Don’t invest in stock prices, but in sound businesses: Kenneth Andrade

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“Investors must not invest in stock prices, instead invest in sound businesses”, said Kenneth Andrade, Founder & CIO, Oldbridge Capital in a conversation with Money9.

Speaking about the way markets have turned volatile, there is a fear of bubbles being created and valuations being too high, Andrade, an investment professional with over 25 years of experiance in Indian equities, said while markets historically have seen both good and bad times, things might also get frothy at times, one should not worry about corrections.

“One should ensure that your portfolio is built with companies that have longevity. Longevity is key. If the company is around for ten years, you will definitely make money,” he said. “Good companies will always overcome any crisis,” he added.

On the commodities super-cycle and how long it will last, he said we can’t say if we are in for a long haul in commodities but if the prices stay where they are right now or drop 10% from current levels, even then some of these companies will make enormous cash flows.

“I won’t discount that they shouldn’t be a part of everyone’s portfolio but one should not look at the run-up in prices to decide to invest in commodity stocks. Buy businesses and companies on their ability to make profits. Even at current prices, some of the companies are highly profitable”, said Andrade.

On the new-age companies lining up to hit the street including the likes of Zomato, Nykaa, Delhivery, Urban Company, and Paytm, he expressed concerns about the steep valuations.

He said, “These are good franchises that have been set up over the last few years but nowhere are they in line with what I would be willing to pay for them. Forget about the listing gains, I would be cautious even about the medium term on how much money you’ll make on these companies”.

As an investment mantra, he believes that as an investor, our job is not to fund a company’s growth but to effectively get a return from the company.