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True to Label

After a frustrating start, Magnum Contra's value philosophy has taken it to the top of the performance charts. The fund's large-cap orientation makes it less volatile. Investors looking for value orientation can choose this fund.

Taking a contrarian view is a tough call. But this fund has pulled it off and has been rewarded by a place in the first quartile in the past two calendar years. Even recently, the fund is up 23.58 per cent on the year-to-date basis as against the benchmark BSE 100's gain of 9.47 per cent as on July 18, 2003.

The fund's contrarian view on petroleum and metal stocks has been hugely rewarding in recent times. This has, however, not always been the case. In its early years, the fund didn't touch the IT sector. As a result, it could not produce any gains in the technology driven rally of 1999 and early 2000. But, when the market tanked in 2000 the fund's PSU stocks and others like Hindustan Sanitaryware were also hammered sending the fund reeling. It was in this period that the fund made heavy investments in HPCL at the bargain basement level of Rs 140.

This combination of PSU stocks without any allocation to technology, has now turned out to be a gold mine for the fund. In another bad year, 2001, the fund rode the pre-budget rally on the strength of stocks like HPCL, Reliance and Concor. These and other PSU stocks helped the fund shoot ahead when markets recovered after 9/11. In between these two rallies, it avoided a pasting when markets tanked post-budget. This superlative performance sent the fund to the top of the performance charts. When mid-caps rallied in 2002, the fund mostly stuck to large caps. As the market drifted southwards in the middle of the year, the fund's sizeable PSU allocation helped it in preserving value. Though the fund did not gain much in the year-end rally, earlier gains were sufficient to end the year on a very positive note.

Magnum Contra, however, has not participated in the value unlocking in PSU banks. SBI has been the fund's only holding in the sector and the fund has gained from the stock's recent rally.

Magnum Contra has remained true to label by sticking to its value theme under all sorts of market weather. A large-cap orientation has also helped it keep a tight lid on volatility. Investors looking for value orientation can unhesitatingly choose this fund. An issue of concern, however, is single investor concentration in this fund. As on March 2003 two investors hold 68.8 per cent of the funds assets.