Kenneth Andrade, the ace investor known for his high-conviction calls, looks for businesses early into a business cycle as part of his investment philosophy. The chief investment officer of Old Bridge Capital Asset Management observed that India’s market capitalisation to GDP ratio is 130%, which still indicates overvaluation. However, he still sees pockets of opportunity in the market. Andrade shared his market outlook recently during a presentation on his fund’s position and where he sees investment opportunities.
Outlook on pharma
Andrade’s portfolio heavily bets on the pharmaceutical industry. He says that his fund’s portfolio has 17% exposure to pharma sector. Andrade points out that Indian pharma firms account for 55% of all drug registrations in the US, the world’s largest pharmaceutical market, and hold a similarly substantial share across other regions.
“While the US is a major player, the rest of the world represents a market twice as large in the generics space, offering a massive profit pool that Indian companies are well-positioned to tap into due to their proven capabilities,” he says.
Looking ahead, there is a major opportunity in the patent peak expected between 2026 and 2034, he added. During this period, drugs worth over $400 billion are estimated to lose patent protection globally. “This wave of expiries will open up a significant generics market. Indian companies, with their established presence and expertise, are poised to capture a substantial share of this ‘genericization’ trend,” Andrade said.
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Global businesses
Andrade’s portfolio largely comprises global-facing businesses rather than domestic-oriented businesses. “For example, we have identified an aviation business trading at 12-13 times earnings, a pharmaceutical giant—India’s largest generic player—with a 10-year EV/Ebitda payback, and metal firms valued at 8-10-year payback period on their Ebitda,” he said.
“These businesses share a common trait: significant international exposure. In every meeting and commentary, these managements highlight efforts to expand global operations and investments. These businesses also have leadership positioning.”
On the other hand, the fund has avoided sectors such as construction, contracting, capital goods, and defence, where valuations are extremely high right now, he added.
“For many of these companies, this is their first growth cycle, which can lead to volatility and potential disappointments. By disappointments, I mean outcomes falling short of market expectations, especially since most of these firms are priced to perfection—factoring in growth projections out to 2028 or 2030,” Andrade explains.
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