Vetri Subramaniam, Chief Investment Officer, and Vinay Paharia, Equity Fund Manager, co-manage Religare Invesco Tax Plan. Here they share their views on the fund which recently bagged the Morningstar Award in the Equity Linked Savings Scheme category.
What is the investment strategy you follow for Religare Invesco Tax Plan?
The stock picking is long term-oriented, with a focus on underlying business quality and valuation attractiveness. The fund typically owns some of our best large- and mid-cap ideas. We try to keep the portfolio well diversified but it typically has a growth bias. We manage the portfolio with a long-term focus and are patient with the mid-cap companies in our portfolio. Our portfolio turnover averages about 0.5 over time and is a good indicator of our patient approach.
The fund recently won the Morningstar award in the ELSS category. What was key to its success?
The fund‘s bottom-up stock-picking strategy and the portfolio structure - a blend of large- and mid-cap stocks contributed to last year’s performance. Our stock picking is long term-oriented, with a focus on underlying business quality and valuation attractiveness.
In addition, we are ready to invest in some of the attractively valued high quality cyclical businesses, which have good balance sheet health but may be suffering due to near-term earnings.
You have been overweight in the healthcare and exposure to technology has been rising. What are your views on these sectors going forward?
In both we find several companies that have competitive advantages and are competitive in global markets. The tailwind from currency movements in 2012 and 2013 is an additional lever that these companies can use to invest in their businesses and increase market share. We are ready to own stocks in these sectors which are available at attractive valuation.
Which sectors/ themes are you looking at this year?
We are currently overweight on consumer discretionary and industrials and underweight on consumer staples and financial sectors.
We are overweight on companies in cyclical industries which are attractively valued, have high quality businesses, good balance sheet health, but may be suffering in terms of income statement.
We are also overweight on companies which are growing at a pace faster than GDP, have superior business quality and are available at attractive valuations.
Our sector positions reflect our current bias towards where we think the best opportunities are but are also impacted by our top down views.
To read more about the fund, click here.