Magnum Contra has just been through a critical manager change. When Sandip Sabharwal, who was supposed to be the man responsible for this fund's phenomenal success, deserted it last year everyone, including Value Research, was apprehensive about the fund's future. However, Magnum Contra continues to impress, even though it is too early for a final verdict.
Overall, we don't see a major shift in the fund's approach. New manager Sanjay Sinha, who has over 16 years experience in fund management, has maintained the portfolio continuity. Barring four stocks (KPIT Cummins Infosystems, Kajaria Ceramics, Subex Systems and Wockhardt), he has kept the entire portfolio of his predecessor. Among the new additions, Sinha has introduced Union Bank of India, Tata Steel, Dredging Corpn of India and Biocon. Tata Motors, Oriental Bank of Commerce, Maruti Udyog, MTNL and GAIL, have staged a comeback.
The new manager seems to be making efforts to tone down aggression. Though it's too early to say much on this, Sinha has hinted that individual stocks won't have much say under him. The fund's allocation to top five stocks, which used to be generally above 30 per cent, has consistently dropped to touch 24.68 per cent as on February 28, 2006.
And regardless of all the upheavals, the fund has cruised nicely to end another year of exceptional performance-with 70.92 per cent return, Magnum Contra was the third best fund last year. Investors continue to throng the fund with assets nearly doubling under the new fund manager.
For those who are still unaware of this star performer, let's recollect a bit of history. As the name indicates, Magnum Contra picks stocks that have potential for appreciation but are undervalued and out of favour.
In 2004, it pulled off an exceptional return of 64.49 per cent to emerge as the second hottest diversified equity fund. In the 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 other contrarian stocks were also hammered. However, the fund's fortune changed in 2001 when it pulled off top quartile returns.