ICICI PRUDENTIAL DISCOVERY
This fund identifies stocks whose prices are low, relative to historic levels, book values (BV), earnings and cash flow potential. It picks stocks with high potential, at a discount to their inherent value. Selection is focused on the merits of the stock, unperturbed by the market trend. Investors need conviction and investment discipline to realise these gains. It invests in well managed and fundamentally strong companies.
| Period | Returns (%). |
| 3-month | -8.98 |
| 6-month | -4.63 |
| 1-year | 13.94 |
| 3-year | 15.24 |
| 5-year | 15.21 |
| Returns as on March 1, 2011 | |
It isn’t surprising to see the fund move in and out of sectors wherever it sees value or lack of it. A mix of investing strategies have been employed in this fund- contra, dividend yield, low valuations and special situations.
Financial services, metals and healthcare are the top three sectors, but the stock choices aren’t typical. The top ten stocks include some uncommon and offbeat companies as well. The fund focuses on mid-caps (35 per cent), small-caps (35 per cent) and large-caps (30 per cent). The equity exposure is always above 90 per cent.
The long-term track record is impressive and it has fallen less than the category average in the current market upheaval.
Though it trounced the competition in 2009 and was a top-quartile performer in 2010, its value-based approach can be a letdown during bull runs. Since it tilts towards a mid- and small-cap portfolio, its downside protection is moderate. Its market cap tilt and value-based approach make it mandatory to stay invested for the long term.
IDFC PREMIER EQUITY PLAN A
This fund seeks to invest in companies that may not have scale at the time of investment, but have the potential to become market leaders.
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In periods when the fund manager perceives market valuations to be dangerously stretched, lump sum subscriptions are stopped and only investments made via systematic investment plans (SIPs) are accepted.
| Period | Returns (%). |
| 3-month | -13.76 |
| 6-month | -11.07 |
| 1-year | 15.10 |
| 3-year | 8.66 |
| 5-year | 21.62 |
| Returns as on March 1, 2011 | |
The fund has outpaced its benchmark, the BSE 500, during bull phases and contained the downside during corrections. In 2008, the fund quickly moved a fourth of its assets to debt, checking the fall.
It invests in small-cap and medium-sized businesses with good long-term potential, at cheap valuations. Though the portfolio sports a mid-cap bias, the fund picks stocks that are leaders in their sectors and have attractive valuations. The fund manager does not shirk from contrarian stands or bold sector bets.
Fast moving consumer goods (FMCG), services and chemicals are the top three sectors. The portfolio comprises of 25 stocks. Mid-caps form 60 per cent of the portfolio and 30 per cent is small-caps. The top 10 stocks account for over 40 per cent of the assets.
The fund returned 32 per cent in 2010 with a 24 per cent five-year annualised return (as on January 31, 2011). But with the focus on small companies, strong top sector bets and a fairly tight portfolio, there is an inherent strong risk taken to deliver that performance.
ING DIVIDEND YIELD
The fund aims to invest in stocks which offer high dividend yield. The fund’s value-based strategy is to gain from investing in fundamentally strong and free cash flow generating businesses. It has low volatility due to investment in high-yielding stocks. It tries to include stocks that yield dividend above that of the Nifty and stocks with liquidity.
| Period | Returns (%). |
| 3-month | -9.87 |
| 6-month | -6.31 |
| 1-year | 18.07 |
| 3-year | 13.35 |
| 5-year | 15.63 |
| Returns as on March 1, 2011 | |
The fund maintained a mix of stocks across market capitalisations, with a tilt to mid-caps. Since it focuses on mid- and small-cap stocks, small asset size is an advantage. With assets of less than Rs 50 crore, the fund deftly moves in and out of stocks, sectors. It tilts towards a buy-and-hold strategy, which has helped the fund gain handsomely.
Half the portfolio accounts for financial services, technology and energy. The fund is well diversified with 34 stocks where allocation to a single one is not over four per cent. Micro Inks, NIIT Technologies, Bharati Shipyard and Oriental Bank of Commerce were some picks that helped deliver 105 per cent in 2009.
The fund has been improving each year. When compared with other dividend yield in the category, it made a mark in 2009 with a return of 105 per cent, the prime reason being the tilt towards smaller cap stocks, which had triggered the rally. Compared to the mid & small cap category, it has been a first or second quartile performer.