Off The Trodden Path

The focus of contra funds is to invest in those stocks or sectors that are out of favour in any market condition. A contrarian buys ill-priced stocks (mainly due to market sentiments) with distressed valuations without compromising on a company’s fundamentals and growth prospects. A contrarian doesn’t follow herd mentality and tries to find under-valued stocks. As such, this fund is no different. It has recently completed 10 years and has managed to beat the average category returns on a consistent basis.

Since its inception, this fund has managed to provide remarkable returns of 27.51 per cent on an annualised basis. This proves its mettle in the contrarian investment approach. In fact, it has managed to stay ahead of the curve in both the bullish and bearish market conditions. Such consistent performance by the fund has placed it in the top league amongst its diversified peers. The fund follows a flexible investment approach and invests in stocks across the market cap without any style bias. However, looking at the fund’s historic portfolios and investment approach, one can say that this fund has behaved more like a diversified fund than being only a contrarian fund. As per the fund’s June 2009 fact sheet, energy and financial services were the top two sectors for the fund that together contributed 36.39 per cent to the total assets. And these two have been the top sectors for the fund over the past few months. On a MoM basis the fund has increased its exposure in the energy sector, while the exposure in the financial sector recorded a marginal fall.

Looking at the 73 stocks’ portfolio wherein the top ten holding of the fund accounted for 35.10 per cent of the total assets, the fund seems well diversified. At the same time, the fund had a large-cap bias that accounted for over 71 per cent of its total assets and the mid and small-cap contributed over 18 per cent of the total portfolio. Meanwhile, the cash and equivalent holding of the fund accounted for the remaining 10.68 per cent of the portfolio. The fund seems to be taking aggressive cash calls considering that the cash and equivalent holding that stood at 27.03 per cent of the portfolio in February has, since then, gradually reduced to the current levels.

Pankaj Gupta, who has over four years of experience in fund management, equity research and corporate banking, took over this fund’s management in May 2007. At SBI, Pankaj also manages the other two funds viz. Magnum Comma and SBI Bluechip. While Magnum Comma hasn’t managed to beat its category returns, SBI Bluechip has comfortably beaten its category in the last one year. This fund, over a period of one and five years, has managed to beat the category returns by 1,188 and 721 basis points. Thus, in view of the fund’s consistent long-term track record, diversified portfolio with large-cap concentration, and lastly the ‘value-based’ investment approach, even low risk investors can take exposure in the fund through SIP.