‘Value’ For Money - Tata Equity PE Fund

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Are you one of those who search for “value” in each and everything that you buy? Then this fund is just the right choice for you! And for a novice investor, thinking how one can find value in stock market, all that is needed is to find stocks of the companies that are trading “cheap”. In equities, “cheap” means buying stocks that are available at low Price to Earnings (PE) and Price to Book Value (P/BV) – one of the most sought-after criteria under value style of investing. In fact, great gurus such as Sir Benjamin Graham – father of financial analysis & value investing and Warren Buffett – one of the world’s most successful investors, religiously followed these criteria.

As the fund’s name indicates, it has to invest around 70 per cent of the total assets in stocks having a trailing P/E ratio less than that of the BSE Sensex at the time of investment. Currently, the average P/E of the portfolio is around 17 times the trailing twelve-month earnings of the portfolio stocks, whereas the Sensex stocks average P/E stands over 23 times, indicating fair upside for the fund. Though definitely not a head-turner with their performance, value funds provide stability and consistency which lowers the risk of your overall investment. It is imperative for the investor to remain patient as such funds may take longer time to reward its investor. This is because the value stocks may take longer time in value unlocking.

This fund’s mandate makes it one of those funds that follow the value style of investing which may help restrict losses in the bad times. Its fund manager, Sachin Relekar, managing this fund since May 2008, is quite astute in managing portfolio risk and performance. Furthermore, Sachin currently has almost 50 per cent of the funds portfolio invested in the small and mid-cap stocks that may bring zing in the performance, while the value style as well as large-cap exposure will help the fund check its downside. In August, the fund had a well diversified portfolio of 59 stocks wherein the top ten stocks contributed over 37 per cent of the total assets. The top three sectors – Energy, Financial and Technology contributed 43 per cent of the assets.

Sachin also manages other four funds at Tata AMC and all these funds have managed to remain ahead of the curve by beating the category returns by a big margin. Coming to this fund’s performance, it has seen its ups and downs; though it has managed to outpace the category returns by 304 and 561 bps in one and three-year period. Thus, even conservative investors can take exposure to this fund through SIP.