Despite its recent stumble, Birla Advantage still makes a strong case for long-term growth investors. Near-term it lands in the bottom half of its peer group, but its long-term performance is still impressive.
Except for getting tech-obsessed during 1999 and 2000, the fund has kept its exposure spread across diverse sectors. Fund manager Bharat Shah has long demonstrated a knack for spotting opportunities earlier than others and scouts around for large-cap market leaders. The strategy paid off well in 1999, with a massive 300 per cent return. At that point, FMCG, technology and healthcare stocks formed a major chunk of its portfolio. But the great ride did not last long.
In 2000, Shah's strong belief in revival of the tech sector led to disaster. The fund lost 40 per cent that year leaving it in the bottom of the category. The problem was not that it bought at highs and sold at lows. It just held on too long in the face of the tech collapse.
Having realised that, it had goofed, the fund has revisited disciplined investing since 2001. The portfolio once again looks like that of a diversified fund instead of a tech fund. The stakes in tech stocks are much below the category norm.
What is more striking about the change in its style is the shift towards mid-cap companies like United Phosphorus, Thermax and Vysya Bank. Its rationale: while valuations of large businesses have gone down, there are plenty of well-run small-sized businesses in this category that have shown a positive trend and can prove to be globally competitive. Overall, the fund with a vast exposure to mid-caps looks an appealing choice only if its belief doesn't go wrong.
It is unlikely that the fund will clock the fantastic returns of 2000. Nevertheless, it is good long-term growth holding for the more aggressive types. As 2002 draws to a close, Birla Advantage has almost nothing in common with what it was a couple of years ago—not the portfolio, neither the sectoral focus, nor—hopefully—fund manager Shah's views on how long to wait before booking profits.
This article was originally published on November 11, 2002.
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