MO Focused Fund has seen a sharp turnaround in the last 1 year, since Ankit Agarwal took over, delivering 16% returns over the last year in a market that’s remained flat and in a category whose average returns were around 4%.
Ankit says his principal restructuring of the portfolio upon taking over its management was to make it a lot more growth focused, which is in keeping with the firm’s overall style.
Key stocks that drove this significant outperformance are from diverse sectors including specialty chemicals, capital goods, NBFCs, small finance banks, exchanges and others – highlighting the bottom up nature of stock wins rather than getting a big thematic call right.
Ankit divides the portfolio into two parts – growth bucket and turnaround bucket. Growth bucket consists of market leaders in growing sectors – the thesis being leaders will grow more rapidly and thus create more wealth.
The turnaround bucket also focuses on market leaders but in sectors experiencing some cyclical or other slowdowns with emerging signs of coming out of such slumps. Getting in early in these cases can be very rewarding.
Ankit says that the strategy he has adopted is entirely in consonance with MO’s time tested philosophy, which should give investors and distributors comfort on sustainability of this performance turnaround.
His financials holdings – at 25% of portfolio – are large but they include just one small allocation to a large private sector bank, in sharp contrast to peers who have loaded up meaningfully on this segment.
Ankit agrees with peers that large private banks can potentially deliver mid teens earnings growth – but he sets his sights higher at around 20% or above on earnings growth for stocks to come into his portfolio’s consideration set.
In response to the view that focused funds do well only in range bound markets and struggle in upward trending markets, he says that’s not entirely true. Fact is good bottom up stock picking based high conviction portfolios can deliver a lot more alpha in a sideways market but should continue delivering alpha –albeit to a lower extent – even in bullish markets.