It has been ruling the performance charts. Besides calendar year performances, even the year-to-date (YTD) and 1- 2-and 3-year returns are ahead of the category average.
Focused Bluechip was launched in May 2008 when equity markets across the globe were falling. As the market kept going down, the fund manager was in no tearing hurry to deploy cash and the debt exposure averaged close to 30 per cent for the first five initial months of its launch. The portfolio had an exposure of around 16 per cent to derivatives between July and December 2008. Yet, its performance in the September 2008 was surprisingly almost equal to the fall of the category average though it managed to stem the slide better in the December quarter.
By the time the market began to rally in March 2009, the fund held close to 91 per cent of its assets in equities (including equity derivatives). After that, there has been no looking back.
The mandate of the fund allows the fund manager to explore options from the Top 200 stocks in the equity universe, in terms of market capitalisation on the NSE. But Kothari has restricted his universe to Top 100 stocks. Within that, he has invested only in 36 stocks this far, some of which have been held since inception. Currently, close to 65 per cent of the fund’s portfolio comprises of Nifty stocks.
What you will not find here is a radically changed portfolio every now and then. Since Kothari prefers staying put once he buys a stock, the portfolio changes its complexion pretty gradually. However, if the price of the stock gallops and he finds it way of his comfort zone in terms of valuation, he would exit.
Kothari looks for companies where the underlying business is very stable and he has a fair degree of confidence in its management. After that, valuations, growth prospects and high earnings possibility are other factors that come into play.
He shuns those which are heavily leveraged, which would explain why Real Estate and Construction never featured in his portfolio, probably also because there no such options amongst the cream of the large caps. Surprisingly, his exposure to Metals has always been on the lower side. The BSE Metal index delivered 233.68 per cent in 2009. All through that year, exposure to this sector never crossed 4 per cent. In hindsight, that was a big miss! The limited universe and tight portfolio with low amount of churning are the mark of this portfolio. A reliable option for an investor who wants to stick to the big boys.
This article was originally published on October 07, 2011.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
