In the past Value investing has provided attractive returns over the long term. Value investment opportunities can be found across market cycles, sectors, as well as companies. Investors have had several value investment opportunities over the last two decades as a result of events like global financial crisis, demonetisation, and recently the COVID-19 pandemic.
Value investing generally aims to invest in high quality businesses which are going through a temporary downturn. This enables investors to buy undervalued stocks and benefit from rerating once the stock prices start reflecting their true values. Intrinsic value investing involves buying companies at a price lower than their intrinsic value, maintaining a margin of safety, and taking advantage of market inefficiencies.
Investors can consider investing in a fund that follows the value investing approach with their portfolio to benefit from the emerging opportunities in various market cycles and diversification.
Canara Robeco Mutual Fund has launched Canara Robeco Value Fund. It is an open-ended equity scheme following a value investment strategy. The fund house is of the view that you must consider investing in businesses that endeavour to enhance the value of your money.
On the launch of this fund, Mr Nimesh Chandan Head – Investments (Equities) at Canara Robeco Mutual Fund said, “The equity fund will look for opportunities in sectors and companies that are mispriced due to heightened market reactions. Value investing looks at future growth prospects of the company, but has a conservative estimate of growth to keep some room for any possible errors in forecasting of future growth.”
Table 1: Details of Canara Robeco Value Fund
|Type||An open-ended equity scheme following a value investment strategy.||Category||Value Fund|
|Investment Objective||The fund aims to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity related instrument, with higher focus on value stocks. There is no assurance or guarantee that the investment objective of the scheme will be realized.|
|Min. Investment||Rs 5000/- and in multiples of Re 1 thereafter. Additional purchase Rs 1000/- and in multiples of Re 1 thereafter.||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||
|Fund Manager||Mr Vishal Mishra||Benchmark Index||S&P BSE 500 TRI|
|Issue Opens:||August 13, 2021||Issue Closes:||August 27, 2021|
(Source: Scheme Information Document)
The investment strategy for Canara Robeco Value Fund will be as follows:
Canara Robeco Value Fund will aim to invest predominantly in equity and equity related instruments to generate long-term capital appreciation. With stock selection, there will be a higher focus on stocks trading below their intrinsic value with a sufficient amount of margin of safety.
The scheme will follow intrinsic value investing strategy, which involves buying companies at a price lower than their intrinsic value. This strategy tracks the overreaction of market participants to the short-term developments in industries/companies and exploits opportunities for investment returns. This strategy also relies on the analytical and behavioral edge of the fund manager to generate investor alpha.
The fund will follow the philosophy of identifying mispriced opportunities between its intrinsic value and the market price of a company to make an investment decision. Under this strategy, for the purpose of calculation of intrinsic value, factors such as earnings power of the business, opportunity size and ability to lower cost of capital will be considered.
The companies could take time to regain their underlying intrinsic value. This strategy will ride on the time lag and intends to make profits for investors by exploiting these anomalies.
The fund would adopt a bottom-up stock selection approach with a strong focus on valuations to spot businesses whose stocks have a higher potential for better returns and other such opportunities over the medium to long term.
The fund manager will evaluate companies on robustness of business fundamentals, competency of management, valuation in comparison to its earnings growth prospects, and its historical long-term valuation.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation of Canara Robeco Value Fund
|Instruments||Indicative Allocation (% of net assets)||Risk Profile|
|Equity and Equity-related Instruments||65||100||Medium to High|
|Debt and Money Market Instruments||0||35||Low to Medium|
|Units issued by REITs and InvITs||0||10||Medium to High|
|Units of MF schemes||0||5||Medium to High|
|Equity Exchange Traded Funds||0||10||Medium to High|
(Source: Scheme Information Document)
Who will manage Canara Robeco Value Fund?
Mr Vishal Mishra will be the dedicated fund manager for this scheme.
Mr Vishal Mishra is a Fund Manager at Canara Robeco Asset Management Co. Ltd. He is ACA and Bachelor of Commerce with over 18 years of work experience in financial services industry. Prior to this, he was associated with Daiwa Asset Management (India) Pvt. Ltd. as Fund Manager, Collins Stewart as AVP – Research, IL&FS Investsmart as Analyst, Crisil Ltd. as Research Analyst, and Quantum Information Services Ltd. as Research Analyst.
Mr Mishra also manages other schemes such as Canara Robeco Blue Chip Equity Fund, Canara Robeco Infrastructure, Canara Robeco Equity Tax Saver Fund, and Canara Robeco Capital Protection Oriented Fund – Series 10.
Fund Outlook – Canara Robeco Value Fund
Canara Robeco Value Fund will aim to discover stocks available at a discount to their “Intrinsic Value” with the potential to do well based on strong fundamentals, to achieve wealth creation. The scheme invests in undervalued stocks, which provides a reasonable margin of safety and helps to minimize downside risk.
The scheme aims to benefit over the full investment cycle making it an ideal fit for any investor’s core portfolio. This fund will invest across market capitalization and sectors with adequate margin of safety to reduce risk in a volatile market environment.
The fund manager will actively manage the portfolio and use the Quant model to aid the portfolio construction, keeping in mind opportunity size, and risk limits.
However, the scheme’s performance will depend on the ability of the fund manager to spot the growth potential of undervalued stocks in different sectors/market capitalisation at an early stage and to hold on to it until its full potential is realized.
The scheme is suitable for long-term investors who can stick through various market cycles to benefit from the opportunities through value investing. Ensure your suitability to the fund based on high-risk appetite, long investment horizon, and your investment objective is aligned with the fund.
This article first appeared on PersonalFN here