31 January 2015

UTI Transportation and Logistics: Buy :: Business Line

Please Share:: Bookmark and Share


�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��
-->
The fund still has some traction left and will make a good diversifier
UTI Transportation and Logistics fund sports an enviable return of 116 per cent in the last one year. This thematic scheme invests predominantly in auto and auto component stocks and takes small exposures to segments such as ports, railways and road transportation.
Over one, three and five years, it has outperformed both the CNX 500 and BSE Auto Index by a big margin. It exhibited an ability to contain losses better than these indices in the market falls of both 2008 and 2011.
A turnaround in auto sales and the likely trickle-down benefits from the economic recovery to logistics companies have fuelled the huge gains for these stocks.
But there may still be some juice left. Factors such as the cooling off of inflation, the RBI’s interest rate cuts, bettering industrial production and steady recovery in car and commercial vehicle sales indicate that earnings for these companies would gain traction.
The fund has also shuffled its holdings quite well, keeping an eye on relative valuations and prospects. Investors with a high risk appetite can allocate a small portion of their portfolio to the scheme to act as a diversifier.
Promising moves
Even after the massive rally, many auto and auto component stocks are not among the most expensive in the market today. The fund has used this to its advantage, altering its holdings in individual stocks based on valuations and prospects in comparison with its peers.
Thus, among two-wheeler manufacturers, it has cut down exposure gradually to TVS Motors, which has been a multi-bagger and sports a trailing PE ratio of 47 times now.
Instead, it has now increased holdings in the bigger player, Hero MotoCorp, which trades at a more reasonable 24 times.
Similarly, it has booked periodic profits on stocks such as Wabco, MRF, Eicher Motors, Bosch and Amara Raja Batteries, whose valuations have expanded relative to their respective peers, while maintaining/increasing stakes in stocks such as Sundaram Fasteners and Mahindra and Mahindra which trade at lower valuations. Stakes in low-PE stocks in the sector such as Tata Motors have moved up.
The fund has also been nimble on its feet by utilising big corrections to re-enter some stocks, Balkrishna Industries being an example.
Recent additions such as Tube Investments, Motherson Sumi, Tata Motors DVR, Gateway Distriparks and Container Corporation bring good diversification within the auto theme.
Diffused portfolio
A universe consisting of stocks from auto, auto component and logistics means the fund holds 40-50 stocks. It thus avoids concentrated exposures, which is a risk with sector funds. The scheme has invested only 5-7 per cent in the likes of Maruti Suzuki, Hero MotoCorp and Tata Motors. It normally holds 30-35 per cent in mid-cap stocks.

No comments:

Post a Comment