Cautiously Positive

Advising investors to expect moderate returns going ahead, R Janakiraman, Fund Manager at Franklin Templeton Investments India, shares his investment approach and talks about the Franklin India Smaller Companies Fund in an exclusive interview with Mutual Fund Insight. What is your approach to investing? Is it growth, value, growth at reasonable price (GARP), contrarian...? I really would not classify my investing approach into any of these categories in a complete manner. I follow multiple approaches while investing. There are times when I have applied a contrarian approach. Those were stock-specific calls. Having said that, if you look at what kind of philosophy I have followed in the last decade, it is broadly GARP. It is not totally GARP, but predominantly what I follow is close to GARP. The idea is to identify good-quality stocks and buy them at relatively reasonable prices for a longer time period. The investment philosophy does not vary and stays the same across schemes. Many money managers across the globe look at the investment strategies of well-known people like Warren Buffett, Peter Lynch, Charlie Munger and Philip Fisher? Have you ever done this? All the names you have mentioned are great investors and their written material is also extremely useful. So, I have gone through much of their material but you do not follow a particular investor in toto. Instead, you pick the best of material from the investment luminaries. I am also influenced by the thoughts of people like Ben Graham and Adam Smith, who has written a classic book called The Money Game. The book mostly deals with the behavioural part of investments. I would say that I have gained a lot from the writings of investment gurus. For example, the writings of Peter Lynch are very useful for mid-cap investing and his style of investing requires people to have a very open mind and it also calls for going and meeting companies. It is a kind of exploratory investing, which fits very well in the mid-cap category. I have been influenced by a lot of such very successful investors and would not like to limit myself to a particular investor. Franklin India Smaller Companies Fund has been a top performer in the mid- and small-cap category. What stocks or strategy contributed to the great performance of the scheme? The strategy is the same across all our schemes. The strategy is to identify and invest in good-quality businesses. Along with that, there are certain financial parameters we look at while investing. The key metric that we look at is whether a business provides a good return on capital. We like business that are less capital intensive and are able to generate good cash flows through a business cycle. The management should be good at both day-to-day execution as well as strategic decisions. The board should treat the minority shareholders i