Aditya Birla SL Pure Value: Retains its focus on value - Buy

A fund that truly sticks to its label, value investing, and has benefited from the style

Aditya Birla SL Pure Value has been around for a little over 10 years and has been a chart-topper across time-frames.

The scheme has a healthy blend of stocks across market capitalisations, though it does have a mid-cap tilt.

Despite the holdings being anchored by value, which can result in long periods of tepid showing, the fund has outperformed its benchmark and peers by a wide margin over the years.

ABSL Pure Value has delivered splendid 20 per cent annual returns over the past 10 years, placing it on top of the mid-cap fund universe, ahead of even quality names such as IDFC Premier Equity, HDFC Mid-Cap Opportunities and UTI Mid Cap. It has delivered 2-7 percentage points higher than value-focussed funds such as L&T India Value and ICICI Pru Value Discovery over the long term.

 

 

The out-performance vis-à-vis its benchmark — BSE 200 — has been to the extent of 10-15 percentage points over the long term. This performance has been achieved without taking too much risk.

Thus, the scheme is suitable for investors with an above-average risk appetite, looking to derive superior gains over a long term of 7-10 years. Opting for the direct plan would ensure substantially lower charges (1.04 per cent) compared with the regular option (2.34 per cent).

Valuation focus

ABSL Pure Value does not load up on mid-cap stocks, and generally, allocates 50-60 per cent of its portfolio to the segment. Given the fund’s focus on valuations, its picks may be a tad offbeat for momentum seekers. So, chemicals, petroleum products and select finance companies are among the fund’s top holdings. Consumer durables, too, are among its favourites.

The fund has continuously increased its exposure in the chemicals space and has regularly churned holdings to catch the winners, as the segment is fairly diversified with varied players coming up trumps at different times.

By not loading up on banks, as most schemes are prone to, ABSL Pure Value has managed to shield itself reasonably well in the heavy correction witnessed in the space over the past one year.

Tata Chemicals, MRF, HPCL, L&T Finance Holdings, India Cements and Century Plyboards are among its top holdings. It is clear, therefore, that the fund does not chase momentum stocks and retains its value focus. But, it has consistently demonstrated its ability to identify picks that can gain from broader market rallies.

Exposure to individual stocks is mostly less than 5 per cent. There are as many as 40-65 stocks in its portfolio across time-frames, thus making for a diffused moderate-risk portfolio. Cash and debt calls are taken during volatile markets and could account for 7-8 per cent of the portfolio at times.

ABSL Pure Value can be the core part for an investor’s portfolio, provided the investment horizon is 7-10 years and there is an appetite for digesting volatility.

SEBI Guideline changes

ABSL Pure Value will not be affected by SEBI’s guidelines for mutual funds, and will continue with its present name and mandate. Its benchmark, though changes, from BSE 200 to BSE Enhanced Index Value.

This index came into existence in December 2015. It mostly has companies from the metals, banks, oil and power sectors. Given the under-performance in these spaces, the Enhanced Value Index’s returns are far lower than BSE 200’s.

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