Greetings from Team Carnelian!!
Wishing you and your family a very happy and healthy 2022!
The turn of the year is a good time for reflection of the year gone by…it offers insights, both good and bad. Also, a time to plan and build for the future. In this letter, we shall do both.
2021, with the backdrop of 2020, was another challenging year full of twists, turns and uncertainties.
A. What worked
1. We are extremely happy with the way the entire team at Carnelian stayed focussed and delivered another year of spectacular returns to our investors.
The most satisfying part for us was that we were able to generate significant outperformance by keeping Beta way lower than the index (Beta is one of the measures to assess risk undertaken to generate returns vs benchmark). It means we took less risk and delivered more returns while maintaining liquidity
Every success always reinforces faith as long as it is the result of a process and not out of adhocism. We are very glad to state that team stayed true to the processes.
The above outcome is the result of your trust and patience coupled with our investment philosophy backed by MCO and CLEAR framework.
2. Magic Basket: It is worth highlighting that our Magic Basket truly worked wonders for us. Magic Basket contributed significantly (~60-80%) to the outperformance. Stocks in the Magic Basket across strategies witnessed re-rating.
3. Non-Consensus calls: We were in minority while taking aggressive call on the IT & Manufacturing (China +1) theme way back in September 2020 and positioned our portfolio accordingly. This contributed very well to our performance this year.
Few of our non-consensus picks in the Magic Portfolio include LTTS, Mindtree, Max Financials, ICICI Securities, Praj Industries, KPR Mills, Mastek, Birlasoft, etc. which have generated multi fold returns for our investors.
All the names highlighted above carry impeccable governance track record, leverage free balance sheet and have cleared all the tests under our CLEAR and PIU framework.
Sector wise contribution
Compounder Strategy (Top 5 contributors)
Our picks within the IT sector have delivered 81% returns vs IT index 60% clearly showing that we could pick winners like Mindtree/LTTS/Birla Soft.
Our picks within the BFSI non-credit have delivered ~55% returns vs financial services benchmark of 14%.