What's Saurabh Mukherjea Investing In After The US Elections 2024?

Summary

In this insightful discussion, Sorab shares his thoughts on the impact of the US presidential election result on global markets, focusing on sectors like US industrials, China Plus One, and commodities. He emphasizes the waning obsession with ESG investing and the rise of nuclear power as an alternative energy source. Sorab also discusses his investment approach, advocating for diversification in US and Indian markets while cautioning about short-term volatility in sectors like autos. With a keen eye on global trends, he provides valuable insights into strategic investment opportunities amidst shifting economic dynamics.

Takeaways

• 😀 Sorab anticipated a Trump victory in the 2024 US presidential election, which led to an increased focus on US industrial stocks and cyclical investments.
• 😀 Despite a Trump victory, Sorab was surprised by the decisiveness of the margin, indicating that betting markets had underestimated the outcome.
• 😀 US industrial stocks were a key investment focus post-election, especially companies like Parker-Hannifin, benefiting from Trump's push for North American industrialization.
• 😀 The China Plus One strategy has proven beneficial for Indian companies like Dev Labs, which has seen growth in its investments as a result of shifting away from China.
• 😀 Sorab sees inflation and trade tensions with China as key factors impacting commodity markets, particularly crude oil, and emphasizes the importance of US industrials as a hedge against this.
• 😀 Sorab expressed skepticism about the long-term success of renewable energy investments, pointing to the growing trend of nuclear energy, especially in the US, as a viable alternative.
• 😀 The rise of nuclear power, driven by energy needs and corporate investments (e.g., Amazon's captive nuclear plants), is expected to be a key part of the future energy landscape.
• 😀 Sorab advised caution in the auto sector due to a cyclical downturn, noting that auto stocks will likely face softness for a few quarters before any meaningful rebound.
• 😀 Aisha Motors (Royal Enfield) stands out in the auto sector, benefiting from rural India’s recovery and strong export growth, making it a solid long-term investment.
• 😀 Sorab highlighted the China Plus One strategy's influence on the chemicals sector, with companies like Devis Labs and Ami Organics benefiting from cheaper Chinese raw materials.
• 😀 The ESG (Environmental, Social, Governance) obsession is waning among Western institutional investors, and Sorab predicts a lessened focus on renewables as a result.
• 😀 Despite concerns around lab-grown diamonds (LGD), Sorab remains cautious about the potential threat LGD poses to Titan’s market share, though it has not yet materially affected the company.
• 😀 Sorab encourages diversification between India and US markets due to their low correlation, providing a balanced portfolio with high long-term growth potential and low volatility.
• 😀 Sorab's broader investment philosophy prioritizes stocks with strong compounding potential in key sectors (e.g., North American industrials, China Plus One, rural-focused auto stocks, and chemicals).

Q & A

What was Sorab's initial expectation about the US presidential election results, and how did it impact his investment strategy?

Sorab expected a Trump victory in the US presidential election, based on betting trends and market analysis. As a result, he increased exposure to US industrial stocks, specifically cyclicals, anticipating a positive impact from a potential Trump win. This decision proved profitable, as the portfolio was up by 2.5% the day after the election results.

How did Sorab view the impact of the US election on commodities and inflation?

Sorab suggested that the outcome of the election could lead to stronger US dollar strength, inflationary pressures, and higher yields. He mentioned that certain commodities like crude oil might remain range-bound. Sorab also discussed the uncertainty around whether Trump’s policies would generate higher inflation or whether he would take actions to lower inflation, such as bringing Russian oil back into the market.

What are Sorab's views on gold as an investment?

Sorab has never been a fan of gold as an investment, arguing that it offers lower returns and higher volatility compared to equity markets. He emphasized that for serious investors, diversifying between India and the US stock markets offers better compounding potential with lower volatility, making gold an unnecessary addition to a portfolio.

What is Sorab's perspective on the rise of lab-grown diamonds and its impact on jewelry companies like Titan?

Sorab expressed concern about the impact of lab-grown diamonds (LGDs) on traditional jewelry companies like Titan. While he has reduced his position in Titan over the past year due to LGD, he still sees strong demand for jewelry, particularly in rural India. He also pointed out that LGDs haven't gained significant traction in Western markets, and he remains cautious about their potential impact in India.

What is Sorab's stance on the energy sector, particularly in the context of ESG (Environmental, Social, and Governance) investments?

Sorab believes that the obsession with ESG investments is waning, particularly in Western markets, as evidenced by the rise of nuclear power. While Trump’s policies may de-emphasize renewable energy, Sorab sees nuclear power as a growing sector, with companies like Amazon investing in captive nuclear plants to meet the energy demands of data centers.

What does Sorab think about the future of the auto sector in India?

Sorab anticipates a cyclical downturn in the Indian economy, which could negatively affect auto stocks for the next couple of quarters. However, he remains optimistic about certain players like Aisha Motors, specifically Royal Enfield, which is less affected by the cyclical downturn due to its rural market focus. He advises caution in the auto sector for the short term, but sees long-term potential for stocks like Aisha Motors.

How does Sorab approach investment in chemicals and specialty chemicals in the context of China’s influence?

Sorab focuses on investing in specialty chemicals companies whose raw materials come from China, as these companies benefit from Chinese dumping practices. He specifically mentions companies like Devis and Ami Organics, which have seen margin improvements due to cheaper raw materials sourced from China. He advises being cautious with chemical investments and focusing on companies that benefit from China’s practices rather than those that are vulnerable to them.

What impact does Sorab foresee from the geopolitical situation between the US and China on his investment strategy?

Sorab expects that the ongoing geopolitical tension between the US and China will lead to more opportunities for India under the 'China Plus One' strategy. He has increased investments in Indian companies that are poised to benefit from this shift, such as Dev Labs and Poly Medic, which stand to gain from diversifying away from China in the medical equipment and API sectors.

What is Sorab's view on the role of technology, especially in the semiconductor sector, in the context of the US presidential election results?

Sorab is cautiously optimistic about the semiconductor sector, particularly companies like ASML, if inflation remains stable and tech spending increases. He sees potential for growth in tech cyclicals if long-term bond yields do not rise sharply, which would support increased investment in the global semiconductor supply chain.

How does Sorab recommend investors position themselves in the current economic climate, particularly with regards to US and Indian equities?

Sorab suggests that investors should focus on diversifying their portfolios between the US and India, two of the best-performing markets globally, with low correlation to each other. He advocates for long-term investment in both markets, emphasizing the stability and compound growth they offer. He cautions against speculative investments like gold and recommends a more balanced approach with investments in cyclicals and sectors benefiting from 'China Plus One'.