Chirag Setalvad, Senior Fund Manager, Equities, HDFC Mutual Fund is a bottom-up investor. He looks for quality businesses with decent cash flows and run by honest management. His typical holding period ranges from three to ten years. Setalvad stays away from stocks that are glamorous, the 'hot stocks', which, according to him, produce poor returns in the long run. Instead, he prefers to stick with neglected sectors. Such sectors offer two distinct advantages: earnings pick up in the future and the low valuations take care of the downside.
What he's buying: Banks and pharma stocks
Setalvad added banks and finance stocks to his funds, loading up on HDFC, HDFC Bank and ICICI Bank. He also added pharma companies like Aurobindo, Merck and Glenmark.
What he sold: Financials, large and mid caps
Though Setalvad added the above financial stocks, he pruned others like IndusInd Bank, Bajaj Finance and Yes Bank. He also cut his position in Reliance Industries, Oracle Financial Services and Lakshmi Machine Works.
What he's loading up on: Dilip Buildcon
This road construction company reported an average annual revenue and bottom line growth of 35 per cent and 26 per cent respectively. It has bagged orders worth Rs 13,900 crore this financial year, taking its order book to over Rs 24,000 crore. The opportunity in the road sector is vast, with the government committing to develop roads at a fast clip. The NHAI has a target award of 8,000 km in FY18, of which 4,000 kilometres of awards have already been achieved. A fast growing market for Dilip should hold it in good stead. The stock trades at 22x earnings.
An interesting pick: Crompton Greaves Consumer Electricals
Trading close to 50x earnings, Crompton Greaves is one of Setalvad's largest additions. Crompton is a consumer electric company that sells fans, lights, etc. The government's push towards rural electrification and affordable housing make Crompton a key beneficiary.
Here's the link to the other stories in this series.