The economy has recovered to close to pre-Covid-19 levels based on the growth in core industries and other high-frequency indicators. Contrary to the widespread perception that existed in April 2020 that large caps will outperform the mid and small caps, the markets are approaching pre-Covid19 levels, particularly in the mid and small size space. The high-growth portfolio is made up of high-growth companies, predominantly in the small- to the mid-cap range, and focuses on emerging themes in the future economy. In this blog, we brief you about high-growth stock models and strategies fund managers follow to make a portfolio grow in value.
fund managers focus on companies that are still expanding and expected to
generate increased revenues, rather than those that pay dividends. Some growth
funds are particularly aggressive, so managers must choose stocks based on how
quickly the company is expected to expand, rather than its ability to provide
long-term sustainable growth. Based on this backdrop conducted a Webinar
“Identifying High Growth Models –SISOP”
The keynote speaker was Mr. Madanagopal Ramu, Head – Equity & Fund Manager, Sundaram Alternates. In this webinar session, Mr. Madanagopal Ramu first briefed on the highlights of their SISOP Strategy in brief. He then listed the contributors of SISOP returns and presented their stock selection process.
The key insights of this webinar are as follows
- What are high-growth models?
- How to build high-growth models?
1. What are high-growth models?
High-growth models are those whose objective is achieving steady, low volatility returns by investing across sectors and asset classes. The base of this approach is tactical and dynamic asset allocation. By investing in a small number of high conviction stocks, you can create capital appreciation overall in market cycles.
The additional overlay within this strategy is multiple asset classes like fixed income, oil, and gold.
Keeping the volatility factor low, the strategy strives to reach a high return profile. These models are designed for investors looking to gain profits through investments in a concentrated portfolio of businesses with enduring competitive advantages and fair prices.
2. How to Build a High Growth Model?
You need to be able to identify new ideas and maintain small-cap space which has been under-researched and not so well discovered by the market therefore it left a lot of value on the table both from an earnings growth per share and valuation perspective.
The stock selection process is a crucial and crucial component of the overall wealth generation process. Even if you are invested in two underperforming sectors, you can still make meaningful returns if you have made the right stock selection. When we talk about growth, we don't mean the next one to two years; rather, we mean the next four to five years. As a result, the stocks we select must be able to grow at least 20% over the next four to five years to have a reasonable chance of doing so.
Next, for a good stock selection process we must ask how big the opportunity size is for that business, for instance, and what will help them to keep gaining market share continuously. The current market share is one of the criteria that you can use, or, what are the adjacent areas they can grow, or, what are the adjacent markets they can grow," because these markets, when added together, create the total addressable market.
Those who follow the markets or specific investments more closely can beat the buy and hold strategy if they can time the markets correctly and consistently buy when prices are low and sell when they are high. This strategy will yield much higher returns than simply holding an investment over time, but it also requires the ability to correctly gauge the markets. For the average investor who does not have the time to watch the market daily, it may be better to avoid market timing and focus on other investing strategies more geared for the long term instead.
You don't need to specialize in many different sectors/industries. Pick a few sectors you understand and that you believe could benefit from long-term trends. Focus on companies you believe have a strong and sustainable competitive advantage. Your core holdings should represent a good portion of your portfolio and should be well-established companies, with a solid business model and consistent top-line/bottom-line growth. Look for businesses in a fast-growing industry that could benefit from long-term trends. These will be smaller companies (think small/mid-cap)
Interesting Question from an Investor & Mr. Madanagopal Ramu’s answer to it:
As in past sectors like specialty chemicals which have already outperformed a lot in the last five years, is it worth still looking at these sectors? Which are the sectors one can consider investing in?
What is important is not what the company has done over the past five years but what matters is what it will do over the following five years. Looking entirely futuristic, the selection procedure that you consider must be to understand the potential for these businesses. How well positioned are these businesses to expand over the next four years? In five years, do they make enough money, and do they have a clear road map for how they want to produce this 20% growth throughout the ensuing four to five years?
Mr. Madanagopal Ramu answered many other questions from the audience on the Macro-Macroeconomics as well as sector-related questions in the webinar session. He also discussed SISOP in brief and discussed the above-mentioned points on the High Growth Model. Relive the entire session & hear the in-depth insights from the speaker with the link appended below -
Get access to rich data and analytics of PMS & AIF by subscribing to us. Join the 40000+ investors & experts now: Subscribe NOW
211 of 291 PMS Strategies outperformed NIFTY in August 2022
Amidst global turbulence, our Indian economy looks very stable & promising. With FIIs returning back strongly and NIFTY nearing 18K Mark, PMS strategies have capitalized on the positive market sentiment to generate a positive performance in August 2022. This August, almost 72% of PMSes outperformed NIFTY & just 3 of them returned a negative yield.
Wealth Creation from Sectoral Trends
The Asian Development Bank predicts that the Indian economy will expand by 7.5% in FY2022 and by roughly 8% in FY2023, supported by rising public infrastructure expenditure and a rise in private sector investment. Investors are prepared to devote a larger percentage of their savings to capital instruments in 2022 and are also motivated to invest in the growing industries in India. They are also inspired to invest in India's expanding industries. This blog will cover those sectors that will grow in the future in India and sectors that will ﬂourish even more in the investing game, in the near future. Along with that sectoral Growth triggers and their impact, sectorial past performance is discussed.
Understanding Mark Trend - The Abakkus Way
The Indian economy has fully recovered to the pre-pandemic real GDP level of 2019-20, according to the provisional estimates of GDP released on May 31, 2022. Real GDP growth in FY 2021-22 stands at 8.7% which is 1.5% higher than the real GDP in FY 2019-20. These figures are associated with stronger growth momentum, indicating increased economic demand. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers globally over the next 10-15 years, backed by its robust democracy and strong partnerships. In this blog, we shall discuss India’s current market trend and how India is poised for robust growth, surpassing both emerging and developed markets
With Easing Inflationary Pressure, PMS Performance Surges in July 2022
Amidst the latest earnings downgrade of India Inc., July month saw a surge in the monthly returns of PMS schemes as the inflationary pressure is easing in the Indian economy. 166 of the 283 PMS schemes in the PMS Bazaar radar outperformed NIFTY and only one scheme out of them produced a negative monthly return in July 2022.
How Quant Strategies are Relevant in the Current Market Scenario?
The widespread application of quantitative investment strategies is a relatively recent trend. Over the past few decades, the field of quant investing has made significant advancements in the world of finance. Additionally, this field has been evolving to create new investment technologies that ultimately simplify the process. This webinar blog will provide you with a better understanding of quant investing and illustrate how it has been relevant in the current market scenario.
The New-Gen UHNIs and Evolving Advisory Space
The number of Indian ultra-high-net-worth individuals (UHNIs) having net assets of USD 30 million (about Rs 226 crore) and more has increased 11% last year on the back of buoyant equity markets and the digital revolution. India also ranked third in the billionaire population globally in 2021. Understanding this growing ultra-HNI segment in the wealth management landscape is very important, and this blog will give you an in-depth understanding of the UHNIs and evolving wealth management space.
Investing in Alternates Through the Market Turmoil
COVID-19 risks are fading, and mobility data indicates a return to normal across many developed economies. The re-opening was meant to create a burst of activity in the first quarter of the year, followed by a more modest economic expansion. However, with the rising inflation, growth risks are to the downside, and the only certainty in public markets appears to be volatility. In such situations, alternative assets play a crucial role as they can enhance returns while minimizing downside risks of portfolios. This blog covers alternative investments that can deliver differentiated sources of return, diversify a portfolio, and serve as an inflation hedge, as well as, provide potential income.
Are We Witnessing India’s Golden Decade Ahead?
India reported the highest foreign direct investment (FDI inflow) to the tune of $83.57 billion for the financial year 2021-2022. Despite the recent FDI Outflow narratives, FDI inflows have actually increased 20-fold in the last 20 years. Supported by GDP growth, favorable demographic inflection, and consistency of government policy, India has embarked upon a ‘Golden Decade’ journey of high investment, consumption, and growth. In this blog, we shall cover the major reasons and future projections that will make this decade a golden period for the Indian economy.