---
title: "Snakes And Ladders: Why Smart Money Stays The Course | Quarterly Newsletter - September 2021 / Q2 FY22"
period: "Q2 FY22"
published: 2021-10-15
modified: 2021-10-15
url: https://equitreecapital.com/insights/newsletters/september-2021
markdown: https://equitreecapital.com/insights/newsletters/september-2021.md
authors: ["Pawan Bharaddia", "Ssuneet Kabra"]
publisher: "Equitree Capital Advisors Private Limited"
language: en-IN
---

# Snakes And Ladders: Why Smart Money Stays The Course

Quarterly Newsletter, September 2021 / Q2 FY22. Published 15 October 2021 by Equitree Capital. About 10 minutes to read. Web version: https://equitreecapital.com/insights/newsletters/september-2021

> Quarterly Newsletter published 15 October 2021. Figures are as of the dates stated in the letter and are not updated after publication.
> Performance data has not been verified by SEBI. Past performance is not indicative of future returns.
> Current performance, with its as-of date and benchmark: https://equitreecapital.com/pms
> Performance relative to other portfolio managers in the same strategy: APMI, https://www.apmiindia.org/apmi/IaInsight.htm?IAID=407
> Not investment advice, an offer or a solicitation.

> The contrary investor is every human when he resigns momentarily from the herd and thinks for himself.
>
> Archibald MacLeish

Dear Investors,

The Nifty 50 scaled fresh all-time highs of about **18,600** during the quarter and posted a return of close to **12%** from the previous quarter. **A swift correction of around 5% from the peak followed** as the market began wrestling with what we have always called the *“snakes”* of investing.

The relentless climb up the *“ladders”* (which we have written about across earlier newsletters) has now been joined by familiar “snakes” — **the Evergrande crisis in China and a faster-than-expected pace of US Fed tapering**. Through this chop, several so-called “growth” stocks have corrected by **30%+** from their highs, and individual stocks across our universe are **15–20%** off recent highs.

> **Takeaway:** Through this volatility, **we are happy to share that our portfolio has held up well against the broader markets** — beating the Nifty 50 and the NSE Small Cap 100 over the six-month and one-year windows by a comfortable margin.

## Our Performance

| Returns | 1 Month | 3 Months | 6 Months | 1 Year |
| --- | :---: | :---: | :---: | :---: |
| Equitree Capital | 6.03 | 5.31 | 39.49 | 123.43 |
| Nifty 50 | 3.20 | 12.40 | 18.50 | 54.30 |
| NSE Small Cap 100 | 5.80 | 11.10 | 31.50 | 85.80 |

As on 30th September 2021. Returns over one year are annualised. Individual portfolio performance may differ.  
Source: Equitree Capital internal performance records[1].

## 01. The Market: A Game Of Snakes And Ladders?

Markets through this quarter have looked very much like the childhood game we all played. Every time we appeared to be inching closer to *“100”*, we found ourselves slipping back a few squares. That is the shape of the climb — **a series of ladders interrupted by snakes**, and the discipline is in not mistaking either for the destination. We discussed several of these *“ladders”* in detail in our **June 2021 newsletter** as well.

Some of the *“ladders”* we have repeatedly written about — record monthly merchandise exports from India of about **$35.43 bn in July**, an aggressive vaccination drive, and an Indian corporate sector that walked into FY22 with the cleanest balance sheet in years. **The “snakes” we have flagged are not abstract — they have names**: Evergrande in China, an accelerating Fed taper, and the very normal lumpiness of a market that has been on a one-way ladder for several quarters.

> **Takeaway:** Markets do not move in straight lines. **Volatility is the price of admission for compounding** — we use it to deploy where conviction is highest and to stay disciplined where prices have run ahead of the business.

## Smart Money

> Beware of the investment activity that produces applause; the great moves are usually greeted by yawns.
>
> Warren Buffett

## 02. Smart Money Does Not Move With Market Momentum

Market momentum is seductive — it rewards conviction-free participation in the short run and punishes it in the long run. **At Equitree, our discipline is built on five rules that look unfashionable in a euphoric tape and indispensable in a correcting one.**

### 2A. Focus On The Business, Not The Stock

Behind every stock sits an underlying business. **We chase good businesses, not market tips.** When the price is in the news but the business is not, we have learnt to slow down and read the latter.

### 2B. Staggered Buying In Reasonably Valued Companies

Portfolios are built over time, not in a single deployment. **Turbulent markets give us repeated entry opportunities** in the same company at sharper prices — the discipline is to keep dry powder for exactly these moments.

### 2C. Reasonable Debt

**Debt-to-equity below 0.5x** is one of our hard filters. Lower leverage means more profits accrue to equity holders — and more importantly, means the business survives the snakes.

### 2D. In Investing, Laziness Is Good

**Low portfolio churn but hyper-active on-the-ground research** is our default mode. Momentum trading earns a quick buck; long-term company-specific conviction creates wealth.

### 2E. Do Not Try To Time The Market

Bank of America looked at the impact of missing the market’s **10 best and 10 worst days each decade since 1930**[2]. The arithmetic is brutal in both directions — and decisive in favour of staying invested.

| Decade | Price Return | Excluding<br>Worst 10 Days | Excluding<br>Best 10 Days | Excluding Best<br>& Worst 10 Days |
| --- | ---: | ---: | ---: | ---: |
| 1930 | -42% | 39% | -79% | -50% |
| 1940 | 35% | 136% | -14% | 51% |
| 1950 | 257% | 425% | 167% | 293% |
| 1960 | 54% | 107% | 14% | 54% |
| 1970 | 17% | 59% | -20% | 8% |
| 1980 | 227% | 572% | 108% | 328% |
| 1990 | 316% | 526% | 186% | 330% |
| 2000 | -24% | 57% | -62% | -21% |
| 2010 | 190% | 351% | 95% | 203% |
| 2020 | 18% | 125% | -33% | 27% |
| Since 1930 | 17,715% | 3,793,787% | 28% | 27,213% |

Decade-by-decade S&P 500 price return, comparing staying invested vs missing the 10 best / 10 worst trading days each decade.  
Source: Bank of America[2].

> **In Focus:** Missing the **10 best days each decade** since 1930 reduced total returns from **17,715%** to **28%**. Staying invested is the only strategy with that asymmetric a payoff.

## How We Invest

> Successful investing is about managing risks, not avoiding it.
>
> Benjamin Graham

## 03. How We Invest: A High-Conviction Idea, Held Through The Drawdown

### 3A. The Story: A High-Conviction Idea

A few years ago, on the back of detailed bottom-up work, we identified an **agri-equipment company** as a long-term high-conviction idea on the Indian solar-pumping opportunity. The business case stood on four legs:

• Industry size of about **USD 3.8 bn**, with the company’s specific product expected to grow at **27% CAGR**.  
• **Government financial support of ₹34,422 crore** under specific solar-pump schemes.  
• A vast **export-market opportunity** beyond the domestic order book.  
• ~**50% domestic market share** with room to expand both at home and into new geographies.

### 3B. The Story In A Chart

[Chart: Shakti Pumps (India) — weekly close, Sep 2017 – Sep 2021. The ₹150–180 buying zone (April–May 2020) sat just above the March 2020 low of ₹113. Position doubled near the bottom; held through the recovery. Drawn on the web page: https://equitreecapital.com/insights/newsletters/september-2021#how-we-invest]

Series: Shakti Pumps.

Weekly closing price (last trading day of each week; final point is the 30 Sep 2021 close), ₹. Prices are as quoted at the time: Yahoo’s history is adjusted for the 6-for-1 share-count change of 25 Nov 2024 (split/bonus), so it is multiplied back by 6. Not adjusted for dividends. Source: NSE closing prices via Yahoo Finance (SHAKTIPUMP.NS), retrieved 23 Oct 2026[3].

### 3C. Why We Did Not Sell

After our initial purchase, the stock fell about **50% from our buy price** as the macro turned and **March 2020 added a covid-driven shock** on top. The temptation to take a small loss and move on is always there. **Instead, we doubled the position at rock-bottom prices** because nothing about the underlying business case had changed.

> **Takeaway:** Holding through that drawdown is what produced **~4.5x returns from those lows** — and it is the same discipline that lets us hold conviction positions today through the current chop, **rather than mistaking a snake for the end of the climb**.

## Know What You Own

> Know what you own, and know why you own it.
>
> Peter Lynch

## 04. The Secret To The Market: Know What You Own

Across our portfolio companies, **we expect earnings growth of north of 20% for Q2 FY22**. The **average portfolio P/E currently sits at about 17x** — which we still consider rather reasonable given the underlying growth profile.

We are **selectively booking profits** where valuations have run ahead of fundamentals and **redeploying** into new opportunities where the business is still mispriced. As an example of the kind of opportunity we are working on: **a kids-segment knitwear exporter** — about **₹700 crore topline**, trading at about **9x FY23E earnings** with an expected growth profile of **20–25% over the next few years**.

> **In Focus:** **The discipline through every quarter is the same: own businesses we understand, sized to our conviction, bought at prices that already discount the snakes.**

## 05. In Closing

As always, please feel free to [reach out to us](https://equitreecapital.com/contact) with your comments, suggestions, and queries. We are grateful for the trust you place in us through every quarter — the steadier the snakes, the more the ladders compound.

Warm regards,

Team Equitree

- Pawan Bharaddia, Co-Founder & CIO (pawan.b@equitreecapital.com)
- Ssuneet Kabra, Co-Founder & CEO (skabra@equitreecapital.com)

## Sources

1. Equitree Capital internal performance records as of 30th September 2021. Returns over one year are annualised; individual portfolio performance may differ. Portfolio outperformance vs NSE Small Cap 100: +0.23 pp (1m), +7.99 pp (6m), +37.63 pp (1y).
2. Bank of America — “Decade-by-decade S&P 500 price return: missing the 10 best vs 10 worst days each decade since 1930.” Cited in BofA Global Research market commentary.
3. NSE; Yahoo Finance (SHAKTIPUMP.NS), retrieved 23 October 2026 — Shakti Pumps (India) Ltd. weekly closes (last trading day of each week), 1 September 2017 to 30 September 2021, restated to the pre-25-November-2024 share count (multiplied by 6) and not adjusted for dividends. Weekly closes in April–May 2020 ranged ₹148–174 (the ₹150–180 buying zone) against a March 2020 weekly low of ₹113. The 30 July 2021 close of ₹769 is 4.3–5.1x the buying zone.

## Disclaimer

This newsletter is prepared by Equitree Capital for informational purposes only and is directed at existing investors of its Portfolio Management Services. It does not constitute investment advice, an offer, or a solicitation to buy or sell any securities.

Past performance is not indicative of future results. Returns are computed on a TWRR basis, net of fees and expenses, and are not verified by any regulatory authority. Individual portfolio performances may vary. Forward-looking statements are subject to risks and assumptions that may not materialise. References to specific securities (including Shakti Pumps) are illustrations of our investment process and are not a recommendation to buy or sell.

Investments in small- and micro-cap equities carry higher volatility, liquidity, and business-specific risks, including the possible loss of principal. Equitree Capital is a SEBI-registered Portfolio Manager. Recipients should consult their independent financial, legal, and tax advisors before making any investment decisions.

This document is private and confidential. It may not be reproduced, redistributed, or published, in whole or in part, without the prior written consent of Equitree Capital.