Jinesh Gopani, fund manager, Axis Long-term Equity, talks about the investment strategy of the fund, while discussing the few principles that are core to their approach.
What is the investment strategy for the fund?
We follow a rigorous investment process across various schemes as is articulated in the internal document. The fund focuses on investing in different stories as per the different stated investment objectives. Furthermore, thorough research helps us weed out those companies which do not meet stated objectives or adhere to our investment philosophy on critical parameters such as corporate governance, track record, performance etc. Based on these parameters we create a suitable portfolio so all the above steps translate into a robust process which helps us develop a fairly diversified portfolio. In all this, scalability of the business model as well as sector outlook for 3 - 5 years is an important indicator defining the portfolio selection.
As the fund is a 3 year lock in product, we have designed the portfolio to buy and hold strong secular businesses. We have been bottom up stock pickers which has sound business models, pricing power, quality management and have consistently created long term wealth for its shareholders. Simply put, smart stock picking has been the key for becoming best performing fund since inception in this otherwise volatile market for most of last 5 years.
Few principles which has been core to our investment approach has been:
- Clean and excellent management pedigree with track record to manage business in all economic cycles
- Superior and scalable business model
- High sustainable growth & superior return metrics
- Attractive Industry
What is included in the portfolio and what is avoided?
As we are bottom up stock pickers, we have stocks across sectors which can deliver potential high growth. We are investing more in the 'Domestics sector' such as Pvt Sector banks,autos, auto ancillary, housing & consumption sector , etc., basically the retail consumption area where the Indian consumer opportunity can be leveraged. Also very bottom stock selection in Pharma, IT and defence sectors. Normally, the portfolio avoids highly cyclical stories and highly regulated sectors.
Tax planning funds have a different redemption pattern given the three year lock-in compared to the diversified equity schemes. How much does this factor play a role in fund management and investment? Does it have any bearing on cash allocation?
As liquidity risk forms important metric while constructing the portfolio, the fund manager have to allocate funds keeping in mind the internal limit set so as to avoid any sharp down moves to address flow issues in the fund.
What will you attribute the relative consistent performance of your fund in recent years?
Consistent performance of the fund is the outcome of underlying robust investment philosophy followed. It is centred on four pillars viz.,Thorough bottom up research, Identify scalable businesses having economic moat, strong management team and lastly superior risk management systems. Within the fast growing industries, it targets companies with pricing power, cost advantages, sustainable competitive advantages, innovative products or services and ability of the business model to generate steady free cash flows over a longer period of time. The fund endeavors to buy and hold high growth secular businesses run by dynamic management with utmost integrity.
We have been consistent with this philosophy since day one and this has helped us create wealth for our investors.
Any tactical miss you regret (not having, or not having enough or holding something) in your portfolio?
Our stock selection strategy is completely research based and it is armored with proper checks and balances to ensure its fit in our portfolio construct. Although there have been a few cases where certain stocks have not met our expectations and we have been lucky enough to exit them at the right time.
Please click here to read the analysis of this fund.