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Revisiting the Underdogs

My father had invested in Taurus Starshare, Taurus Discovery Stock, Magnum Equity and Magnum Multiplier Plus many years ago. Should I hold them?

My father had invested in Taurus Starshare, Taurus Discovery Stock, Magnum Equity and Magnum Multiplier Plus many years ago. Should I hold them?
Sutirtha Banerjee

We have received many queries regarding these funds. All four funds have posted an unimpressive performance in recent times, which has compelled us to make a strong call on them. Before that, let's see what has gone wrong with each fund.

Performance of the Underdogs
Fund  Taurus Starshare    Taurus Discovery Stock    Magnum Equity    Magnum Multiplier Plus  
Year Return Rank Return Rank Return Rank Return Rank
1995 -33.52 22/33 -19.59 3/33 -25.5 10/33 -27.38 14/33
1996 -29.77 33/36 -45.2 36/36 -11.77 15/36 -11.97 16/36
1997 -12.17 32/34 -9.38 31/34 5.7 17/34 13.41 7/34
1998 10.85 7/29 -9.26 18/29 8.06 11/24 0.33 12/24
1999 135.42 17/38 86.79 27/38 206.24 7/38 218.92 4/38
2000 -25.93 26/49 6.43 2/49 -40.08 42/49 -50.31 49/49
2001 -38.29 54/58 -45.97 57/58 -34.68 51/58 -41.59 55/58
2002 17.52 23/60 9.03 44/60 4.96 51/60 -2.22 58/60
2003 112.52 29/71 95.64 48/71 98.90 45/71 117.60 24/71

In case of Taurus Starshare, constant reshuffling and inconsistent strategy has led investors nowhere. Launched around the IPO boom in 1994, the fund built a widely diversified portfolio. Soon after, the IPO bubble burst, taking the fund along with it. A large portfolio of illiquid stocks acquired in the IPO boom played havoc with the fortunes of Taurus Starshare. Though it gained some ground during the tech-led rally of 1999-2000, its losses in the subsequent bear phase evened out its gains. Moreover, the fund totally missed the PSU rally of 2001-02. Thus, it has had more misses than hits. Though the fund has made some ground recently, considering its long history of under-performance, you could consider moving out of the fund.

The story is similar with Taurus Discovery Stock. The fund scouts for undervalued stocks that have the potential to become tomorrow's blue chips. But Taurus Discovery Stock has hardly discovered any hidden diamonds. By its very nature, the fund has invested in small and mid-cap stocks, thus making it risky. Even this fund was affected badly when the IPO rally collapsed in 1995. Year 2000 provided a fresh lease of life to the fund, which didn't last either. A high exposure to technology with no PSU stocks in its kitty, this fund was among the worst performers in the category through 2001 and 2002. The fund's inability to make decent gains in a rising market and its tendency to lose more in a falling market make it an inappropriate investment to hold on. Exit options can be exercised.

Magnum Equity's total return of 12.28 per cent (annualised) in the past 13 years is quite decent but not as good as other well-managed equity funds. Till 1999, it was a decent performer and had paid good dividends to its investors. The major setback came after the tech crash of 2000 as the fund was overweight on tech stocks. The subsequent years have been harsh on this fund and it has languished in the bottom of the category. The fund hasn't got things right: it missed the PSU rally in 2001 and 2002, the mid-cap rally of 2002 and 2003, and the appreciation in PSU bank stocks. There is a plethora of funds that have done better than Magnum Equity. Thus, moving out some portion of your investment in some other good funds will be a better idea.

Magnum Multiplier is one of the most volatile funds in the category. Though its portfolio looks well diversified, loaded with quality stocks, the fund's inability to book profits at the right time makes it unreliable. This fund does well when the markets move up but it's the higher downfall in the subsequent bear phases, which is a cause for concern. For instance, post-9/11 till Budget 2003, it gained 40 per cent (in line with the category average), but it lost the most in the category in the subsequent dull phase. Again, in the current market rally, the fund is making smart gains. But going by its history, the downside risk is higher here. Thus, if you think that markets are on a high, book your gains.

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