A look at 8 tax-saving funds

By Morningstar Analysts |  07-02-19

Axis Long Term Equity

(click on the above to access the brief analyst note)

  • Star Rating: 4 stars
  • Analyst Rating: Silver
  • Fund Manager: Jinesh Gopani

Jinesh Gopani looks for companies that have the capability to grow over a three to five-year period and seeks quality names at reasonable valuations. However, he can tend to invest in stocks that are slightly expensive in relative terms (reflected in the fund’s higher price/earnings ratio) as long as they meet his quality and growth criterion. The portfolio is about 50%-70% large-cap stocks, while small- and midcaps constitute the remaining portion.

The focus is on being able to identify companies with sustainable earnings-growth potential, credible management, and good corporate governance practices. Stock-picking is based on fundamental bottom-up research with emphasis on top-down risk parameters, liquidity, and internal volatility targets. From a financial standpoint, they look for companies with low capital gearing and strong balance sheets. They undertake a 360-degree approach while evaluating a company by ensuring thorough channel checks are in place and spend time speaking to dealers, distributors, clients, and so on.

The fund house has a research universe of about 350 stocks which are bucketed into three segments based on the frequency and depth of coverage. They seek to spend more time identifying fresh ideas and researching firms that are not as widely researched by the broader market. The research team also runs a live model portfolio, essentially a combination of their best ideas.

The fund’s portfolio reflects Gopani’s high-conviction ideas and has a distinct character. This results in a benchmark-agnostic portfolio that typically shares a very low overlap of about 25%-30% with the S&P BSE 200 Index. He tends to take significant exposures against the grain in stocks based on his conviction levels.

Gopani’s investment results in a concentrated portfolio of about 35-40 stocks.

In our opinion, the fund’s growing asset size could put some pressure on the manager’s ability to invest in the right opportunities. The AMC monitors the fund size on a consistent basis and places constraining limits on it, but this number can vary constantly based on the growth and liquidity in the markets. This in addition to the multi-cap nature of the fund, which should help mitigate risks of an asset bloat.

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