Markets have absorbed lot of negative newsflow over 18months of a sideways correction and has now begun a new up-leg. We are now at over 19x 1 yr forward earnings. That’s not cheap – so we need to be careful about picking stocks with strong earnings momentum.
Vihang attributes HSBC Flexicap Fund’s strong top quartile performance over the last 1 yr to a focus on avoiding mistakes of commission(buying stocks that significantly underperform) and omission (not buying benchmark stocks that do very well). The fund is benchmark aware and drives alpha through superior stock selection rather than large market cap or sector bets.
Vihang’s stock picks revolve around his 3U strategy –under-researched, under-valued and under-owned. He went overweight pharma 6months ago when it was very under-owned. He believes the sector’s US business is coming out of a decade long slump while the domestic business exhibits staples-like characteristics, thus making these stocks very interesting, especially when the US generics focused stocks got very under-valued about 6months ago.
He is underweight financials – a very lonely contra call against the most crowded trade in the market – as he believes margin compression will set in – which is never healthy for any business, especially one that is as competitive as the BFSI space.
Vihang’s favoured approach towards equity investing is one he practices himself: 12 month STP into the equity fund of your choice. Avoid lumpsums, avoid very short STPs. Give yourself time, stay invested for the long haul.