We take an industry based approach if the positive factors are industry generic, says Anoop Bhaskar, fund manager, UTI Mid Cap
Anoop Bhaskar, fund manager, UTI Mid Cap, says that rather than focusing on past 12 months returns, investors should focus on asset allocation between large and mid-caps.
What is your investment universe?
Stocks excluding those part of the Sensex, Nifty and outside top 50 in terms of market cap form the investment universe for this fund. As an internal norm, we rarely go below ₹500 crs. market cap. Our focus area is companies with market cap of ₹4,000 crs. to ₹12,000 crs.
What are the essential attributes for the stocks to be in your portfolio?
The company should have a track record of generating positive operating cash flow (PAT + Depreciation less change in working capital) for at least 3 out of 5 years on a historic basis. We generally focus on companies where earnings growth could surprise positively. At times, if factors positive for a company are generic to the industry, then we take an industry based approach and buy a cluster of companies of the same industry, rather than building a large position in a stock.
What kind of stocks never enters your portfolio?
As stock market movements are cyclical in nature, hence no stock will remain a permanent "pariah". However, we would limit our enthusiasm for "perpetual" turnaround candidates, which usually sprout when markets are positive on mid caps. While it is possible that we may invest in companies which do not generate positive operating cash flow consistently, if we do succumb to such temptation, we would limit such stocks to less than 1% - 1.5% of the portfolio on an individual basis.
Anything else you would like to add about the fund?
Rather than focusing on past 12 months returns, investors should focus on asset allocation between large and mid caps. Unlike the large cap space, where the number of companies are limited, mid cap space is more varied and diverse. Hence, consolidate the number of large, large/mid cap fund in one's portfolio, and allocate across more number of mid cap funds in your mid cap allocation, as the character and focus of mid cap funds is more dispersed as compared to large cap funds.
What will you attribute the relatively superior performance of your fund to in recent years?
It could be attributed to our focus on stock selection. Merger of two mid cap oriented funds into a single mid cap focussed fund also helped. The stability of our research team and the maturity of their skill also helped in identifying new opportunities.
Is there any tactical miss you regret (for instance, not owning a stock or not owning enough of it)?
Defence, oil marketing companies and NBFCs have been sectors which have out performed. For various reasons, our investment in these segments was lower than what we should have ideally held.
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