Spotting winning ideas in mid-caps :: Business Line

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The fund has beaten its benchmark as well as peers

The BSE Mid Cap and BSE Small Cap indices have corrected 6-10 per cent in the last 10 trading sessions. This weakness may present a good buying opportunity for investors with a three- to five-year horizon. Now may be a good time to start systematic investment in an equity fund with a good performance track record.

ICICI Prudential Value Discovery Fund, with a mandate to invest in undervalued stocks, has delivered returns higher than the benchmark and category average across one-, three- and five-year timeframes.

The fund beats peers such as HDFC Midcap Fund in consistency. In the last five years, its annual returns have been higher than the benchmark. Investors with a high risk appetite can consider investing a portion of their surplus in the fund through the SIP route.

The fund has not only delivered returns higher than its benchmark, CNX Midcap Index, during market rallies, but has also managed to contain downsides during turbulent phases.

Sticking to value

Identifying value picks now, given the strong broad-based rally over the last 15 months, may not be an easy proposition. However, ICICI Pru Value Discovery has demonstrated its ability to spot winning ideas ahead of peers in the past. For instance, the fund zoomed in on off-the-road tyre maker Balkrishna Industries ahead of its peers. The stock price has grown eight-fold in the last five years. Battery maker Amara Raja Batteries is yet another example; the stock has grown ten-fold since 2009.

Likewise, the fund added ING Vysya Bank as early as June 2007; its stock price has more than tripled since then. Also, the fund’s strategy to ride out the short-term price turbulence and stay invested in its high-conviction bets has paid off well. For instance, the scheme has been an investor in IT outsourcing company eClerx Services since its IPO in December 2007. The fund manager’s patient wait paid off; the stock price has grown four-fold during this period.

Systematic monthly investment in ICICI Prudential Value Discovery over the last five years would have fetched annual returns in excess of 29 per cent.

Even as most mid-cap schemes are betting big on cyclicals, the fund has diversified its holdings across sectors. For instance, over 7 per cent of the scheme’s assets are invested in transport and logistics stocks. Likewise, about 4 per cent of the scheme’s corpus is invested in the stocks of crop protection chemical makers. As of November, the fund held 61 stocks in its portfolio, minimising concentration risk.