HDFC Capital Builder Value Fund-Presentation · Sector Allocation. 13 • The Scheme also uses...
Transcript of HDFC Capital Builder Value Fund-Presentation · Sector Allocation. 13 • The Scheme also uses...
July 20
Table of Contents
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• Market Outlook
• What is definition of Value for HDFC Capital Builder Value Fund?
• Why invest in HDFC Capital Builder Value Fund
• Investment Approach
• Stock Selection
• Sector Allocation
• Large/Mid/Small-Cap break-up
• Portfolio Characteristics
• Portfolio Statistics
• Top 10 Holdings
• Fund Suitability
• Scheme Facts
• Scheme Performance
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Market Outlook
Equity Markets Update – Valuation near previous lows
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• Markets were down by 23% in March 20 (one of the sharpest monthly falls) led by highest ever monthly FPI outflows
• FY21 P/E is less relevant due to significant dislocation of profits expected in several sectors. NIFTY 50 (30-June-20)
is trading at FY22 P/E of 16.8 times (Source: Kotak Insti Equities)
• Price / Book Value, Marketcap / GDP are better measures in current situation. Prevailing Price / Book Value ,
Marketcap / GDP are comparable with market bottoms in earlier crises (refer chart above)
Source: Kotak Insti Equities, CY20 & CY21 ratio based on current Market capand GDP estimates of CY20 & CY21
India market cap to GDP ratio, calendar year-ends, 2000-21E (%)
Refer Disclaimer on Slide 23
Low Market Cap to GDP – What does history tell us ?
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End of Calendar Year
Marketcap to GDP
%
Next 1 year NIFTY returns
Next 3 year NIFTY returns
2003 48 11% 111%
2004 55 36% 195%
2008 56 76% 113%
2011 61 28% 79%
2013 65 31% 30%
June 2020 ~64 ? ?
• Marketcap to GDP is close to 60% and reflects good value. In the past , similar valuations were followed bygood returns over next 3 years
• Significant correction in Indian equities led by global selloff in equities and FPI outflows from India. March 20saw highest ever monthly FPI outflow of US$ 8.4bn
• In the past, periods of heavy FPI outflows were followed by periods of sizeable inflows
• Historically, sharp corrections in Indian markets triggered by global events were followed by good returns overmedium to long term
Past performance may or may not sustain in future. Returns are neither assured nor guaranteed.
Source: Kotak Insti Equities, Bloomberg
Refer Disclaimer on Slide 23
FPIs selling, will the trend reverse?
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Source – Edelweiss; Maximum outflow on a 90 days rolling period
FPI Flows Rs crs
Year90 days period ending
Outflows*
next 360 days
FPI outflows as % of India total Market
Cap
% NIFTY Return
next 360 days
2006 11-Aug-06 -4,758 95,307 -0.2% 33%
2008 29-Oct-08 -30,428 1,11,664 -1.1% 85%
2011 13-Dec-11 -12,680 2,00,042 -0.2% 23%
2013 01-Oct-13 -6,938 1,71,914 -0.1% 38%
2015 18-Dec-15 -30,179 73,552 -0.3% 5%
2016 29-Feb-16 -26,497 93,963 -0.3% 28%
2017 08-Feb-17 -30,414 44,457 -0.3% 23%
2018 09-Nov-18 -38,872 68,564 -0.3% 13%
2020 05-May-20 -50,000 ?? -0.4%
29.3
(0.5)
24.5
20.0
16.2
3.3 2.9
8.0
(4.6)
14.2
(4.3) (10.0)
(5.0)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
CY10CY11CY12CY13CY14CY15CY16CY17CY18CY19CY20uptoMay
FPI flows USD bn
• During the current COVID crisis, FPIs have sold more than Rs.50,000 crs as on 5-May-2020 on a 90 day rolling basis.
• In the past, periods of major FPI selling, were followed by periods of sizeable FPI inflows
Refer Disclaimer on Slide 23
Equity Markets Summary : Opportunity in adversity
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• Significant impact on corporate profits in FY21 likely; however, minimal impact expected on intrinsic values of most
businesses.
• Indian equity markets in aggregate are trading at attractive valuations;
• Marketcap to GDP is ~64% and reflects good value. In the past , such levels were followed by good returns over
next 3 years
• The current Price to Book Value of the markets is comparable to earlier crisis such as GFC, IT Bubble and Asian
Crisis.
• Historically, sharp corrections in Indian markets triggered by global events were followed by good returns over medium to
long term.
• 10 year NIFTY returns are at 5% CAGR currently, this has happened after 15 years. Historically NIFTY returns below 5%
CAGR for a 10 year period have been followed by good returns over next 3, 5 and 10 years
• Significant increase in Covid-19 cases in India & across the world, sharp rise in oil prices, sharp escalation in border dispute
with China, etc. are key risks in near term
Life is a cycle, always in motion, if good times have moved on so will times of troublePast performance may or may not sustain in future. Returns are neither assured nor guaranteed. Refer Disclaimer on Slide 23
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HDFC Capital Builder Value Fund
Investment strategy of this fund would be to focus on :
• Companies trading below intrinsic value, as measured by potential earnings or asset values, and/or future cash flow growth
• Companies in turnaround phase – Good businesses that have gone through a temporary difficult period and de-rated but are poised for turnaround in profitability
• Companies trading below their historical average multiples
Provided that the fund shall invest at least 50% of the portfolio in companies which are trading at multiples lower than Median P/E (Price/Earnings) or Median P/B (Price/Book Value) of NIFTY 500 Index.
What is definition of Value for this Fund ?
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• Diversified multi-cap strategy with a value bias
• Fund is managed true-to-mandate and invests at least 50% of the portfolio in companies which are trading at multiples lower than Median P/E (Price/Earnings) or Median P/B (Price/Book Value) of NIFTY 500 Index.
• Emphasis on investing in undervalued stocks with a reasonable margin of safety
• Investors with long term horizon can benefit not only from earnings growth but also re-rating of multiples
• Actively managed diversified equity portfolio which invests across sectors without a market cap bias.
Why Invest in HDFC Capital Builder Value Fund ?
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HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. The current investment strategy is subject to change depending onthe market conditions.
Investment Approach
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HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. The current investment strategy is subject to change depending onthe market conditions.
•Emphasis on undervalued stocks
•Preference for companies•(a) trading below intrinsic value•(b) In turnaround phase•(c) trading below historical average multiples
Stock Selection
•Active Overweight/Underweight vs benchmark based on top down investment callsSector Allocation
•Investments across Market Capitalization rangeNo Capitalization Bias
Stock selection
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• At the time of stock selection there is a preference for companies trading below intrinsic value, companies trading blow historical average multiples and companies in turnaround phase.
• As of June’20, 79% of the portfolio is in preferred category as follows :
Particulars % of Net Assets (Jun’20)
Average TTM P/E
AverageTTM P/B
Average EPS Growth
(Estimated)FY20-22ECAGR %
Average ROE
(FY20)%
Description of some companies in our portfolio
Companies trading below intrinsicvalue (Absolute Value)
31% 13.7 2.4 2% 18.3% Largest Utility Co. in India, Largest Tobacco Co. in India, Large Tech Co.in India
Companies below historical average multiples (Relative Value)
29% 21.8 3.2 16% 14.9% Largest Private sector bank in India, Large Corporate Focused private sector bank, Largest Auto Co. in India
Companies in Turnaround phase 19% 52.1 5.5 43% 12.2% Second Largest Telecom Co. in India, Large Corporate focused Private Bank,Largest Healthcare player in India.
Source – Bloomberg, Ratios /Growth estimates as of 6th July 2020, TTM – Trailing 12 months, P/E-Price/Earnings,P/B –Price/Book Value, EPS – Earnings per shareROE – Return on Equity computed for Fiscal Year ended 31st March 20.
The above is purely as per our internal analysis.The current investment strategy is subject to change depending on the market conditions. Refer disclaimers on Slide 23.Stocks/Sectors referred herein are illustrative and not recommended by HDFC Mutual Fund / AMC. The Fund may or may nothave any present or future positions in these stocks/ sectors. The data/statistics are given on the basis of information which isalready available in publicly accessible media. The same should not be construed as any research report/researchrecommendation to buy or sell any security covered under the respective sector/s. HDFC Mutual Fund/AMC is not guaranteeingreturns on any investments.
Sector Allocation
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• The Scheme also uses sector allocation and takes top down investment calls.
• The Scheme is positioned to benefit from sectors which are beneficiaries of accelerated adoption of technology (IT and Telecom) ; higher healthcare spends (Healthcare), government capex on infra and Defence (Industrials) and lower interest rate cycle (Utilities)
• The fund is underweight Financials due to asset quality concerns and consumer staples due to expensive valuations
• Key overweight/(underweights) –OW /(UW) are as under
Sectors Scheme Weight %
Benchmark Weight %
OW/(UW) %
Jun’20 P/E Jun’20 P/B
Industrials 9.6 5.9 3.7 21.5 2.4
Communication Services 6.5 3.5 3.0 NA 3.3
Health Care 7.7 6.3 1.4 37.4 3.3
Information Technology 12.1 10.9 1.2 18 4.3
Utilities 3.6 3.2 0.4 10.6 1.2Energy 11.6 11.2 0.4 18.7 1.9
Real Estate - 0.6 (0.6) 36.8 1.6Materials 7.8 8.6 0.8) 17 1.7Financials 27.7 30.5 (2.7) 20.6 1.9
Consumer Discretionary 4.5 8.2 (3.7) 46.5 2.6
Consumer Staples 6.8 11.2 (4.4) 36.7 7.6
As of 30th June 20. Source: Bloomberg, Stocks/sectors referred above are illustrative and are not recommended by HDFC Mutual Fund/AMC. The Fundmay or may not have any present or future positions in these stocks/sectors. The above statements / analysis should not be construed as an investmentadvice or a research report or a recommendation to buy or sell any security covered under the respective sector/s .The same has been prepared on thebasis of information which is already available in publicly accessible media.
Large/Mid/Small Cap break-up
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As of 30th June 2020, Source :MFI Explorer
• The Scheme invests across market capitalization
• At present, the scheme has a large cap bias (~75% of Net Assets)
• Market Cap Bias is an outcome of valuations and bottom up stock selection
75
914
0
10
20
30
40
50
60
70
80
Large Cap Mid Cap Small Cap
% o
f N
et A
sset
s
Market Cap Break-up
Large Cap Mid Cap Small Cap
Portfolio Characteristics
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Source :Bloomberg
$ As of 7th July 2020
Characteristics Scheme NIFTY 500
Return on Equity (ROE) FY20 12.7% 9.4%
Trailing 12 Month - Price to Earnings Ratio (P/E) $ 27.6 27.2
Trailing 12 Month - Price to Book Value Ratio (P/B) $ 2.1 2.4
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Portfolio Statistics (As of June 30, 2020)
16** Risk Free Rate 3.89% (Source FIMMDA, MIBOR)For complete portfolio details please visit www.hdfcfund.com
Particulars % To Net Assets
Top 10 Equity And Equity Related Holdings 51.58%
Total Equity & Equity Related Holdings 97.95%
Cash, Cash Equivalents And Net Current Assets 2.05%
Assets Under Management (Rs. In Crore) 3,595
Standard Deviation** 6.573%
Beta** 1.036
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Top 10 Holdings (As of June 30, 2020)
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Particulars GICS Sector % To Net Assets
HDFC Bank Ltd. Financials 9.27
Reliance Industries Ltd. Energy 8.36
ICICI Bank Ltd. Financials 7.12
Infosys LimitedInformation Technology
6.18
ITC Ltd. Consumer Staples 5.32
Bharti Airtel Ltd.Communication
Services4.25
Kotak Mahindra Bank Limited
Financials 3.11
Axis Bank Ltd. Financials 2.83
Aurobindo Pharma Ltd. Health Care 2.82
NTPC Limited Utilities 2.32
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Fund Suitability
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The scheme is suitable for investors who
• Intend to invest in undervalued companies.
• Would like to invest in a diversified portfolio with a long term horizon.
• Want twin benefit of earnings growth as well as re-rating of valuation multiples
• Are looking for a sound and disciplined approach to investing in volatile times.
Scheme Facts
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Type of Scheme An open ended equity scheme following a value investment strategy
Inception Date
(Date of allotment)February 01, 1994
Investment Objective To achieve capital appreciation/ income in the long term by primarily investing in undervalued stocks
Fund Manager $ Mr Amit Ganatra
PlansDirect PlanRegular Plan
Sub-OptionsUnder Each Plan: Growth & Dividend. The Dividend Option offers Dividend Payout and Reinvestment facility.
Minimum ApplicationAmount
(Under Each Plan/Option)
Purchase: Rs. 5,000 and any amount thereafter
Additional Purchase: Rs. 1,000 and any amount thereafter
Load Structure
Entry Load:• Not Applicable. Upfront commission shall be paid directly by the investor to the ARN Holder (AMFI
registered Distributor) based on the investors’ assessment of various factors including the servicerendered by the ARN Holder.
Exit Load:• In respect of each purchase / switch-in of Units, an Exit Load of 1.00% is payable if Units are
redeemed / switched-out within 1 year from the date of allotment.
• No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment.
In respect of Systematic Transactions such as SIP, Flex SIP, GSIP, STP, Flex STP, Swing STP, Flex index, etc - Exit Load, if any, prevailing on the date of registration / enrolment shall be levied. For further details on load structure, please refer to the Scheme Information Document/Key information memorandum of the Scheme.
Benchmark Index NIFTY 500
For further details, refer Scheme Information Document and Key Information Memorandum and addenda thereto available on www.hdfcfund.com and at InvestorService Centres of HDFC Mutual Fund. $ Dedicated fund manager for overseas investments Mr. Chirag Dagli
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Asset Allocation Pattern
2020
For further details, refer Scheme Information Document and Key Information Memorandum and addenda thereto available on www.hdfcfund.com and at InvestorService Centres of HDFC Mutual Fund. $ Dedicated fund manager for overseas investments Mr. Chirag Dagli
Under normal circumstances, the asset allocation (% of net assets) of the Scheme’s portfolio will be as follows.
Types of Instruments Normal Allocation (%) Risk Profile
Equity and Equity relatedinstruments
65-100 High
Debt Securities (includingsecuritised debt) andmoney marketinstruments
0-35 Low to Medium
Units issued by REITs andInvITs
0-10 Medium to High
Non-convertiblepreference shares
0-10 Low to Medium
The Scheme may invest in the schemes of Mutual Funds in accordance with the applicable extant SEBI (Mutual Funds) Regulations as amended from time to time. The Scheme may invest up to 35% of its net assets in foreign securities. The Scheme may invest up to 100% of its net assets in Derivatives.
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Scheme Performance Summary – HDFC Capital Builder Value Fund
Value of Rs 10,000 invested
Scheme Returns (%)
Benchmark Returns (%)
Additional Benchmark Returns (%)
Scheme Benchmark
(Rs)
Additional Benchmark
(Rs)
Last 1 Year -18.49 -11.13 -11.51 8,151 8,887 8,849
Last 3 Years -2.14 1.76 3.95 9,371 10,536 11,233
Last 5 Years 3.57 5.45 5.55 11,920 13,041 13,104
Since Inception 12.73 NA 9.56 237,092 NA 111,657
The above scheme has been managed by Amit Ganatra, the fund manager since May 21, 2020The performance of the Scheme is benchmarked to the Total Return Index (TRI) Variant of the Indices.Past performance may or may not be sustained in the future. The above returns are of Regular Plan – Growth Option. Returns greater than1 year period are compounded annualized (CAGR). Load is not taken into consideration for computation of performance. Different Plansviz. Regular Plan and Direct Plan have a different expense structure. The expenses of the Direct Plan under the Scheme will be lower to theextent of the distribution expenses / commission charged in the Regular Plan. Returns as on 30th June 2020.
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Performance Summary of other Scheme(s) managed by the Fund Manager
Scheme
Managing scheme since
Returns (%)
1 year 3 year 5 yearCAGR (in %) CAGR (in %)
Amit Ganatra manages total 3 schemes
HDFC DYNAMIC PE RATIO FUND OF FUNDS # 20-May-20 -4.84 2.00 5.79
NIFTY 50 Hybrid Composite Debt 65:35 Index -2.04 6.23 7.30
HDFC Multi Asset Fund ## 12-Jun-20 -0.63 2.87 5.3290% NIFTY 50 Hybrid Composite Debt 65:35 Index + 10% Domestic Price of Gold
1.85 7.64 7.99
Past performance may or may not be sustained in the future. The performance of the Scheme is benchmarked to the TotalReturn Index (TRI) Variant of the Indices. The above returns are of Regular Plan - Growth Option. Load is not taken intoconsideration for computation of performance. # The scheme is co managed by Amit Ganatra (Equities) and Anil Bamboli(Debt). ## The Scheme is co managed by Amit Ganatra (Equities), Anil Bamboli (Debt) and Krishan Daga (Gold related assets).Returns as on 30th June 2020. Different Plans viz. Regular Plan and Direct Plan have a different expense structure. Theexpenses of the Direct Plan under the Scheme will be lower to the extent of the distribution expenses/ commission charged inthe Regular Plan. On account of difference in the type of the Scheme, asset allocation, investment strategy, inception dates,the performance of these schemes is strictly not comparable.
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Disclaimer The presentation dated 22nd July 2020 has been prepared by HDFC Asset Management Company Limited
(HDFC AMC) based on internal data, publicly available information and other sources believed to be reliable. Any calculations made are approximations, meant as guidelines only, which you must confirm before relying on them. The information given is for general purposes only. Past performance may or may not be sustained
in future. The statements are given in summary form and do not purport to be complete. The views / information provided do not have regard to specific investment objectives, financial situation and the
particular needs of any specific person who may receive this information. The information/ data herein are not investment advice and alone are not sufficient and should not be used for the development or
implementation of an investment strategy. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Stocks/Sectors referred
herein are illustrative and not recommended by HDFC Mutual Fund / AMC. The Fund may or may not have any present or future positions in these sectors. HDFC Mutual Fund/AMC is not guaranteeing returns on any investments. The data/statistics are given on the basis of information which is already available in publicly
accessible media to explain general market trends in the securities market. The same should not be construed as any research report/research recommendation to buy or sell any security covered under the
respective sector/s. Neither the AMC and HDFC Mutual Fund nor any person connected with them, accepts any liability arising from the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be
fully responsible / liable for any decision taken on the basis of information contained herein.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
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Thank You
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