Portfolio Moves: Taking the road less travelled

PPFAS Long Term Value has made a good start with global investments and dark horse picks



It invests wherever it finds value — small-cap, mid-cap, large-cap, domestic, international — and picks off-beat stocks.

That’s the mandate of PPFAS Long Term Value fund, managed by Parag Parikh Financial Advisory Services’ asset management company. The fund was launched in May last year and is the only one from the PPFAS stable.

While a value focus requires holding for longer timeframes, the fund’s performance since its inception has been good, its NAV gaining 7 per cent.

The CNX 500, against which it is benchmarked, has lost 1 per cent in this period.

PPFAS Long Term Value shows no preference to sectors or market capitalisation. Its portfolio has sported around 12 to 14 sectors. That’s a lot for a fund that holds less than 30 stocks.

While this makes the fund more vulnerable to swings in stock prices, especially those that are of lower market cap, the focus on value caps some of this risk.

Further, the reverse is also true - surge in some stock prices can lift returns. PPFAS Long Term Equity has kept portfolio valuations below that of its benchmark for the most part.

Its latest portfolio, for example, carries an average price-earnings multiple of 14 times, below the CNX 500’s 17 times.

The fund has also taken a fair measure of debt and cash calls, with equity investments at less than 90 per cent.

This may, however, be on account of slower deployment of the proceeds raised in the offer period, as well as the turbulence in the equity market in the past several months.

Off the beaten track

Banks and finance have been the top sector holdings, with stocks such as Axis Bank, J&K Bank, and YES Bank making up the exposure. These are conventional picks. But elsewhere in its portfolio, the fund has moved off the beaten path.

Zydus Wellness, Selan Explorations, Gujarat Gas Company, Noida Toll Bridge, and Maharashtra Scooters (automobiles) are some examples. Selan, for instance, has almost doubled in the past six months. While not all of these have delivered smartly in the past few months, it is too short a time to correctly judge performance.

Other stocks that have delivered well since they made their way into the portfolio include ICRA and GSK Pharma.

Moody’s open offer for ICRA announced last week should provide a lift to this stock.

PPFAS Long Term doesn’t rely on domestic markets alone for value stocks either.

Far and wide

International picks such as Nestle SA and 3M Co are available at a fraction of the valuations their Indian arms trade at.

The logic espoused by the fund house is that global consumer stocks are today available at far more reasonable valuations than their locally listed arms.

3M Co, for instance, is at 19 times trailing earnings, while 3M India is at a whopping 79 times.

Investments in foreign equities have moved between 14 and 20 per cent of the fund’s portfolio. A weak rupee will also help in boosting returns from these investments.

A value focus and compact portfolio requires adroit stock selection. PPFAS seems headed down the right path.

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