Big money comes from turnarounds, not the already-great, says First Global’s Devina Mehra

Stressing the importance of focusing on turnaround stories rather than chasing already-successful companies, Devina Mehra, Founder and Chairperson & MD at First Global, which manages assets worth nearly ₹297 crore, says that the big money is always made when a company goes from bad to average, and not from when it goes from good to very well.

Mehra explained that in cyclical industries, the companies that have struggled the most often benefit the most when market conditions improve, as even small improvements in margins can significantly boost net profits.

She explained, “If the EBITDA goes up by 2% points, it is a tripling of the net margin, whereas the guy who was already at 10%, it is only from 10% to 12% so the percentage is not so high. It's a very interesting phenomena, which is why I always say that do the actual maths. Do the whole exercise as to what happens to cash flows, what happens to balance sheet if this happens? You will see very different scenario emerging.”

Mehra also discussed the current gold rally, cautioning investors about entering markets driven by fear of missing out. She labelled the current environment as "frothy territory." Drawing historical parallels, she pointed out that the last time gold saw a similar rally was in 1979, which was followed by a significant downturn.

She suggested maintaining modest gold allocations, while pointing out silver’s industrial demand as a potential growth driver.

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On global diversification, Mehra emphasised caution and the need for expertise. She noted that investors often assume the US market is the default global play, but that’s not always the case.

She explained that First Global has been underweight on the US while overweighting Europe and China based on tactical opportunities.

Rather than making concentrated high-conviction bets, Mehra’s approach is built on diversification. For 2025, First Global is overweight on FMCG, pharma, and healthcare, with selective additions in auto components.

Mehra’s view on banks is cautiously optimistic. She noted that after many years of underperformance, the banking sector is doing better this year, which has led First Global to hold a slightly higher allocation than usual. However, she does not consider banks a major overweight in her portfolio.

She advises investors to reassess holdings regularly, focus on cash flows and balance sheets, and approach high-risk sectors like artificial intelligence (AI), electric vehicles (EVs), and data centers cautiously.

For the entire discussion, watch the accompanying video

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