Kenneth Andrade: Analyzing the stock-picking strategy and philosophy of this market expert

Andrade has a disciplined approach and the ability to nurture a stock and allow it to grow - a rare ability in fund managers.

Kenneth Andrade is currently the CIO of Old Bridge Capital Management, an India-based registered PMS. He manages the investment process and leads investment ideation. Along with over 27 years of experience in Indian Capital Markets, he has a published track record of managing Mutual Fund schemes for the last 13 years.

His experience in portfolio management includes the 10 years at IDFC Asset Management Company, which was ranked amongst the top 8 in the Mutual Fund industry in India, the Year 2005 - 2015.

Before he moved to IDFC, Andrade was managing the Kotak MNC and Kotak Midcap Fund of the Kotak Mahindra Group.

Coming to his investment style, Kenneth Andrade follows a simple thumb rule of investing and is known to have a disciplined approach while planning his portfolio. When he enters a new space, he likes to invest in all the leading stocks in that space and then keeps a watch on the performance of these companies. He uses the data put out by all companies in the sector to decide and evaluate how he will fine-tune his holdings. After it becomes clear which company are likely to race ahead, Andrade gradually moves out of other stocks and focuses entirely on that company.

When it comes to cyclical industries, Kenneth Andrade believes that smart capital allocation can make all the difference when it comes to a successful company and an also-ran company. He believes that debt is an albatross on a companies growth margin and so, irrespective of market capitalization, he chooses debt-free companies. Finally, he is not hesitant about paying a premium for companies that operate as virtual monopolies and has a strong fondness for such companies.

In his words, “Equities are all about buying efficient capital delivered by underlying business.” And so, Andrade looks for companies that respect capital. A good example is Shree Renuka Sugars. In 2006, the company had a market capitalization of Rs 3600 crore as compared to the then market leader – Bajaj Hindusthan at Rs 7,058 crore. The promoters of Renuka Sugars were baffled by the higher market capitalisation of Bajaj Hindusthan and felt that they should be on par as Renuka Sugars was strong on all financial parameters.

Most investors made a beeline for Bajaj Hindusthan. But not Andrade. He liked Renuka Sugars because it had set up capacities at low costs and had a scalable model for bigger capacities at half the capital cost. This idea came to fruition after the sugar industry hit a low point in 2009. Bajaj Hindusthan borrowed heavily to survive, it was saddled with Rs 4,500 crore debt and its market capitalization fell to Rs 1,500 crore. However, Renuka Sugars emerged from the downcycle with a market capitalization of Rs. 4,000 crore.