The Intelligent Investor's Almanac
Your Bi-Weekly Guide to Markets, Movements, & Money.
Presented By Ken Majmudar & Ridgewood Investments
Issue 1 • February 26 to March 12, 2025
Never miss another valuable edition of The Intelligent Investor's Almanac again.
Your TL;DR Institutional Intelligence
- Market insight: Major Indian companies are trading at attractive valuations while U.S. markets reach record highs, creating potential value opportunities.
- Strategic Opportunity: Financial institutions and cash-rich companies are seeing enhanced profits as interest rates remain elevated.
- Risk Alert: The Federal Reserve’s stance on maintaining high rates and persistent inflation continue to reshape market winners and losers.
- Action Point: Consider investment in companies with strong cash positions and minimal debt that can turn high interest rates into a competitive advantage.
The Value Investor
Ken Majmudar, CFA & Founder of Ridgewood Investments
Despite headwinds from high interest rates and potential new trade tariffs, US markets have reached all-time highs. International markets haven’t kept pace with these highs, which has caught my attention as a value investor.
I’ve spent the last few months exploring overseas opportunities firsthand. I recently returned from India. India’s market includes over 500 companies valued at $1 billion or more, yet many of these high-potential businesses are currently available at attractive prices due to market declines.
When I was in India, I chatted with a Chinese investor from Singapore. He told me he was launching an Indian investment fund, and I asked him why. He said: ‘India today is like China was 30 years ago, and I see a lot of opportunities for investors to profit just like they did in China.’
It was a great conversation because I was in India to explore Ridgewood’s own approach to establishing an Indian-focused investment fund. It’s designed to give our investors access to market opportunities in India using the same long-term value investing principles we’ve successfully applied in the US for over 30 years.
The timing feels right – both the Indian and US markets have been among the best performers over the last 10-15 years. However, recent market declines in India have created what we at Ridgewood believe is an attractive entry point. If you’re interested in talking with us about these entry points, click the button at the bottom of this newsletter to book a call.
I share this because it’s an example of the mindset involved in value investing. With modern technology, it’s possible to find new investment opportunities around the world – if you understand how to know them when you see them. By regularly reading this newsletter, you will also start to develop this capability.
Fed Update – Your Pulse on the Current Investing Climate
WINNERS
Cash-Rich Companies – Businesses like Berkshire Hathaway ($BRK), Markel ($MKL), and Wise ($WISE) with strong balance sheets benefit as they earn more on their cash reserves.
Banks & Financials – Higher rates imply wider net interest margins for banks, boosting profits (think JPMorgan, Bank of America, Goldman Sachs). Similarly, companies with large fixed-income portfolios (insurers, pension funds) will earn higher yields for longer.
Tech Companies that Act as Intermediaries – Many tech companies hold large cash balances on behalf of their customers (think Airbnb or Visa) and earn significant interest from their treasury operations.
LOSERS
Debt-Heavy Businesses – Highly leveraged firms (car dealerships, REITs, private equity-backed businesses, etc) face rising borrowing costs, squeezing profits.
Real Estate & Housing – Mortgage rates stay high, making home buying less affordable and slowing new developments.
Consumer Discretionary Retailers – Consumers cut back on big-ticket discretionary spending when borrowing is expensive and credit card rates are high.
Dividend Stocks With High Payout Ratios – Some high-yield dividend stocks may also become less attractive as investors move money into safer, higher-yielding bonds and treasuries.
Based on this analysis, here is what we see as necessary for protecting and growing wealth in today’s market:
- Look for companies that benefit from high interest rates rather than suffer from them.
- When considering an investment, strong cashflow, low debt, and resilient demand are the key factors.
- If rates stay elevated, capital preservation and yield will be more important than chasing speculative growth.
Dynastic Wealth – Tips on Preserving and Building Your Legacy
This year, the IRS announced that the federal gift tax exemption was rising to $19,000 per person per year. This is an increase from previous years and creates opportunities for tax-efficient wealth transfer.
Here’s a practical example:
If you and your spouse have two children, each of you can give $19,000 to each child annually. That means each child could receive $38,000 per year ($19,000 from each parent) completely tax-free. Over time, this can transfer substantial wealth out of your taxable estate while giving your children capital to invest and grow.
This annual gift tax exemption is separate from your lifetime gift tax exemption. You can use both strategically, along with tools like trusts, to create an estate plan that:
- Reduces your taxable estate
- Transfers wealth efficiently to the next generation
- Protects assets for the long term
- Creates opportunities for investment growth in your children’s accounts
When it comes to using tax-free gifting to transfer your estate, timing and consistency are very important. Starting early matters because of compound growth. A gift of $19,000 invested today could grow significantly over decades in your children’s accounts.
Missing out on even a few years of gifting means missing out on years of potential investment returns.
Let’s look at the impact of starting early.
We’ll keep the gift exemption at $19,000 for this example. Let’s say you begin gifting $19,000 annually to your child when you’re 35 instead of waiting until 45. Assuming a 7% average annual return, those extra ten years of gifting and compound growth could mean a difference of over $1 million in your child’s account by the time you’re 65.
Also, consider going beyond cash gifts – you can gift appreciated securities, which avoid capital gains tax while using the full exemption amount. Many of our clients also coordinate their gifting strategy with education planning. They use these gifts to support college savings and other educational goals.
At Ridgewood, we help our clients integrate gift planning into their broader wealth strategy. The most successful wealth transfers we’ve seen combine tax efficiency with careful thought about how to prepare the next generation for financial responsibility.
If you would like to discuss with us about how to best use this increased exemption as part of your broader estate planning strategy, click the button at the end of this newsletter to book a call.
Here’s to building lasting wealth,
Ken Majmudar, CFA
Founder & Chief Investment Officer Ridgewood Investments
P.S. If you’re ready to explore how our institutional-grade investment approach can work for your portfolio, let’s schedule a time to talk below.
Gain Industry – Level Intelligence For Your Investment Strategy
Transform your approach to wealth building with institutional-grade insights. Schedule a private discovery call with Ken and the Ridgewood team to:
- Analyze your current portfolio positioning
- Explore sophisticated investment opportunities
- Design your personalized wealth architecture
Building generational wealth requires institutional-grade thinking. Let’s discuss how our sophisticated approach can work for your family’s future.
Important Disclosure: Ridgewood Investments is a registered investment adviser. This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results.
