution that it is just transitory.
These things come periodically. There is always a chance to find a stock or two or an industry or two. Over the last two years, it has become easier now, but it was not as easy in 2024 and part of 2025.
Valuations have normalized, but to achieve the compounding seen between 2020 and 2024, valuations are not on your side. While we are in safe territory, I would still manage investor expectations right now: do not expect anything north of low teens, and even then, only on a longer-term cycle.
I think most of the worst is already priced in. If a shock occurs, the opportunity will be much larger. You need stock prices or valuations to come off for the opportunity to be wider and longer, but I am not too sure that will be the case.
Interestingly, in my first newsletter to investors in 2024, I said that valuations were steep and the probability of outsized returns didn't exist. Since then, compounded returns have been in the single or low double digits. This is the framework I expect to work with for the next couple of years.
Valuations remain uncomfortable. In India, narratives sell, and some sectors are completely out of whack with global valuations. At the other extreme, there are smaller industries dominated by certain corporates that haven't done much lately; that is where the opportunity begins.
To summarize, only about 15% of small-cap companies are investable. That ratio is higher for large- and mid-caps, but as a whole, the market is comfortable rather than cheap.
We’re in a phase where it makes sense to deploy about 50% of your capital upfront and stagger the rest over the year. Calendar year 2026, and even part of the first half of 2027, looks like a good window to gradually build out a portfolio.
Our buy discipline is mirrored by our sell discipline. We favour industries undergoing consolidation, which usually happens because growth has stalled. When there is no growth, no new players enter; instead, older ones exit, leading to a consolidated market, as seen in aviation and telecom. Post-consolidation, you often get a 10 to 15-year expansion window.
While we buy during these phases, we sell when every company in that industry becomes profitable. At that stage, existing firms expand, and new entrants appear. This increased supply hurts pricing power and, consequently, profitability. That is our primary sell discipline. Additionally, we step back when valuations no longer make sense, such as in the current HVDC (High Voltage Direct Current systems) space, where valuations are exceptionally tight.
Unless things go wrong, we give a company at least two and a half to three years to demonstrate its ability to put the pieces of the puzzle together; if things are working out, we are happy to wait longer. Our average churn is about 20% of the portfolio. With a universe of 25 companies over the last decade, 20% means about five companies are rolled over every year, which is equivalent to a five-year holding period per stock.
Dipti has spent nearly a decade happily knee-deep in the fast-moving, occasionally nerve-wracking, and always fascinating world of stock markets, tracking everything from sharp sell-offs to surprise rallies, and the narratives that drive them. She began her journalism journey at Informist, sharpened her market instincts at CNBC Digital and Moneycontrol, and is now charting new territory with Mint. Here, she is exploring new ground, bringing together sharp analysis, on-ground insights, and a keen eye for what really moves markets.Before stepping into journalism, Dipti studied law and worked with a solicitor firm for close to three years, an experience that gave her a strong foundation in analytical thinking, contracts, and corporate structures. But the pull of markets and storytelling proved stronger, prompting a switch from law to journalism.She writes about stocks and investments, but that’s only part of the story. Dipti also teams up with market experts to turn complex trends into sharp, easy-to-understand videos, occasionally peeks at deals and acquisitions, and regularly picks the brains of industry leaders. Somewhere between earnings calls, market swings, and boardroom chatter, she’s always looking for the next story that explains what’s really moving the markets.