Value Fund - Series 2

Transcription

1 GOOD COMPANIES at DISCOUNTED PRICES OUR VALUE INVESTMENT PHILOSOPHY Value Fund - Series 2 A Close-Ended Equity Scheme NFO Period: November 18, 2013 to November 29, 2013

2 Contents 1 Why Equities Now? 2 Value Investing Identifying Value in the market Value Investing - Globally ICICI Prudential Value Fund Series 2 Key Take Aways 2

3 Why Equities now? 3

4 Why Equities now? Valuations lagging Fundamentals 120, ,000 80,000 INR bn 60,000 40,000 20, Nominal GDP Mcap (BSE) India's market cap to GDP indicates valuations are at historical low. The gap between nominal GDP and market cap of BSE has widened post 2010 Source: Bloomberg 4

5 Why Equities now? 2014 General Elections S&P BSE Sensex In the past, elections have been a good trigger point for market direction. Red mark represents elections in that year Elections - Previous Govt was dissolved just 16 months after formation Elections - Hung parliament Elections - first time a united front of parties attained a majority 1998 Re-elections as the Govt collapsed 2004 Elections The Indian national Congress gained majority with the help of its allies Elections - The United Progressive Alliance (UPA) led by the Indian National Congress formed the government

6 Why Equities now? S&P BSE Sensex & Elections Elections Absolute Appreciation Election Year Date Sensex 20% Appreciation 50% Appreciation 70% Appreciation Jun Within 1 year Within 1 year Within 1 year May Within 2 years The bull phase that started in 1991 ended in Mar Within 2 years Within 2 years Oct Within 1 year May Within 1 year Within 2 years Within 2 years May Within 1 year Within 2 years Within 2 years Above chart explains how S&P BSE Sensex has performed post elections. Provided only for reference and understanding of market movement post elections. Nothing in the slide must be construed as future performance of S&P BSE Sensex. Source: and Election Commission of India 6

7 Why Equities now? Broad Market Valuations Sensex P/E Ratio Avg PE Sensex P/B Ratio Avg PB Current valuations below 10 year average, despite some stocks trading at very high valuations Source: 7

8 Why Equities now? Polarisation of Valuation P/E 30.0x Defensives vs Cyclicals 25.0x Defensives 20.0x 15.0x 10.0x Cyclicals 5.0x Cyclical Consumer Discretionary, Energy, Financials, Industrials, IT, Materials Defensives Consumer Staples, Healthcare, Telecom, Utilities Source: UBS Securities 8

9 Why Equities now? Market Segmented 100% Mid & Small Cap discount to Sensex 90% 80% Mid cap discount to Sensex 70% 60% 50% Small cap discount to Sensex Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 S&P BSE Mid Cap S&P BSE Small Cap Since the last peak in Nov 2010 the Small and Mid cap stocks are trading at a discount to their Large cap counterparts Discount is calculated taking Nov 10 index values as base. Source: 9

10 Value Investing 10

11 Value Investing term fundamentals. instant gratification. 11

12 Value Investing Margin of Safety Margin of Safety is the difference between the intrinsic value of a stock and the price arrived at after taking the worst case scenario in calculation of intrinsic value. 12

13 Understanding Value Investing 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Values rebased to 10,000 Rs 36,214 Rs 23,662 Rs 22,399 Rs 10,751 0 Dec/10 Mar/11 Jun/11 Sep/11 Dec/11 Mar/12 Jun/12 Sep/12 Dec/12 Mar/13 Jun/13 Oct/13 S&P BSE Sensex Natco Pharma Ltd Amara Raja Tech Mahindra Ltd This is a high level oversimplified illustration to explain the concept of Value Investing. Actual results may vary significantly from the ones mentioned here and may not always be beneficial or profitable. The stocks given above should not in any manner be construed as recommendation and ICICI Prudential Mutual Fund/AMC may or may not have any future position in these stocks. There may be other value stocks in the market which may have significantly underperformed large cap stocks. No inference must be drawn that value stocks generate long term performance as there may be cases where such value stocks may actually be value trap. Source: Bloomberg 13

14 IDENTIFYING VALUE IN THE MARKET 14

15 Identifying Value in the Market Earnings MS Coverage Consumer Basket - Earnings vs Market Cap Trailing Net Profit Market Cap (RS) in INR Bn 7,000 6,000 5,000 4,000 3,000 2,000 1, Source: Morgan Stanley Research 15

16 Identifying Value in the Market P/E 40 Large cap IT vs Midcap IT TOP Mid Caps This is a high level oversimplified illustration to explain the concept of identifying value. Actual results may vary significantly from the ones mentioned here and may not always be beneficial or profitable. The stocks given above should not in any manner be construed as recommendation and ICICI Prudential Mutual Fund/AMC may or may not have any future position in these stocks. The performance of stocks would ultimately depend on various factors such as prevailing market conditions, global political scenario, exchange rate etc. It may have adverse bearing on their performance. Source: MSCI, RIMES, Top 4 - TCS, Infosys, Wipro, HCL Tech Midcap Mindtree, Hexaware & Infotec Ent. 16

17 Identifying Value in the Market Top 20 performers vs Rest of the market 350 Values rebased to Top 20 performers Bottom 80 performers BSE100 Source: Bloomberg, Jefferies estimates 17

18 VALUE INVESTING - GLOBALLY 18

19 Value Investing Globally, is working 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 MSCI China Index CHINA INDICES MSCI China Value Index RUSSIA INDICES MSCI Russia Index MSCI Russia Value Index Values rebased to US INDICES 2,500 Values rebased to ,000 1,500 1, S&P 500 Value Index Russell 2000 Value Index S&P 500 Growth Index Source: Bloomberg 19

20 The Product Value Fund - Series 2 (A Close-ended Equity Scheme) This product is suitable for investors who are seeking*: diversified portfolio of stocks through fundamental analysis. * Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Note: Risk may be represented as: (BLUE) investors understand that their principal will be at low risk (YELLOW) investors understand that their principal will be at medium risk HIGH RISK (BROWN) (BROWN) investors understand that their principal will be at high risk 20

21 About the fund # bargain price. *Dividends will be declared subject to availability of distributable surplus and approval from Trustees #The number of stocks provided is to explain the investment philosophy and the actual number may go up or down depending on then prevailing market conditions at the time of investment 21

22 Why Focused Approach? Some value picks in existing funds Company/Issuer Fund 1 % to NAV Fund 2 % to NAV Value Stock % 0.60% Value Stock % 1.38% Value Stock % 0.30% Value Stock % 1.33% returns. For illustration purpose only 22

23 Why close ended? Exposure to less traded stocks Aiming to identify potential much ahead of the market Restrict in/outflow to capture limited market opportunity Lock-in brings in the necessary discipline 23

24 Investment Approach Absolute and relative basis Cyclical stocks Contra play Growth stocks at reasonable valuations Others 24

25 Stock Selection Process stocks Data Integrity Screens Recurring process 300 Investable Universe Company Characteristics Financial Strength Business Durability Management Behavior 100 Valuation & Fundamental verification Value Parameters Low PE/PB Good Dividend ields Attractive ROE/ROCE High Conviction Portfolio (25-30 stocks)* Daily Risk control *The number of stocks provided is to explain the investment philosophy and the actual number may go up or down depending on then prevailing market conditions at the time of investment 25

26 Key Take Aways pockets. positive price movements. bear phases. 26

27 Why are we launching Series 2, now? In Rs. Crores Change Bank Deposits 44,47,787 73,05,820 28,58,033 MF Equity AUM ,77,668 1,78,280 participated in the recent market run-up. continues to offer returns potential.» Some contraction in the divergence has started to take place. expected to stay at bay. offering. Data Source: AMFI, RBI, Crisil Research 27

28 Scheme Features Type of scheme Options Minimum Application Amount Entry Load Exit Load Benchmark Index Fund Manager A Close ended equity scheme The investment objective of the Scheme is to provide capital appreciation by investing in a well diversified portfolio of stocks through fundamental analysis. However, there can be no assurance that the investment Direct Plan Dividend Option; Regular Plan Dividend Option Only Dividend payout facility available Rs 5,000 (plus in multiple of Rs.10) Not Applicable Not Applicable S&P BSE 500 Index Mr. Sankaran Naren & Mr. Atul Patel 28

29 Disclaimers Disclaimer: In the preparation of the material contained in this document, the AMC has used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates. Information gathered and material used in this document is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as will, expect, should, believe and similar expressions or variations of such expressions, that are forward looking statements. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. The AMC (including its affiliates), the Mutual Fund, the trust and any of its officers, directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/are liable for any decision taken on this material. The sector(s)/stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of ICICI Prudential Mutual Fund. 29