MO’s Innovation Opportunities Fund has got off to a strong start, delivering 29% returns in its first 9 months.
Varun’s definition of innovation gets down to the basics: businesses innovate to gain market share. His focus therefore in this fund is to identify companies across sectors that are gaining market share – whether through product, process, communication or any other form of innovation.
A fund that assembles only the strongest market share gainers across sectors is showing the way to create alpha even in challenging markets. Its still early days to evaluate performance, but a strong beginning perhaps holds some promise for future prospects due to its focused portfolio construct.
MO Digital India Fund has held up well with a modest 3% return over the last 1 yr in an environment that has been very challenging for IT stocks – the NSE IT index is down -14% in the same period.
Varun says focus on growth stocks is what has helped the fund. NSE IT index earnings growth has been a tepid 5% over the last 1 year. With the index down -14%, that’s around 19-20% valuation correction for IT stocks.
His portfolio has also seen a similar valuation correction – its just that since the earnings growth momentum of his portfolio is much stronger, fund returns are positive when index returns are negative.
Varun says growth style always trumps value in the long run. If you observe closely, even when value stocks have their day in the sun, it is the fastest growing among them that lead the way.