6 Gold-rated funds of 2019

By Morningstar Analysts |  30-12-19 | 
 

These 6 equity funds were given Gold ratings by Morningstar’s fund analysts over the past 365 days.

  • HDFC EQUITY
  • CATEGORY: Multi Cap
  • FUND MANAGER: Prashant Jain
  • STAR RATING: 3 stars
  • ANALYST RATING: Gold
  • MORNINGSTAR ANALYST: Himanshu Srivastava
  • DATE OF ANALYSIS: April 2019
  • ANALYST NOTE
  • DETAILED PORTFOLIO
  • PERFORMANCE 

The process is solid with research at its core. Prashant Jain adopts a hands-on approach to research, to ferret out quality companies with robust business models, clean balance sheets and competitive strengths. He adopts a research-intensive approach to get an in-depth understanding

of the business. Although the bottom-up style is clearly integral to Jain’s investment style, the top-down isn’t ignored either. Hence, the style can be described as a mix of top-down and bottom-up, with the latter being a tad more important.

  • HDFC TOP 100
  • CATEGORY: Large Cap
  • FUND MANAGER: Prashant Jain
  • STAR RATING: 3 stars
  • ANALYST RATING: Gold
  • MORNINGSTAR ANALYST: Himanshu Srivastava
  • DATE OF ANALYSIS: April 2019
  • ANALYST NOTE
  • PORTFOLIO
  • PERFORMANCE

Although Prashant Jain is mindful of benchmark weights and invests largely in IISL Nifty 100 stocks, that is not to suggest that he is a closet indexer. He takes significant exposure versus the benchmark on stocks and sectors to deliver outperformance.

Conversely, in market periods when he fails to uncover enough stocks that can generate alpha or believes that valuations are stretched, he will align the portfolio with the index.

Over time, Jain has shown a marked preference for public sector companies. His conviction often stems from the economies of scale they enjoy and barriers to entry in the business in which they operate.

  • ADITYA BIRLA SUN LIFE FRONTLINE EQUITY
  • CATEGORY: Large Cap
  • FUND MANAGER: Mahesh Patil
  • STAR RATING: 3 stars
  • ANALYST RATING: Gold
  • MORNINGSTAR ANALYST: Kavitha Krishnan
  • DATE OF ANALYSIS: March 2019
  • ANALYST NOTE
  • PORTFOLIO
  • PERFORMANCE

Mahesh Patil considers the fund house’s investment universe and the IISL Nifty 50 Index when constructing the portfolio. Typically he will invest in companies that display strong earnings growth potential, while focusing on parameters such as ROE and ROCE. Patil makes use of relative valuation measures, such as P/E, price/book value, and EV/EBITDA vis-a-vis comparable peers when selecting stocks. That said, he isn’t valuation-conscious in the strictest sense. Patil is willing to be flexible if he is convinced of the growth prospects.

The fund’s strategy leads to a significant overlap with the benchmark. Though this approach also makes it more comparable to the benchmark, the performance profile tends to differ significantly given that the weights at the stock level are different (although within the templated range).

  • FRANKLIN INDIA PRIMA
  • CATEGORY: Mid Cap
  • FUND MANAGER: R Janakiraman
  • STAR RATING: 5 stars
  • ANALYST RATING: Gold
  • MORNINGSTAR ANALYST: Himanshu Srivastava
  • DATE OF ANALYSIS: December 2018
  • ANALYST NOTE
  • PORTFOLIO
  • PERFORMANCE

Fundamental research forms the crux of the investment process. The coverage list for small/mid-caps is built by the portfolio managers in conjunction with the analysts. Janakiraman uses this model portfolio as his initial reference point, and he selects companies that can generate consistent and sustainable earnings growth over a business cycle and have low leverage and reasonably high ROEs. His investment process is visible in the portfolio construction. His benchmark-agnostic approach coupled with his bottom-up stock-picking results in a portfolio that is distinct from that of the benchmark index or peers.

  • FRANKLIN INDIA EQUITY
  • CATEGORY: Multi Cap
  • FUND MANAGER: Anand Radhakrishnan
  • STAR RATING: 3 stars
  • ANALYST RATING: Gold
  • MORNINGSTAR ANALYST: Himanshu Srivastava
  • DATE OF ANALYSIS: December 2018
  • ANALYST NOTE
  • PORTFOLIO
  • PERFORMANCE

Anand Radhakrishnan seeks companies with clean balance sheets. He looks for steady businesses with sustainable competitive advantages that can generate healthy ROEs and returns on capital employed. He focuses on profitability, using economic value added as a measure. Despite the apparent growth focus, it would be wrong to infer that the approach isn’t distinctive. Indeed, a rather contrarian streak is perceptible in Radhakrishnan’s stock picks.

He is benchmark-agnostic while constructing the portfolio and selects stocks using a bottom-up approach. This, coupled with his penchant for contrarian bets, often results in a portfolio that is dissimilar to that of the typical peer.

  • FRANKLIN INDIA BLUECHIP
  • CATEGORY: Large Cap
  • FUND MANAGER: Anand Radhakrishnan
  • STAR RATING: 2 stars
  • ANALYST RATING: Gold
  • MORNINGSTAR ANALYST: Himanshu Srivastava
  • DATE OF ANALYSIS: December 2018
  • ANALYST NOTE
  • PORTFOLIO
  • PERFORMANCE

This is a true-blue large-cap fund.

The investment process is research-intensive and relies heavily on a bottom-up approach. Portfolio managers and analysts jointly decide on the coverage list where they look for growth companies that fit their qualitative requirements.

Anand Radhakrishnan’s portfolio displays strong convictions and deviates significantly from the benchmark index and category peers both in terms of stock picks and sector weights. He prefers private-sector entities over their public-sector counterparts, in line with his belief that the former offer more robust business models and superior operational efficiencies.

The fund has been positioned to benefit from the economic turnaround and pickup in consumption demand. It is composed of quality stocks which stand to gain over the long term. In light of the fund’s positioning, we believe that under Radhakrishnan’s stewardship, it has the means to be back on track.

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