The investment traveller

SPECIAL REPORT

Deven Sangoi

Good management forms the foundation for all investment decisions for Prudential ICICI's senior fund manager Deven Sangoi.

Deven Sangoi is a big fan of Jim Rogers' 'travel the world and expand your horizon' philosophy. And he uses it to spot stocks that could be the next big story on his trips in India and abroad. A collection of such stocks in the six funds that he handles have helped give good results for investors over the last year.

His Growth and Emerging S.T.A.R. funds have returned 61 and 53 per cent respectively in the past year. His decade long experience in the capital markets where he has tackled bull and bear markets is proving to be an asset as he decides on his next course of action with the Sensex crossing the 13,000 points mark.

The equity way to wealth
For the electronic engineer who was interested in the markets since college, "equities are the best way to create wealth." And this is true not just for the periods when bulls go berserk as they are now but also in times when markets are heading south for long periods.

Giving an example, Sangoi says that the Birla Advantage Fund launched over 16 years ago has seen successive bear and bull markets with returns yo-yoing from high double digits to negative over this period. But the returns? A healthy 25 per cent since inception. Sangoi finds equities challenging yet exciting and believes like Benjamin Graham that a focus on fundamentals is key for unlocking long term growth.

The focus on underlying value according to him is well encapsulated in Graham's phrase that the market is a voting machine in the short term and weighing machine in the long term.

Past financial data, he says gives a clear indication of the way a company performed both in good as well as rough times. While these are broad principles, what are the specifics that Sangoi looks at when picking stocks?

The four essentials
"A good management will help a company bounce back from temporary setbacks or cyclical downturns," he says. Sangoi believes that a good management not only strengthens a business but also takes care of its minority shareholders.

The quality of the business is also important. And how does one gauge this? For secular firms consistently high return on investment is an indicator, while for cyclical sectors how businesses perform in downturns indicate their ability to withstand volatility.

Since markets always look for growth stocks, the opportunities available to take the company forward play an important part in Sangoi's calculations.

He also looks at how a company allocates capital. "We have many examples of companies that engage in unrelated diversifications. Proper allocation can work wonders, whereas moving away from your core competency can stretch your resources and dilute your focus."

In addition to this, for Sangoi spending time in understanding a business is more important for a fund manager than reacting to short term movements on the technical charts.

Markets in the classroom
For the senior fund manager who is looking after investments of Rs 2,400 crore, understanding the business takes time. "Investing is an art you have to learn over a period of time. Experience coupled with discipline, focus, analysis and consistency will open the doors to a successful stint in the markets," he says.

Introspection is a powerful weapon for fund managers, believes Sangoi as it tells you where you are going wrong. It also points out shortcomings and the need to relearn as well as reinvent yourself to survive.

Your ship is in danger of sinking when the risk-reward scenario is not in favour and you are not able to assess that, and when you stop adapting yourself to changing market circumstances.

The experience over the years has helped Sangoi turn ordinary stocks into multi-baggers for his previous employers--Alchemy and Birla Sun Life AMC. 
 

SANGOI'S PERFORMANCE Scheme returns (in %) as on Nov 2
	One year	Category
Emerging S.T.A.R	53	48
Growth	61	48
Services Industries	33	48

Hits and misses
This Newport University MBA has a number of hits to his credit. These have come about during his five year tenure at Birla Sun Life where he was handling Birla Dividend Yield Plus Fund from 2003 to 2005.

Among his top picks were GE Shipping, Thermax, Hero Honda and Crompton Greaves. His process of selection was in line with the investment philosophy of the fund: pick stocks which had high dividend yields, good cash flow and muted growth. His worst picks? SSI, Sterlite and PTC India.

"While there was nothing wrong with these picks, the industry dynamics or government policy saw their fortunes dwindle," he says. So what should a portfolio look like?

"Have a collection of stocks that have short, medium and long term potential. While the core of the portfolio will constitute your long term bets, medium and short term stocks will make up the outer part and periphery," he says.

The companies Sangoi is betting on are those that are into outsourcing, Indian MNCs and software product makers. The ones that he would like to avoid are FMCG and select commodity sectors like sugar.

When the markets are silent
In his spare time, Sangoi immerses himself in biographies, investment and business management books. Common Stocks and Uncommon profits by Philip Fisher is one of his all-time favourites.

He also likes to tap into the investment philosophies of Warren Buffett, Peter Lynch and Bill Miller. To calm his nerves he listens to music and meditates.

Travel is another passion and he frequently engages in trips with his wife and 11-year-old daughter Tanya. His latest sojourn? A trip to the North East from where he came away impressed with the development and progress of the seven sisters.