We trimmed HDFC Bank

On Tuesday, we trimmed HDFC Bank (HDB) on behalf of our members in our Offshore strategy and used the proceeds to add to our positions in Nubank (NU), Marvell (MRVL), and Vista Energy (VIST).

We believe the opportunity cost of maintaining a larger position in HDFC Bank has grown, and while our investment thesis is by no means broken, reducing exposure here enables us to reinvest the proceeds in what we believe are more attractive investment ideas. 

Let’s dive in.

Trimming HDFC Bank

HDFC Bank (HDB) recently posted earnings in line with expectations but neglected to provide any material positive or negative updates – it’s something we’ve grappled with for quite some time and hoped that results would give us some clarity on a path forward. Management continued to emphasize their focus on improving overall profitability metrics, but near-term plans to decrease the bank’s loan-to-deposit ratio could put negative pressure on earnings growth.

It may take through mid to late 2025 (longer than we’d like) before the loan-to-deposit target is reached, and we believe the stock could trade range bound until then.

Our thesis isn’t broken given the company’s deep distribution network and long-term potential to deliver continued market share gains remains intact. However, trimming our position in HDFC Bank allows us to reinvest the proceeds in holdings with more favorable risk/reward prospects (more on that below).

Sizing into conviction

Nubank’s (NU) growth as a digital banking powerhouse has been unprecedented: the fintech giant has acquired 10%+ market share in Latin America while boasting an 80%+ compounded annual growth rate in revenues over the past five years. Despite this staggering growth, we believe there are multiple avenues ahead for further margin expansion by cross-selling its fintech products to customers and expanding its scale across new markets in Mexico and Colombia. Even after we sized up to a core position back in July, Nubank’s strong fundamentals and potential for continued market share gains now warrant additional investment in our eyes.

Marvell’s (MRVL) strong market positioning in networking, accelerating data center revenue growth, and robust backlog of demand for bookings suggest meaningful bottom line growth in the coming quarters. Recently, strong earnings gave us confidence that our thesis is tracking, so we’ve elected to add to the position given the risk/reward prospects here remain compelling.

Vista Energy (VIST) is one of Argentina's leading energy players with prime exposure to the largest shale oil formation outside the US. Despite the recent rally, we believe the stock has key tailwinds firmly at its back: namely regulatory (President Milei’s new reform policies), macro (lower inflation and improving GDP growth), and idiosyncratic (streamlined operating processes), which should provide significant upside potential moving forward. The stock continues to be one of the best performing names (more than +60% year-to-date) in our Offshore strategy, and after an impressive earnings beat with 66% revenue growth year-over-year, we’ve elected to add to our position.

As always, let us know if you have any questions about the recent trades; we’re happy to assist.

– Your Titan Team

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