Unless major path breaking reforms are announced by the
government, outperformance from current levels could be limited, says Nilesh Shetty, Associate Fund Manager-Equity, Quantum AMC.
Can you please take us through QMF's
investment philosophy and style?
Our style is bottom up stock specific investment and we follow a value style of investing. Each company that our research team covers has a predetermined buy limit and a predetermined sell limit based on the long term earnings potential of a company and its long term valuation band, which is reviewed periodically. If a company comes below our buy, the stock will come into our portfolio; similarly if the company exceeds our sell limit and we have no reason to upgrade our long term earnings estimate, we will exit the stock.
Many fund managers are bullish on mid and small cap stocks. With mid and small cap stocks having rallied 81% and 62% respectively over the last one year, do you think there's still some steam left in these sectors?
There would be some stocks in midcap and small cap universe which will do well over the long term, but generally management quality in this universe is perceived to be weak.
Which sectors are you bullish on?
We currently have a larger weight in consumer discretionary and utilities but we do not take sector calls. Sector weightage in the portfolio is just the end result of where we find value in individual stocks.
Is it true that a small corpus allows a fund manager to deliver better performance because of the flexibility to maneuver?
Track record generated with a small corpus may not hold true once portfolio characteristics change and the AUM goes up; hence it is important to keep the portfolio characteristics similar irrespective of AUM.
Quantum Long Term Equity Fund went through a rough patch during Sep 28, 2012 to Sep 30, 2013 during which it underperformed its benchmark....
There may be periods where the stocks that we hold in our portfolio are not appreciated by the market or our strategy may seem inconsistent with market behavior, but we believe over the long term our track record will speak for itself
You had a high cash holding in QLTEF and Quantum Tax Savings Fund. Are you
seeing an impending correction in the market?
Markets may not correct just because we are sitting on cash, but yes valuations of a lot of stocks we were holding had turned expensive forcing us to sell out of them raising cash levels in the fund. Currently we do not see too many opportunities to deploy the cash in companies at reasonable valuations.
Where do you see markets heading over the next 6 to 12 months?
Expectations are running high from the new government. Valuation of individual stocks is at cyclical highs while earnings are yet to reflect all the enthusiasm. Unless major path breaking reforms are announced, outperformance from current levels could be limited.
One book which has inspired you a lot
Security Analysis by Benjamin Graham remains a timeless classic.
In your career as a fund manager, what
have been your greatest learnings?
Patience is an underappreciated virtue.
