Monthly Communiqué Portfolio Management Services Regn No. PMS INP 000000670 August 2014 Dear Investors and my dear advisor friends, July, August, September and October typically tend to mark the months which for our industry may be called as “conference season”. These conferences are ones where mutual fund industry professionals, distributors and advisors alike get together to discuss and debate on issues. Issues range from across the industry's operations like fund performance, products, service et al. I was particularly intrigued by one question that was asked by an advisor friend of mine to a panel of experts discussing some trends in the mutual fund industry. He submitted to the panel that investors find it difficult to buy mutual fund schemes because they have complicated names like Dynamic Plan, MultiCap Fund, FlexiCap Fund, Balanced Advantage Fund or in case of Motilal Oswal Mutual Fund the Focused series of funds with names like MOSt Focused 25, MOSt Focused MidCap 30 and MOSt Focused MultiCap 35. Our PMS schemes where you might have invested go with the names of Value Strategy and Next Trillion Dollar Opportunity Strategy. It goes without saying that such names like Next Trillion Dollar Opportunity Strategy are not likely to be understood by an investor. This is because the name describes what the portfolio is aimed at rather than describing what benefit it provides to investors or where it fits in an investor's mutual fund investment portfolio. Next Trillion Dollar Opportunity Strategy intends to communicate that this fund is aimed at capitalizing from India's GDP growth. We are approximately 2 trillion USD or 120 lac crores economy now and as we add another trillion potentially in the next 5 years (Source: MOSL Research), we will see a lot of mid market capitalization companies emerging as leaders in their chosen areas. The strategy aims to create wealth for you by identifying and investing in such opportunities. This is much like the practice in pharmaceutical business where the names describe the drug rather than telling the patient what the drug will do. For example, some surfing on the net tells me that common drugs used to cure typhoid are Ciprofloxacin, Erythromycin, Levofloxacin, Norfloxacin, Ofloxacin etc. Now the trade names of these drugs marketed by pharmaceutical companies are all such that they tell the Doctor what drug is contained in the medicine e.g. Actiflox or Levacloz or Bactoquin etc. I did not find any name like “typhoid-buster” or “typhoid-king” or what the MF industry could call “typhoid-cure-plan”! Why is that? Why can't they have names that are easily understood by the end consumer? That's because one particular drug can be used to cure multiple ailments which may all emanate from bacterial infections. All the above drugs are used to cure bacterial infections and typhoid is one of them. Combinations of drugs may be used to cure different types of ailments and hence naming a drug something like “typhoid-buster” would result in limiting its usage and conveying a faulty impression. More importantly, the products we are talking about here are “prescription” based on not “over- the- counter” or OTC as is widely understood. They need to be consumed under advice from a Medical Doctor. Well yes, clearly there are OTC drugs with more popular names that could be given to you by a doctor and you could all the same buy it from the drug store by common knowledge – the kind of stuff used to cure headaches. We all know we could buy paracetamol sold under any of the familiar brand names. But that works when it's a common headache you are looking to cure and not typhoid! Next Trillion Dollar Opportunity Strategy is suitable for long term wealth creation over a period of say 5 years and considering that it invests only in small and mid market capitalization stocks, it's return and risk profile is higher than that of Value Strategy which invests only in large or midsized quality companies. Now, there are various purposes in your life goals for which you might want to create wealth over Our Investment philosophy - BUY RIGHT : SIT TIGHT Quality : Quality of business and management Growth : Growth in earnings and sustained RoE Longevity : Longevity of the competitive advantage /economic moat of the business Price : Buying a good business for a fair price rather than buying a fair business for a good price. Buy and Hold: We are strictly buy and hold investors and believe that picking the right business needs skill and holding onto these business to enable our investors to benefit from the entire growth cycle, needs even more skill. Focus: Our portfolios are high conviction portfolios with 20 to 25 stocks being our ideal number. We believe in adequate diversification but over-diversification results in diluting returns for our investors and adding market risk. Buy Right Sit Tight (Continued overleaf)
July, August, September and October typically tend to mark the months which for our industry may be
called as “conference season”. These conferences are ones where mutual fund industry professionals,
distributors and advisors alike get together to discuss and debate on issues. Issues range from across the
industry's operations like fund performance, products, service et al.
I was particularly intrigued by one question that was asked by an advisor friend of mine to a panel of
experts discussing some trends in the mutual fund industry. He submitted to the panel that investors find it
difficult to buy mutual fund schemes because they have complicated names like Dynamic Plan, MultiCap
Fund, FlexiCap Fund, Balanced Advantage Fund or in case of Motilal Oswal Mutual Fund the Focused series
of funds with names like MOSt Focused 25, MOSt Focused MidCap 30 and MOSt Focused MultiCap 35.
Our PMS schemes where you might have invested go with the names of Value Strategy and Next Trillion Dollar Opportunity Strategy. It
goes without saying that such names like Next Trillion Dollar Opportunity Strategy are not likely to be understood by an investor. This is
because the name describes what the portfolio is aimed at rather than describing what benefit it provides to investors or where it fits in an
investor's mutual fund investment portfolio. Next Trillion Dollar Opportunity Strategy intends to communicate that this fund is aimed at
capitalizing from India's GDP growth. We are approximately 2 trillion USD or 120 lac crores economy now and as we add another trillion
potentially in the next 5 years (Source: MOSL Research), we will see a lot of mid market capitalization companies emerging as leaders in
their chosen areas. The strategy aims to create wealth for you by identifying and investing in such opportunities.
This is much like the practice in pharmaceutical business where the names describe the drug rather than telling the patient what the drug
will do. For example, some surfing on the net tells me that common drugs used to cure typhoid are Ciprofloxacin, Erythromycin,
Levofloxacin, Norfloxacin, Ofloxacin etc. Now the trade names of these drugs marketed by pharmaceutical companies are all such that
they tell the Doctor what drug is contained in the medicine e.g. Actiflox or Levacloz or Bactoquin etc. I did not find any name like
“typhoid-buster” or “typhoid-king” or what the MF industry could call “typhoid-cure-plan”! Why is that? Why can't they have names
that are easily understood by the end consumer? That's because one particular drug can be used to cure multiple ailments which may all
emanate from bacterial infections. All the above drugs are used to cure bacterial infections and typhoid is one of them. Combinations of
drugs may be used to cure different types of ailments and hence naming a drug something like “typhoid-buster” would result in limiting
its usage and conveying a faulty impression. More importantly, the products we are talking about here are “prescription” based on not
“over- the- counter” or OTC as is widely understood. They need to be consumed under advice from a Medical Doctor.
Well yes, clearly there are OTC drugs with more popular names that could be given to you by a doctor and you could all the same buy it
from the drug store by common knowledge – the kind of stuff used to cure headaches. We all know we could buy paracetamol sold under
any of the familiar brand names. But that works when it's a common headache you are looking to cure and not typhoid!
Next Trillion Dollar Opportunity Strategy is suitable for long term wealth creation over a period of say 5 years and considering that it
invests only in small and mid market capitalization stocks, it's return and risk profile is higher than that of Value Strategy which invests only
in large or midsized quality companies. Now, there are various purposes in your life goals for which you might want to create wealth over
Our Investment philosophy - BUY RIGHT : SIT TIGHT
Quality : Quality of business and management
Growth : Growth in earnings and sustained RoE
Longevity : Longevity of the competitive advantage /economic moat of the business
Price : Buying a good business for a fair price rather than buying a fair business for a good price.
Buy and Hold: We are strictly buy and hold investors and believe that picking the right business needs skill and holding onto these business to enable our investors to benefit from the entire growth cycle, needs even more skill.
Focus: Our portfolios are high conviction portfolios with 20 to 25 stocks being our ideal number. We believe in adequate diversification but over-diversification results in diluting returns for our investors and adding market risk.
Eicher Motors Ltd.Bosch Ltd.HDFC Bank Ltd.Tech Mahindra LimitedHousing Development Finance Corporation Ltd.Tata Consultancy Services Ltd.Sun Pharmaceuticals Ltd.State Bank Of IndiaLarsen & Toubro Ltd.Asian Paints Ltd.Hero Motocorp Limited
Top Holdings % Allocation*
12.8910.739.438.688.157.907.647.466.175.705.23
Key Portfolio Analysis
Standard Deviation (%)
Beta
25.02
1.00
Performance Data CNX NiftyValue Strategy
22.28
0.81
*Above 5% & Cash
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 31st July 2014. Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
*Above 5%
Value Strategy CNX Nifty All Figures in %
Periods
% o
f re
turn
s
40.88
19.42
12.69 11.9813.46
26.47
34.47
21.52
12.089.51 10.73
19.59
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
1 Year 2 Year 3 Year 4 Year 5 Year Since Inception
Next Trillion Dollar Opportunity Strategy CNX MIDCAP
The strategy aims to deliver superior
returns by investing in focused themes
which are part of the next Trillion Dollar
GDP growth opportunity. It aims to
predominantly invest in Small & Mid Cap
stocks with a focus on Identifying
Emerging Stocks/Sectors.
• Stocks with Reasonable Valuation
• Concentration on Emerging Themes
• Buy & Hold Strategy
Fund Manager : Manish Sonthalia
Strategy Type : Open ended
Date of Inception : 11th Dec. 2007
Benchmark : CNX MIDCAP
Investment Horizon: 3 Years +
Subscription : Daily
Redemption : Daily
Valuation Point : Daily
Strategy Objective
Investment Strategy
Details
25.19
23.73
22.32
8.78
7.04
5.65
0.55
Sector Allocation
15.61
11.98
8.11
7.30
5.91
5.65
5.43
Standard Deviation (%)
Beta
24.11
1.00
Performance Data CNX MIDCAPNTDOP
18.63
0.68
Top Sectors
Sector Allocation % Allocation*
Top Holdings
Top Holdings % Allocation*
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 31st July 2014. Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
*Above 5% & Cash
*Above 5%
Banking & Finance
Auto & Auto Ancillaries
FMCG
Diversified
Engineering & Electricals
Pharmaceuticals
Cash
Eicher Motors Ltd.
Page Industries Ltd.
Bosch Ltd.
Bajaj Finance Ltd.
J&k Bank
Ipca Lab Ltd.
Voltas Ltd.
All Figures in %
Period
% o
f re
turn
s
50.78
35.43
26.1421.20
23.57
14.76
57.69
22.96
10.566.53
12.73
3.78
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
1 Year 2 Year 3 Year 4 Year 5 Year Since Inception *
• Buy Growth Stocks across Market capitalization which have the potential to grow at 1.5 times the nominal GDP for next 5-7 years.
• BUY & HOLD strategy, leading to low to medium churn thereby enhancing post-tax returns
Fund Manager : Kunal Jadhwani
Strategy Type : Open ended
Date of Inception : 11th Feb. 2010
Benchmark : BSE 200
Investment Horizon: 3 Years +
Subscription : Daily
Redemption : Daily
Valuation Point : Daily
Strategy Objective
Investment Strategy
Details
Banking & FinanceFMCGAuto & Auto AncillariesPharmaceuticalsInfotechEngineering & ElectricalsChemicalsRetailCash
29.9015.8511.8110.458.566.676.465.410.40
Sector Allocation
Standard Deviation (%)
Beta
16.28
1.00
Performance Data BSE 200IIS
14.46
0.78
Top Sectors
Sector Allocation % Allocation*
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 31st July 2014. Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
*Above 5% & Cash
Page Industries Ltd.
HDFC Bank Ltd.
Housing Development Finance Corporation Ltd.
Tata Consultancy Services Ltd.
Eicher Motors Ltd.
Ipca Lab Ltd.
Larsen & Toubro Ltd.
Pidilite Industries Limited
Bata India Ltd.
City Union Bank Ltd.
12.94
11.07
9.02
8.56
7.54
6.80
6.67
6.46
5.41
5.36
Top Holdings
Top Holdings % Allocation*
*Above 5%
% o
f re
turn
s
2.25
16.06
25.41
30.31
17.27
12.01 11.48
0.64
16.99
29.66
38.48
21.95
11.6910.08
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
1 Month 3 Month 6 Month 1 Year 2 Year 3 Year Since Inception
The Strategy aims to generate superior returns over a medium to long term by investing in only 8-10 companies across market capitalization. The Fund Manager will take active asset allocation calls between cash & equity. The strategy will also take active equity allocation calls between investments in large caps & mid caps & it will follow a policy of profit booking with predefined price targets.
• Active Equity Allocation between Mid caps & Large caps
• Active Asset Allocation calls between Cash and Equity
• Strategy will follow a policy of profit booking with predefined price targets
• When the Client’s AUM appreciates by 15%, the appreciation amount will be automatically paid-out.
Portfolio Manager : Kunal Jadhwani
Date of Inception : 07th Dec. 2009
Benchmark : BSE 200
Investment Horizon: 12 – 18 Months
Subscription : No
Redemption : Daily
Valuation Point : Daily
Strategy Objective
Investment Strategy
Details
Auto & Auto Ancillaries
Banking & Finance
Infotech
FMCG
Chemicals
Furniture / Thermoware
Pharmaceuticals
Engineering & Electricals
Cash
24.14
23.41
12.90
11.06
8.25
7.24
7.13
5.40
0.46
Sector Allocation
Bosch Ltd.
Tech Mahindra Limited
Kotak Bank
HDFC Bank Ltd.
Page Industries Ltd.
Eicher Motors Ltd.
Pidilite Industries Limited
Supreme Industries Limited
Ipca Lab Ltd.
Cummins India Ltd.
15.14
12.90
12.05
11.36
11.06
9.00
8.25
7.24
7.13
5.40
Top Sectors
Sector Allocation % Allocation*
Top Holdings
Top Holdings % Allocation*
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 31st July 2014. Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
*Above 5% & Cash
*Above 5%
Focused Series IV BSE 200 All Figures in %
% o
f re
turn
s
2.91
18.34
28.43
43.47
32.56
19.25
12.03
0.64
16.99
29.66
38.48
21.95
11.69
8.55
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
1 Month3 Month6 Month 1 Years 2 Years 3 Years Since Inception
The strategy aims to invest in fundamentally sound companies that can benefit from changes in a company's valuation which reflects a significant change in the markets view of the company over a horizon of three years. The Strategy focuses on investing in stocks that can benefit from growth in earnings, re-rating of business or higher valuation of assets. Objective is to increase return rather than reduce risk for Investors.
• Buy and hold philosophy – low portfolio churn
• Follows the principle to pick best rather than diversification
Concentrated Strategy Structure of less than 10 stocks
Investment Horizon : Medium to Long term
•
•
Fund Manager : Manish Sonthalia
Date of Inception : 27th Sept. 2010
Benchmark : BSE 200
Investment Horizon: 2 to 3 Years
Subscription : Daily
Redemption : Daily
Valuation Point : Daily
Strategy Objective
Investment Strategy
Details
Banking & Finance
Oil and Gas
Auto & Auto Ancillaries
Engineering & Electricals
Infotech
Cash
30.14
25.42
23.20
7.79
7.53
0.72
Sector Allocation
Eicher Motors Ltd.
J&k Bank
Ing Vysya Bank Limited
Petronet LNG Limited
Bharat Petroleum Corpn. Ltd
Triveni Turbine Limited
Infosys Technologies Ltd.
Reliance Industries Ltd.
23.20
15.98
10.38
10.20
9.51
7.79
7.53
5.71
Standard Deviation (%)
Beta
16.62
1.00
Performance Data BSE 200Focused Series - V
42.84
1.10
Top Sectors
Sector Allocation % Allocation*
Top Holdings
Top Holdings % Allocation*
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 31st July 2014. Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
*Above 5% & Cash
*Above 5%
Focused Series V BSE 200 All Figures in %
Period
% o
f re
turn
s
1.45
13.11
31.26
47.63
29.06
16.32
7.09
0.64
16.99
29.66
38.48
21.95
11.69
5.69
0.00
10.00
20.00
30.00
40.00
50.00
60.00
1 Month 3 Month 6 Month 1 Year 2 Year 3 Year Since Inception
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 31st July 2014. Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
*Above 5% & Cash
*Above 5%
Bulls Eye Strategy BSE 200
Period
All Figures in %
% o
f re
turn
s
44.06
25.59
18.12
9.9911.98
14.46
38.48
21.95
11.69
8.3510.49
15.35
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
1 Year 2 Year 3 Year 4 Year 5 Year Since Inception
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 31st July 2014. Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
Period
Optima Strategy BSE 200 All Figures in %
% o
f re
turn
s
44.50
25.12
15.4912.04
14.30
23.36
38.48
21.95
11.69
8.3510.49
19.99
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
1 Years 2 Years 3 Years 4 Years 5 Years Since Inception
Disclaimer: This document has been prepared and issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact and terms and conditions. The information / data herein alone is not sufficient and shouldn't be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions, figures, charts/graphs, estimates and data included in this document are as on date and are subject to change without notice. While utmost care has been exercised while preparing this document, Motilal Oswal Asset Management Company Limited does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements/graphs contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions 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. Readers shall be fully responsible / liable for any decision taken on the basis of this presentation. No part of this document may be duplicated in whole or in part in any form and/or redistributed without prior written consent of the Motilal Oswal Asset Management Company Limited. Readers should before investing in the Strategy make their own investigation and seek appropriate professional advice. Investments in Securities are subject to market and other risks and there is no assurance or guarantee that the objectives of any of the strategies of the Portfolio Management Services will be achieved. Clients under Portfolio Management Services are not being offered any guaranteed/assured returns. Past performance of the Portfolio Manager does not indicate the future performance of any of the strategies. The name of the Strategies do not in any manner indicate their prospects or return. The investments may not be suited to all categories of investors. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Neither Motilal Oswal Asset Management Company Ltd. (MOAMC), nor any person connected with it, accepts any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice. Opinions, if any, expressed are our opinions as of the date of appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. The Portfolio Manager is not responsible for any loss or shortfall resulting from the operation of the strategy. Recipient shall understand that the aforementioned statements cannot disclose all the risks and characteristics. The recipient is requested to take into consideration all the risk factors including their financial condition, suitability to risk return, etc. and take professional advice before investing. As with any investment in securities, the value of the portfolio under management may go up or down depending on the various factors and forces affecting the capital market. Any forward - looking statements are not predictions and may be subject to change without notice. For tax consequences, each investor is advised to consult his / her own professional tax advisor. This document is not for public distribution and has been furnished solely for information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. No part of this material may be duplicated in any form and/or redistributed without' MOAMCs prior written consent. Distribution Restrictions - This material should not be circulated in countries where restrictions exist on soliciting business from potential clients residing in such countries. Recipients of this material should inform themselves about and observe any such restrictions. Recipients shall be solely liable for any liability incurred by them in this regard and will indemnify MOAMC for any liability it may incur in this respect. Securities investments are subject to market risk. Please read on carefully before investing.
The given stocks are part of portfolio of a model client of Value Strategy as on 31st July 2014. The stock forming part of the existing portfolio under Value Strategy may or may not be bought for new client. Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments. Name of the PMS Strategies does not in any manner indicate its future prospects and returns. The Companies mentioned above is only for the purpose of explaining the concept and should not be construed as recommendations from MOAMC.
