An awe inspiring performance of beating the category by 10 percentage points is what makes one take a second look at this fund.
Classifying HDFC Growth as a pure large cap oriented fund would not be absolutely accurate as the fund maintains a significant exposure to mid and small cap stocks as well. In fact for a period of 12 months between March 2004- 2005 fund's focus shifted to mid cap stocks.
A glance at the quarterly results reveals that the fund has been consistently performing in line with the category returns, with spurts of brilliance every now and then. Buy and hold seems to be the preferred strategy adopted by the fund, with stocks like BHEL in the portfolio that have been held for more than 73 months.
In such a frenzied equity market, the fund has managed to add that something extra to produce extra ordinary results. Good sector calls has been just one feather in the management's cap. For instance while the category as a whole was neutral towards the healthcare sector, the fund's allocation increased from 4.44 per cent in January 2006 to a whopping 11.33 by the end of the year on the back of concentrated bets in only two stocks: Divi's Laboratories and Sun Pharmaceuticals. Similarly the fund defied popular trend and pruned its allocation to financial services while significantly increasing exposure to the automobile sector.
Yet, the investment strategy cannot be called aggressive; it is comfortably diversified across an average 30 odd stocks which is typical of a fund like HDFC Growth. Moreover, exposure to particular stocks and sectors are done in a very systematic phased manner by building positions slowly.
While it is a good pick, don't count on the fund to outperform the category every single time. The new fund manager has been around for a year now, and he has produced super normal returns by doing something a little different from his peers. It remains to be seen whether he can bring up the fund to the likes of HDFC Equity and HDFC Taxsaver.
This article was originally published on July 31, 2007.
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