Morningstar's analyst recently revisited Templeton India Equity Income and Templeton India Growth and came away impressed. Here is a brief on each of these flexi-cap funds.
The fund manager’s investment philosophy is built upon 3-core principles: value orientation, patient investment outlook, and bottom-up approach. The fund manager looks at stock prices and markets from a 5-year horizon using a combination of discount cash flow models and relevant quantitative parameters such as return on equity, enterprise value/EBITDA and price/book value, among others to arrive at a target price of a company.
Within the framework, emphasis is also given to qualitative parameters like understanding the business, its management quality, ownership structure, and environmental, social, and governance practices. The team prepares the research document for the companies, which is further analyzed by the review team, and based on their feedback, the team sets their final recommendation with target price.
The team roughly covers 200 stocks, of which 120 stocks form the core list, while the emerging-markets team covers around 3,000 stocks, following a similar approach of picking growth stocks that are trading at significant discounts to their intrinsic values.
The framework, supported by risk-management systems, due-diligence procedures, and regular reviews (every six months), makes sure the funds remain in line with their investment objectives.
The manager focuses on investment in stocks that pay off in the long term, neither does he believe in timing the market. The low turnover ratio in both the funds clearly bears out the buy-and-hold investment strategy. Investments in companies like Tata Chemical, Reliance Industries, and Bajaj Holdings & Investment over a long period are examples of this approach.
At the same time, the manager is watchful of the set target price and reduces position in stocks even in long-standing names, if the team thinks they have played out or if they do not have the same conviction in terms of their upside.
Typically, the portfolios are concentrated in fewer stocks than its peers, which is evident from its top-10 holdings. The manager tries to add diversification by investing in holding companies whose stock price is influenced by a number of the underlying businesses. His investments in stocks such as Reliance Industries and Bajaj Holdings & Investment are a case in point.
Check the performance of Templeton India Growth and the brief analyst note.
Check the performance of Templeton India Equity Income and the brief analyst note.
