MO-AMC has launched its Contra Fund with a strategy that clearly sets it apart from others in the category.
Contra is often construed as identifying ignored stocks that have good long-term prospects – which tends to get into the value style of investing.
In sharp contrast, Bhalchandra says this new contra fundwill adopt a growth-contra style.
He will look to invest in growth oriented businesses where the growth trajectory may be underappreciated by markets or where impact of near term challenges are potentially over exaggerated by markets.
In order to provide steady stream of alpha creation, he will split his portfolio into three segments – short, medium and long term.
The short term segment will likely include businesses that have been adversely affected by the Gulf war either in terms of oil prices or supply issues or both. These could include chemicals, auto, tyres etc. He says oil futures are pointing to an early resolution to the Gulf situation and for oil prices to come down to 70$-80$ levels, which will result in a good bounce back for these businesses.
The medium term segment can include sectors like healthcare while IT services is more of a long term contra bet now for him.
He has identified 3 structural aspects in the market today which are creating contra investing opportunities: valuation dispersion at a decadal high, cyclical recovery that’s driving some businesses towards growth inflection points and over concentration of MF industry assets into 50 stocks, thus leaving ample scope to hunt for under-owned growth contra stories.
His one liner description of this new fund: contra growth focused all seasons equity fund.