Market Neutral Strategy: Why Now Transcript

At KCR, we believe in solving problems and one of the greatest issues we hear from subscribers is how to compound their capital safely in today’s market environment. Kailash Capital has provided a quick and insightful presentation on Long Short Equity Market Neutral strategies and why they are a good solution in today’s environment. This presentation is 20+ minutes and covers in detail: What is a Long Short Equity Strategy? Why Long Short Equity? Why Long Short Equity Now? Long Short in Different Environments? Subscribe now to unlock the full contentAlready an Member? Click here to Login YOU ARE NOW READING BASIC MEMBER LEVEL CONTENT KCR Hypothetical Long/Short Market Neutral Notes https://kailashconcepts.com/wp-content/uploads/2021/11/icons8-vertical-line-50.pnghttps://kailashconcepts.com/wp-content/uploads/2021/11/icons8-lock-50.png Subscribe now to unlock the full content 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YOU ARE NOW READING BASIC MEMBER LEVEL CONTENT KCR Model Long Short Equity Market Neutral Notes Using Alternative Investments in Uncertain Markets Good morning, my name is Matt Malgari and this presentation was built by the KCR’s Equity Research Team. On January 1st of 2020, KCR published a paper called “Why Market Neutral Now.” In that piece we explained that record equity valuations had created significant risks for equity investors. We also highlighted that record low bond yields created tremendous capital risk with negligible returns. Our point was that this was, we felt, the perfect backdrop and time to invest in Equity Market Neutral products. This presentation is designed to be a follow up on that piece and explain why, despite recent market declines, the market still offers features that endorse market neutral strategies today. Slide 2 & 3: DISCLAIMERS So the disclaimers are written for a reason and are here for a reason. Please read them in their entirety. We are going to pause on each of these two slides. They will also be repeated, in their entirety, at the end of the transcript. Slide 4 - Agenda So the structure of the presentation is going to walk through the “What”, “Why” and “Why Now” for Long Short Equity Market Neutral. We will then show how a market neutral investment strategy, which puts primacy on generating positive returns with limited market exposure, built using long and short positions from KCR’s large model portfolios would have fared. This is not a solicitation and it is not an investment product or mutual fund you can invest in - this is for illustrative purposes only. In no way shape or form is this personalized investment advice, for those interested in becoming market neutral investors you should consult with your Financial Advisor before investing in market neutral funds or anything else this presentation might discuss. Slide 5 - What Are Market Neutral Funds & Market Neutral Portfolios? So with that, we are going to talk about a model long/short equity market neutral fund based on being long our composite S&P 500 long portfolio made up of our top ranked stocks and have short positions in our S&P500 portfolio made up of our worst ranked stocks. These portfolios have been published since 2011. We settled on what is called a “delta zero” strategy. The long positions sum up to 100% of the capital invested and the short positions sum up to 100%. So the net exposure to what is commonly referred to as “market risk” is zero, rebalancing is done monthly and these strategies typically end up with returns that are very different than the overall market. Fund managers using a strategy like this aim to have 100% of the returns generated from the relative performance of the longs and shorts and limited exposure to beta. We realize that the term “Long/Short” has become a cloudy and murky word in today's Alternatives market. So this next slide is very simple, it is designed to lay out a specific approach to market neutral. We recognize there are numerous other variations on what we describe here. This slide is designed to speak to “WHAT TYPE OF “ALTERNATIVE” ARE WE SPEAKING ABOUT IN THIS PRESENTATION ON THIS MAP OF ALTERNATIVES?” So first three bullets are a quick summary of what we are going to be talking about today. These historical returns from our model portfolio uses large cap listed US equities There is nothing in these returns that comes from futures, commodities, leveraged credit or other esoteric instruments The longs are a portfolio of high-quality blue chip large cap US securities that are undervalued relative to their level of profitability, and firm quality in our view. The short portfolio allows us to express a negative opinion on a stock that is overvalued, and due to their large cap status the returns do not include any borrowing costs or other expenses. The big arrow in the middle. This is designed to highlight how we think about the world in terms of risk and return. There is nothing in here that is designed to be a value judgment – it is merely the lens through which we believe the world works. Going from left to right: Secretive Hedge Funds – these are the smartest people in the room, they are opaque, often use leverage and were recently very popular putting up surreal returns albeit with questionable and unknown risks. We are absolutely nothing like them. Similar if somewhat more transparent versions of this structure can generally fall under Venture Capital, Private Equity and Leveraged Credit. We are generalizing but in those structures, fees are high, asset values are often privately marked and there is a fair bit of leverage. Index Funds and the cheap beta they offer are, in our view, a valuable service for allocators – a topic we have discussed in detail regarding why we think that, while important, index funds are also carrying uncommonly high risk today. Moving past the Passive and Active long only buckets you will see the KCR Model Long Short Market Neutral Strategy, then bond funds and then cash. Then these last three bullets summarize why we believe KCR’s Long/Short Strategy belongs between the long only equity buckets and bond funds: The holdings and position weights are transparent to any enterprise subscriber You want to make 50% a year, this is not your product. This is designed to be the TORTOISE. We are trying to make 4% - 5% over the risk free rate over the full market cycle. We are here to compound capital with a serious emphasis on capital preservation Because the returns come from both the long and short side that means they will typically have low to negative correlations with the market – we believe a strategy like this is a great way to participate in some market upside while serving as a crucial complement to your bond allocation Having said this we could probably talk all day about this and personally, we would love to, but we’ve got a presentation to get through so let’s move on. Slide 6 - Let’s Have a Laugh About the Maths Ok so here’s a dumb question. Do you want to own a stock that goes up 60% and then down 40% or would you rather own a stock that goes up 10% and down 5%? We are not trying to be pedantic or condescending. We, like you, are human beings. The importance of capital preservation, geometric returns and compounding is easily forgotten. The arithmetic is basic but the concept is hard to see. Here’s the chart. The up 60% and then down 40% question is a poorly hidden ruse. It suggests to our brains that we should be thinking we are looking at a net 20% rate of return. We put this up here because we believe that the speculative mania markets are withdrawing from came due to a very common tendency of investors to forget this stuff. Warren Buffett explains this in his lengthy rules for investing: Rule #1, never lose your primary capital Rule #2, never forget rule number one That thinking is exactly what KCR’s Model Long Short strategy is built around. Preserving and growing capital. There is big money in small numbers and this chart, and the one on the following page proves it. Slide 7 – Real World Example So here is a real word example of the power of brutal boredom. Navy blue line. Nasdaq from Feb 2000 through today. What we have found and academics have proven is that we are all long-term investors. That is true until we lose 80% of our capital. In 2020 everyone was convinced that everyone was the next Amazon of everything. No stock price too high. The navy blue line shows the importance of valuation. Pay too much – even for wonderful companies – and you can spend 14 years getting back to BREAK EVEN. Now let's look at the light blue line. That’s the HFRI Equity Market Neutral Hedge Fund Index we are looking to beat over time. Very boring line…..unless you bought it in 2000, in which case it was a very exciting line. It took the Nasdaq 18 years to catch up to the Equity Market Neutral Index from the dot.com peak. Naturally funds like ours went starving for capital in 1999 and 2000. The same thing happened in 2006 and 2007 and it has happened yet again this cycle. We think KCR’s long/short strategy or something like it belongs in your portfolio to some degree simply because nobody can time markets, and having non-correlated absolute return strategies are critical stabilizers that can help us all stay disciplined when more volatile asset classes turn from heroes to headaches. Slide 8 – Summary KCR L/S Equity Market Neutral Strategy So, our conceptual summary of the KCR L/S Market Neutral Strategy A thought experiment designed to show that sophisticated investors can compound wealth with an emphasis on capital preservation which reduces the need to swing for the fences – big money in small numbers – don’t lose as much and you can make a lot less and still do very well Strategies like KCR’s Market Neutral strategy are designed to protect your money when everything else is going sideways while compounding your wealth at 4% over the risk-free rate Our model strategy has duration features that make it a healthy inflation hedge Due to the low volatility, transparency, liquidity and non-correlated nature of returns, KCR’s Market Neutral strategy offers meaningful portfolio diversification benefits at a time where equity and bond markets have seen rising correlations due to an increasingly unfriendly macro backdrop Slide 9 – Why Market Neutral Now? So let’s put some more simple and clear evidence behind our statements earlier. This is Warren Buffett’s market cap to GDP metric. It shows the combined value of all the listed securities in the United States divided by our GDP. This is a way to express the markets overall price to sales ratio but by using GDP as the scaler it is a healthy reminder that equity valuations have to be tethered to the size of the economy. So, what you can see is that at the peak of the dot com bubble, the market was at 172% of US GDP. Over the next decade, an investor who bought the market there lost -17%. Now I’m known as a pretty patient guy, but if I own pure risk asset like equities for a decade, losing nearly a fifth of my money is frustrating. Looking over at the right, you can see that by December of 2021, the total market cap of all US equities hit 235% - a new all-time high. Since then, the market has lost about -20% and the ratio has fallen to 176% of GDP…. which is still above the dot.com peak. If that makes you a tad queasy to see that, I am not going to discourage you. Here are a couple salient pieces of data that are NOT on the chart: In 2000, the US was running a government SURPLUS – today we are running a double-digit deficit In 2000, US companies were earning margins equivalent to 6% vs. today where they are earning 12% - the only other time in roughly 100 years of history that US corporations earned such high profit margins was in….1929 Lastly, this chart severely understates the valuation headwinds investors face: in McKinsey’s most recent report on Private Equity, which it is no secret has never been more popular, they explain that the value of all US private investments equates to 23% of US GDP – for context, a decade ago, that number was about 8% Before we turn the page, I’d love to draw your eye to the green arrow in the middle. That was in October 2008, when the world was ending. Warren Buffet wrote an op ed explaining why he was buying US equities. His observation was that when US stocks were at 100% of US GDP, they are good bargains. So October 2008. Market cap to GDP hits 85% and Buffett says “I’m buying”…. Next chart. Slide 10 – Mkt Cap to GDP Forecast Accuracy Ok so this chart simply explains why we care about the prior chart. You will see there are two axes. The horizontal axis is the market cap to GDP – the numbers that made up that line chart on the prior page. The vertical axis is the 10-year average annual returns that an investor achieved after buying the market at any given level of market cap to GDP. Let’s go through this using the green dot. What that shows is that when Warren Buffett announced he was buying US equities at 85% of GDP. That was in October of 2008. See how that lines up to the horizontal axis? Now if we look at the left axis, what that shows is that over the next decade, US equities returned just shy of 15% annually. All the blue dots on here are points in time in the past and show how the price you paid, market cap to GDP along the horizontal axis, related to the 10-year subsequent returns you achieved, on the vertical axis. What stands out? The lower the price you paid, the lower the market cap to GDP, the better your long-run returns were. Every blue dot corresponds to a point in time where there was a subsequent 10-year return. Now we have two dots – the bright red on the right that do NOT have 10 years of returns yet. That bright red dot shows the December 2021 peak valuation of 235% and estimates what people who bought the market will achieve in returns over the next decade. -8% a year. That is not good. Looking at the burgundy text, you can see the 20% sell off to date has moved up to 176% of GDP. You can see that based on history; we would expect 0% annual returns from equities for the next decade. Again, in 2000, the market was a bit worse and returned -2% p.a.. So, for now this is just an estimate based on history. Nonetheless, it suggests that the downside may just be getting started and we are inclined to believe that history rhymes. Slide 11 – Long Run Annual Returns to G and V Moving on – we are going to tackle the same issue from a different but no less historically informed chart. First bar on the left shows the long run returns to equities averaged 9.1% per year. That hopefully falls in line with common sense, experience and general market views. There can, of course, be major deviations around that 9.1%. The big levers that can drive returns to be higher or lower than that beautiful average are Starting valuation – what we just looked at – how much did you pay for the equities at the beginning What did margins do Third, what were interest rates at the start and end of the period? Well, we just showed the answer to #1. You are paying the same price as people did at the peak of the dot.com bubble even after this market sell off. So that’s a tough beginning. Second, we just mentioned but failed to produce a slide, explaining that margins were at a level only seen in 1929. There is literally no other precedent for that. In our last paper we walked through the evolution of first margins – how we got here and then, in a follow-up piece in the Fridays ahead, we will publish a brief review of antitrust laws and the state of American competition. Needless to say, margins could be a headwind. And third – interest rates - that is the wild card. We have no idea where inflation or rates are going. What we can suggest however is that the post 2009 wonderland of borrowing ever larger sums while paying ever lower levels of interest might be ending.*** Now let's look at the middle bars – the returns from 2009 – December 2021. First bar shows value stocks have returned 12.4% per year. Light blue bar – growth stocks – 19.1% a year. That is a lot. Now to the far right we show you the returns to value and growth between 2017 – 2021 so you can see how back-end loaded GROWTH’s numbers are. Five years in a row GROWTH went up 25% a year. That is called irrational exuberance by some and speculative madness by us. This is algebra. What do those returns and possible mean reversion look like? Next slide. Slide 12 – Return on $1 since 2008, Growth Value & an Efficient Market Average On this slide we show the compound returns to the growth and value indexes since December 31, 2008. The red line is growth – you can see how that period from 2017 through 2021 sent the line parabolic – simply incredible. By the peak in December of 2021, you had seen $1 turn into $9.74 – that’s nearly a 10 bagger owning the GROWTH INDEX. That is as incredible as it is unsustainable. Now look what has happened – the growth Index fell -28% from December through June of this year. So, you went from $9.74 to $6.99. The navy-blue line at the bottom is what you would have had if markets were efficient, rational and delivered their long run rate of average return – 9.1% - over this period, $3.39. All these last two exhibits are doing is trying to show that market cap to GDP triangulates with basic empirical observations around long-run expected returns vs. the mania of 2017 – 2021. Quite simply, we have not cleared the decks, and to the degree there are still valuation bubbles they appear to very much be on the Growth side of the ledger. Slide 13 – Cheapest Decile P/S divided by most expensive Decile P/S And that is the point of this slide. This is simply a slide showing the spread of the cheapest decile of price to sales stocks compared to the most expensive. Price to Sales is a simple proxy for growth and value. All the line is doing is dividing the price to sales multiple of the market’s cheapest stocks by the markets most expensive stocks. The lower the line, the bigger the spreads between the two groups. It is a very simple line that shows the spreads between expensive and cheap. You can see that at the very peak of the internet bubble, spreads were enormous and by the peak in 2021, the spreads matched the exact peak of the dot.com bubble. We have seen some mean reversion by that little uptick at the end. But here is the context – in the post 2000 bubble period the average for this ratio was about 2% and nearly hit 4% as investor preference rotated back to value stocks. Look at the period from 1964 through 1990. The average in there was what? About 3% with the ratio routinely above 4%. We are at 1% today. Very simply what this is saying is that using one of the most basic, simple and easy to understand valuation metrics, spreads have barely moved from the record wides seen in 2000. Our model portfolios are NOT just long value and short growth, and our returns prove that. But we do tend to run with a quality and value bias in our longs and, at the moment, have a healthy dose of comically overpriced money losing stocks in our model short book. Slide 14 – Normal Market Low Interest Here are the KCR Long/Short Market Neutral Model’s returns over a couple horizons. This first slide shows the compound returns over 2014, 2015 and 2016. You can see we made 7% gross. While value, S&P 500 core, growth and bonds, as expressed by the TLT 20-year ETF, made roughly 27%. Over there on the right is the returns of the ARKK ETF since its inception in Oct of 2014. Important to remember that they put up 1% over these three years. So an investor in our model strategy would have made about 7% before fees and expenses. These returns very closely approximated the returns to the short-term investment grade bond ETF, SPIB, which returned 9.2% over this period. Nothing to write home about but certainly doing what would expect. And its important to remember: we are doing this with near-zero leverage and a net exposure that approximates zero – so that number is pure stock selection. Slide 15 – Speculative Bubble, Negative yields, record government stimulus Now let’s go to the years when the mania took off. When investors went gaga for growth. From 2017 – 2020, the KCR market neutral strategy was virtually unchanged. +1%. Now what do we see in the data? Value, core and growth. 35% to 140%. Investors poured money into growth stocks. Look at the far right. ARKK. Up 562% over these years. That’s over 60% annualized a year. We have written dozens of papers about the type of stocks that made up the ARKK fund. Those returns you see on that board were a fiction built on the backs of multiple expansion. In June of 2020, a prominent CIO of a major institution was still talking to me. And not only did he talk to me – he put a snippet of our conversation in his public missive online. https://www.kofcassetadvisors.org/en/news/client-messages/early-thoughts-in-july.html He wrote, and I quote: These thoughts have been swirling around my head at the same time we have been watching some extreme things in the markets. I was speaking with Matt Malgari …. He and I discussed that, Amazon announced the opening of several new Whole Foods stores and their market cap increased by about 3 times the size of Kroger. Kroger has a 10% market share of groceries in the U.S. and a few Whole Foods stores are equal to 3 times the value of Kroger. Hmmm! Another case in point is Zoom, which has a forward P/E Ratio of 189 times, and I’m not even sure how to contextualize that except to say we will never have a meeting in person ever again! That was a serendipitous moment for this CIO to politely suggest that maybe things had gotten a tad out of hand in the growth and extreme growth camp. Since that CIO published those words, Amazon is down -21%, Zoom is down -57%, and boring old Kroger is up nearly 50%. Slide 16 – Speculative Bubble Deflating As the market mania began to abate in 2021 and YTD in 2022, you can see in this slide how the KCR Market Neutral strategy has been busy recapturing the pain of those bubble years. Up a potent 51% over just 18 months. Slide 17 – Significant Market Correction Last slide, I promise. These are the YTD returns for KCR’s model market neutral strategy. First and foremost, this slide is not designed to suggest we think about our investment returns in 6 month windows. We think about them over a full market cycle. The purpose of this slide is to show that when everything is going poorly – even bonds – market neutral can be a powerful and invaluable hedge. So, what are the big take-aways? This strategy is simple, transparent and boring Strategies like these are a healthy sleep-at-night part of any asset allocation strategy The reason a market neutral approach like this might be part of a sleep at night allocation strategy is, let’s say if you put 10% of your money in it, and the goldilocks mania we are coming out of resumes, this model portfolio and others like it will underperform badly – but that would be the best thing ever for you – the other 90% of your portfolio would be screaming – you should WANT to see us flat to down small in crazy manias But possibly most importantly, as the earlier data showed, we are in the early innings of an equity bubble that eclipsed the dot.com mania – these are very good times for market neutral strategies like the one discussed here We have no idea if the Fed can reflate this bubble. Many claim to know. We do not. What we do know is that true disciplined long/short products were almost completely forgotten by the end of 2020, just as they were in 2007 and 2000. We believe they are a valuable non-correlated return stream at any time for any allocation. Slide 18 – Appendix - Benchmark Definitions HFRI EH: Equity Market Neutral Index The HFRI EH: Equity Market Neutral Index employs sophisticated quantitative techniques of analyzing price data to ascertain information about future price movement and relationships between securities, select securities for purchase and sale. These can include both Factor-based and Statistical Arbitrage/Trading Strategies. R1000G ETF: The iShares Russell 1000 Growth ETF seeks to track the investment results of an index composed of large- and mid-capitalization U.S. equities that exhibit growth characteristics. R1000V ETF: The iShares Russell 1000 Value ETF seeks to track the investment results of an index composed of large- and mid-capitalization U.S. equities that exhibit value characteristics. S&P500 ETF The SPDR® S&P 500® ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index (the “Index”) TLT ETF: The iShares 20+ Year Treasury Bond ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years. ARKK ETF: ARKK is an actively managed Exchange Traded Fund (ETF) that seeks long-term growth of capital by investing under normal circumstances primarily (at least 65% of its assets) in domestic and foreign equity securities of companies that are relevant to the Fund’s investment theme of disruptive innovation. ARK defines ‘‘disruptive innovation’’ as the introduction of a technologically enabled new product or service that potentially changes the way the world works. Nasdaq Composite Index: The Nasdaq Composite Index, popularly referred to as ‘The Nasdaq’ by the media, covers more than 3,000 stocks, all of which are listed on the Nasdaq Stock Market. The Nasdaq Composite is as old as the exchange and is different from another popular index, the Nasdaq-100. That was launched in 1985 and is a more compact index comprising of the top 100 (hence the name) non-financial companies listed on the Nasdaq exchange. DISCLAIMER ON PAGE 2 OF PRESENTATION The information, data, analyses, and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses, or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. In preparing the information, data, analyses, and opinions presented herein, Kailash Capital has obtained data, statistics, and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seeks independent verification of any of the data, statistics, and information it receives. Kailash Capital and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction. DISCLAIMER ON PAGE 3 OF PRESENTATION This presentation uses returns calculated from model portfolios that have been in production and distribution since 2011. These portfolios are model portfolios, do not represent an actual investment product and this presentation is not an offer to solicit or invest in any particular product or strategy. This presentation is designed to highlight the potential benefits of a simple long/short market neutral portfolio. To the degree you find this presentation on one type of market neutral strategies of interest, you should consult with a Registered Financial Advisor to see what, if any, market neutral strategies might be appropriate for you. Market neutral strategies vary widely, the example used in this presentation is not comprehensive in any way and Kailash Capital, LLC does is not and does not suggest that market neutral investing is appropriate for any individual. This presentation is designed to be informational in a general way. © 2022 Kailash Capital, LLC – All rights reserved. As a reminder for our Financial Advisors: our models are available on a continuous basis, and most have been in production for over a decade. If you are looking for a simple, concentrated, low turnover, and hard-hitting GARP investing strategy, we would like to talk with you. Similarly, if you are looking for a model portfolio of the most proven and durable dividend payers that is simple to implement, please let us know. KCR also offers a wide range of easy-to-use but sophisticated tools like our Equity Duration product, which allows you to estimate a given portfolio’s interest rate and inflation risk. Over the last 12 years, KCR has built and offers time-tested and class-leading products built by experienced and proven money managers for fixed to low prices. Kailash Capital’s sister company, L2 Asset Management, runs market neutral, long/short, large-cap, and mid-cap long-only portfolios with a value and quality bias. L2 employs a highly disciplined investment process characterized by moderate concentration, low turnover, high tax efficiency, and low fees. While nobody can predict the future, we believe the recent resurgence in risk-adjusted returns seen across all products is the beginning of what may be a long period where speculation is punished, and prudence and patience rewarded. As a reminder for our Financial Advisors: our models are available on a continuous basis, and most have been in production for over a decade. If you are looking for simple, concentrated, low turnover, and tax efficient model portfolios we would like to talk with you. KCR also offers a wide range of easy-to-use but sophisticated tools. Our toolkits can help identify mispriced stocks with the best and worst risk/reward characteristics, estimate a stock’s duration and warn you when a company is engaging in low-quality accounting. Over the last 12 years, KCR has built and offers time-tested and class-leading products built by experienced and proven money managers for fixed to low prices. Kailash Capital’s sister company, L2 Asset Management, runs market neutral, long/short, large-cap, and mid-cap long-only portfolios with a value and quality bias. L2 employs a highly disciplined investment process characterized by moderate concentration, low turnover, high tax efficiency, and low fees. While nobody can predict the future, we believe the recent resurgence in risk-adjusted returns seen across all products is the beginning of what may be a long period where speculation is punished, and prudence and patience rewarded. The topics discussed in this article are aimed at seasoned professionals, as such, we have included some extra reading for anyone seeking out more information related to the topics above. Asset Allocators Safe Dividend Stock Disclaimer The information, data, analyses, and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. In preparing the information, data, analyses, and opinions presented herein, Kailash Capital has obtained data, statistics, and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seek independent verification of any of the data, statistics, and information it receives. Kailash Capital and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction. Nothing herein shall limit or restrict the right of affiliates of Kailash Capital, LLC to perform investment management or advisory services for any other persons or entities. Furthermore, nothing herein shall limit or restrict affiliates of Kailash Capital, LLC from buying, selling, or trading securities or other investments for their own accounts or for the accounts of their clients. Affiliates of Kailash Capital, LLC may at any time have, acquire, increase, decrease or dispose of the securities or other investments referenced in this publication. Kailash Capital, LLC shall have no obligation to recommend securities or investments in this publication as a result of its affiliates’ investment activities for their own accounts or for the accounts of their clients. © 2022 Kailash Capital, LLC – All rights reserved.