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Why Equities?
Why Large caps?
Why Value Strategy?
Portfolio and Sectors
Performance
Risk Analysis
Qualitative Valuations
Strategy Structure
Why Motilal Oswal PMS?
BUY RIGHT : SIT TIGHT
Our Investment Philosophy
Management Team
Why Equities?
Participation in entrepreneurship
Dividend income.
In a nutshell
Equity markets have historically produced higher returns than gold, real-estate,
bank deposits or other fixed income assets over the longer term. (source:
Bloomberg)
Historical data states that the risk of capital loss does exist especially in the
shorter term but with longer periods of investments, this risk is negated.
As markets are not always efficient, using an active manager may also help to
manage risks and improve performance.
1,750
Inflation adjusted current values of the investment of Rs. 100
1,500 invested in March 1979
1,250 1,533
Purchasing Power
1,000
750
Sensex
500
Fixed Deposit
Gold
250 210
108
-
Mar-83
Mar-86
Mar-11
Mar-14
Mar-17
Mar-79
Mar-80
Mar-81
Mar-82
Mar-84
Mar-85
Mar-87
Mar-88
Mar-89
Mar-90
Mar-91
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-12
Mar-13
Mar-15
Mar-16
Source: Bloomberg, MOAMC internal analysis, Data as on Mar 31, 2017
The information herein is used for comparison purpose and is illustrative and not sufficient and shouldn’t be used for the development or implementation of an
investment strategy. It should not be construed as investment advice to any party. Past performance may or may not be sustained in future.
Why Equities?
Rs. 100
Rs. 5.17
Mar-79
Mar-80
Mar-81
Mar-82
Mar-83
Mar-84
Mar-85
Mar-86
Mar-87
Mar-88
Mar-89
Mar-90
Mar-91
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Source: Bloomberg, MOAMC internal analysis, Data as on Mar 31, 2017
The information herein is used for comparison purpose and is illustrative and not sufficient and shouldn’t be used for the development or implementation of an
investment strategy. It should not be construed as investment advice to any party. Past performance may or may not be sustained in future.
Why Equities?
When evaluated in hindsight after the data plays out; one usually
rues that responses were disproportionate to changes in corporate
earnings.
Why Large-caps?
When fundamental supports, the Large cap always remains a Large cap!!!
14
12
When fundamental supports, the Large cap always remains a Large cap!!!
21
3 Years CAGR
Nifty 50 - 11% (1.36X) Nifty 50
19 Nifty Free Float Midcap 100 - 26% (2.00X) Nifty Free Float Midcap 100
BSE Smallcap - 27% (2.03X) S&P BSE Small Cap
17
15
13
11
Nifty 50, Nifty Free Float Midcap 100 and BSE Smallcap rebased to 10 as on 1 Apr 2014
9
Apr-14
Apr-15
Apr-16
Dec-15
Dec-14
Dec-16
May-14
Aug-14
Mar-15
May-15
Aug-15
Mar-16
May-16
Aug-16
Mar-17
Jun-14
Oct-14
Jun-15
Oct-15
Jun-16
Oct-16
Nov-14
Jan-15
Nov-15
Jan-16
Nov-16
Jan-17
Jul-14
Sep-14
Feb-15
Jul-15
Sep-15
Feb-16
Jul-16
Sep-16
Feb-17
Source: Bloomberg ; Data as on 31st Mar 2017
Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments.
Why Large-caps now?
100%
Because mean reversion expected.
80%
60%
40% 23%
Discount
20%
0%
-20%
Premium/ Discount
-40%
-60% Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Dec-16
May-06
May-07
May-08
May-09
May-10
May-11
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Mar-17
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Nifty 50 Index currently trades at 23% discount to Nifty Free Float Midcap 100 Index.
Earnings outlook for Nifty 50 for FY17-20 at ~18% CAGR suggests a possible mean reversion ahead
Source: Bloomberg ; Data as on 31st Mar 2017
Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments.
Why Value Strategy?
Hence when we select the stocks for Value Strategy we ensure the following:
2 Since Inception
Did you know?
4 >5 Years
The average holding period of scrips held under
the Value Strategy as on 30th April 2017 is over 6 4 > 2 Years but <5 Years
years and 6 months 3 <2 Years
Please Note: The given stocks are part of portfolio of a model client of Value Strategy as on 30th April 2017. The stocks forming part of the existing portfolio under
Value Strategy may or may not be bought for new client. The stocks mentioned above are only for the purpose of explaining the concept and should not be
construed as recommendations from MOAMC. Past performance may or may not be sustained in future and should not be used as a basis for comparison with other
investments. Name of the PMS Strategy does not in any manner indicate its future prospects and returns.
Why Value Strategy?
Sector Allocations Top 10 Holdings
0.56
Scrip Names % Holdings
5.00
5.33 HDFC 11.87
5.58 HDFC Bank 11.47
33.61
Kotak Mahindra Bank 10.27
6.91
BPCL 8.89
7.25
Bosch 8.57
Eicher Motors 7.95
8.89 Asian Paints 7.25
Sun Pharma 6.91
26.85
Interglobe Aviation 5.58
Bharat Forge 5.51
Banking & Finance Auto & Auto Ancillaries
Oil and Gas FMCG
Pharmaceuticals Airlines
Engineering & Electricals Infotech
Cash
Please Note: The given stocks are part of portfolio of a model client of Value Strategy as on 30th April 2017. The stocks forming part of the existing portfolio under
Value Strategy may or may not be bought for new client. The stocks mentioned above are only for the purpose of explaining the concept and should not be
construed as recommendations from MOAMC. Past performance may or may not be sustained in future and should not be used as a basis for comparison with other
investments. Name of the PMS Strategy does not in any manner indicate its future prospects and returns.
Performance Snapshot
Since Inception Value Strategy has delivered a CAGR of 25.1% vs. Nifty 50 returns of 17.0%, an
outperformance of 8.0% (CAGR)
25.1
21.1
19.5
19.4
18.5
17.0
16.0
14.0
12.1
11.9
11.6
8.6
7.9
6.6
The chart below illustrates Rs.1 crore invested in Value PMS in March 2003 is worth Rs. 23.52 crores as
on 30th April 2017. For the same period Rs. 1 crore invested in Nifty 50 is now worth Rs. 9.20 crores.
240 23.52X
Value Strategy
190
Nifty 50 Index
Investment Value
140
9.20X
90
40
-10
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Sep-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Strategy Inception Date: 24/03/2003.
Please Note: The Above strategy returns are of a Model Client as on 30th April 2017. Returns of individual clients may differ depending on time of entry in the strategy.
Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments. Strategy returns shown above are
post fees & expenses.
Rolling Returns
Please Note: The Above strategy returns are of a Model Client as on 31st Mar 2017. Returns of individual clients may differ depending on time of entry in the strategy.
Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments. Strategy returns shown above are
post fees & expenses. Returns above 1 year are annualized. Motilal Oswal AMC does not provide any guarantee/ assurance any minimum or maximum returns. Past
performance may or may not be sustained in future.
Qualitative Analysis
Source: Bloomberg The information provided is for general purposes and not a complete disclosure of every material fact. The Stocks mentioned above are used to explain the
concept and are for illustration purposes only. The stocks may or may not be part of our portfolio. It shouldn’t be used for the development or implementation of an investment
strategy. It shall not be constitute as an advice, an offer to sell/purchase or as an invitation or solicitation to do so for any securities. The statements made herein may include
statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and
uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance may or may not be
sustained in future.
Risk Analysis
FY17
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
inception
Value Strategy has been consistently low on Beta !
Since
34%
Standard deviation is a number used to tell how
28%
measurements for a group are spread out from the
26%
25%
25%
23%
22%
average (mean), or expected value. A low standard
22%
19%
18%
17%
deviation means that most of the numbers are very close
15%
15%
15%
14%
13%
12%
12%
12%
12%
11%
11%
11%
to the average. A high standard deviation means that the
9%
numbers are spread out.
incepti…
Value Strategy has been less volatile than Nifty 50 Index.
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Since
Inception date: 24th Mar 2003
Risk-Return Matrix & Strategy Construct
Strategy Objective:
Aims to benefit from the long term compounding effect on investments done in good
businesses, run by great business managers for superior wealth creation.
Investment horizon:
- Medium to long term (3 Years +)
For Whom:
- Investors who like to invest with a long-
term wealth creation view.
Strategy Construct
Allocations - Market capitalization
- Large Caps : 65% - 100%
- Mid Caps : 0% - 35%
No. of stocks
- 15 to 20 stocks for a portfolio
Scrip allocation
- Not more than 10% in a single stock at
the time of initiation
Sector allocation limit
- 35% in a sector
Strategy Structure
Real wealth is created by riding out bulk of the growth curve of quality companies and not
by trading in and out in response to buy, sell and hold recommendations.
This philosophy enables investor and manager alike to keep focus on the businesses they
are holding rather than get distracted by movements in share prices.
An approach of buying high quality stocks and holding them for a long term wealth
creation motive, results in drastic reduction of costs for the end investor.
While BUY RIGHT is largely the role of the portfolio manager, SIT TIGHT calls for
involvement from the portfolio manager as well as investor. This brings in greater
accountability from the manager and at the same time calls for better involvement and
understanding from investor resulting in better education for the latter.
Long term multiplication of wealth is obtained only by holding on to the winners and
deserting the losers.
Investment Philosophy
QGLP – The investment philosophy has been framed out of 20 years of annual wealth creation
studies authored by our co–founder, Raamdeo Agrawal.
Q-G-L-P Demystified
Buy & Hold leads to low churn ratio of the portfolio. If the portfolio is churned many times during a year, the
fund will incur higher transaction costs, thus impacting the returns.
On the other hand, low churn in the portfolio also indicates higher investment conviction of the Portfolio
Manager thus indicating BUY RIGHT : SIT TIGHT
He has also featured on ‘Wizards of Dalal Street‘ on CNBC. Research and stock-
picking are his passions which are reflected in the book “Corporate Numbers
Game” that he co-authored in 1986 along with Ram K Piparia.
He has also authored the Art of Wealth Creation, that compiles insights from 21
years of his Annual ‘Wealth Creation Studies’.
Mr. Manish Sonthalia heads the Equity Portfolio Management Services at Motilal
Oswal Asset Management Company Ltd. He also, serves as the Chief Investment
Officer and the Director of the Motilal Oswal India Fund.
He has over 22 years of experience across equity fund management and research
covering Indian markets and has been with Motilal Oswal for over 11 years.
Mr. Kunal Jadhwani is the Co-Fund Manager of Value Strategy since 2nd
November 2016
Custodian: IL&FS Securities Services Ltd | Auditor: M/s Morzaria & Associates | Depository: Central Depositary Services Ltd
Portfolio Manager: Motilal Oswal Asset Management Company Ltd. (MOAMC)| SEBI Registration No. : INP 000000670