Anand Radhakrishnan, fund manager, Franklin India Prima Plus Fund, talks about how the fund invests in wealth-creating whose competitive advantages translate into superior returns.
What is the Investment strategy for the fund? (Including internal rules investment universe, capitalization orientation and on maximum cash allocation)
Franklin India Prima Plus (FIPP) is a diversified equity fund with a mandate to invest in wealth creating companies whose competitive advantages we believe will translate into superior return on capital. The portfolio comprises mainly of large cap stocks with some exposure to mid and small cap stocks.
What are the essential attributes for the stocks to be in our portfolio?
FIPP invests in wealth creating companies whose competitive advantages are likely to translate into superior return on capital. The fund follows a bottom-up approach to stock picking and in that sense, the sectoral allocations are a derivative of the individual stock picks rather than top-down views.
Our research focuses not only on the track record of companies, but also on their future strategies and their ability to continue to generate wealth on a sustained basis in a competitive business environment. This strategy has helped the fund deliver superior risk-adjusted returns over the last 20 years through various market cycles. During all market conditions, the key parameters that drive our investment decisions are fundamentals and valuations. While typically we at the Franklin Equity Group adopt a blend of growth and value investment styles, FIPP tends to focus more on growth companies.
What kind of stocks never enters your portfolio?
Our sectoral exposures are a derivative of the bottom-up stock selection process. We believe there are interesting opportunities in the financial sector. Private sector banks are gaining market share and growing faster compared to their state-owned counterparts. In general, private sector banks have also enjoyed higher levels of profitability and have tended to maintain better-quality balance sheets. We also believe a number of industrial stocks may be well positioned for a recovery in economic growth, and we see some interesting potential opportunities in that space. Besides that, we have also added exposure to consumer discretionary companies, as with the macro-economic recovery cycle, the consumer sentiment will also turn positive. As far as cash levels are concerned, our portfolios are typically fully invested and the cash exposure is only to meet liquidity needs and/or due to portfolio restructuring/ rebalancing. This is because our product portfolio comprises long only products - a product structure that by design forbids managers from taking cash calls.
What will you attribute the relative consistent performance of your fund in recent years?
We will not be looking at companies with poor corporate governance, short term momentum ideas which have poor long term prospects, fleeting competitive advantages, businesses with artificial barriers to entry, unexplainable financials etc.
Any tactical miss you regret (not having, or not having enough or holding something) in your portfolio?
Certain discretionary consumption plays in Auto, Consumer Durable segments have done very well and the fund missed to capitalize on those ideas well.
Please click here to read the analysis of this fund.
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