Morningstar Analysts assign Gold, Silver, Bronze, Neutral, and Negative, after taking into account three pillars: People, Process and Parent. The highest ratings going to funds the analysts’ research leads them to conclude will outperform over a market cycle, and Neutral and Negative ratings to those they lack conviction in. Read the detailed methodology here.
Here are funds that were upgraded by our analysts in 2021.
Nippon India Growth
- Category: Mid Cap
- Investment Style: Mid Growth
- Equity Holdings: 86
- % assets in top 10 holdings: 30
- Star Rating: 3 stars
- Fund Manager: Manish Gunwani (September 2017), Kinjal Desai (February 2019), Dhrumil Shah (February 2019)
- Analyst Rating: Regular plan upgraded from Neutral to Bronze. Direct share class retains Bronze
- Report: November 2021
- Morningstar Analyst: Himanshu Srivastava
- Return: -10.90% (2018), 6.78% (2019), 22.05% (2020), 22.40% (Since inception as of December 24, 2021)
Analyst View
The investment team has taken measures to improvise their research and stock selection processes. They have introduced a very detailed fund-casing methodology for all funds based on an internal risk matrix. Under this, every stock in the team’s coverage is assigned a four-level risk rating. Risk in a stock is measured on a six-factor framework which includes balance sheet leverage, management efficiency, management capital allocation, normalised ROE of business, the EBITDA to OCF convergence, and corporate governance.
Based on this, every stock is assigned one of the four risk ratings, and there is a cap on how much exposure a fund can have in stocks from each risk rating. This is to ensure that the funds are not exposed to unwarranted risk. The improvement measures are thought-through and have provided more teeth to the stock-selection process.
DSP Midcap Fund
- Category: Mid Cap
- Investment Style: Mid Growth
- Equity Holdings: 51
- % assets in top 10 holdings: 32
- Star Rating: 3 stars
- Fund Manager: Vinit Sambre (July 2012), Resham Jain (March 2018), Jay Kothari (March 2018)
- Analyst Rating: Direct share class upgraded from Silver to Gold. Regular share class retains Silver
- Report: August 2021
- Morningstar Analyst: Himanshu Srivastava
- Return: -10.15% (2018), 9.21% (2019), 23.64% (2020), 15.55% (Since inception as of December 24, 2021)
Analyst View
Vinit Sambre continues to ply a business-oriented bottom-up approach to scout for good-quality stocks. Investments are largely made in companies having able managements, strong competitive advantages, and leadership positions in the areas where they operate. Sambre is cognizant of the risks associated with the mid-cap segment. Therefore, he factors them in and keeps a buffer in the portfolio by investing only in high-quality companies.
The strategy also involves theme-based choices where Sambre scouts for turnaround stories or those companies which are capex-oriented and linked to overall economic growth. His investments in building materials and the auto ancillary space are a case in point. The portfolio also has exposure to textile, chemicals, and agriculture-related businesses. Sambre constructs a relatively more-concentrated portfolio, and given an opportunity, will not shy away from taking big stock-specific bets in his high-conviction picks. He believes in constructing a durable portfolio which can last many cycles and deliver performance over three, five, and 10 years.
DSP Flexi Cap Fund
- Category: Flexi Cap
- Investment Style: Large Growth
- Equity Holdings: 55
- % assets in top 10 holdings: 41
- Star Rating: 3 stars
- Fund Manager: Atul Bhole (June 2016), Abhishek Ghosh (January 2021)
- Analyst Rating: Direct share class upgraded from Neutral to Bronze. Regular share class retains Neutral
- Report: August 2021
- Morningstar Analyst: Himanshu Srivastava
- Return: -7.49% (2018), 17.04% (2019), 18.74% (2020), 13.83% (Since inception as of December 24, 2021)
Analyst View
Atul Bhole studies a company's growth prospects, expected cash flows, and other quantitative parameters with an overlay of qualitative aspects. The objective is to understand the businesses and how various events (regulatory changes, earnings results, and changes in the company’s fundamental attributes) will impact the stock price. He prefers businesses that have compounding characteristics with regards to sales as well as earnings and strong entry barriers.
On the other hand, he doesn’t like managements that enter into multiple businesses through one company. Companies that meet this criterion typically have advantage in terms of cost, brand, franchise, or distribution. On the qualitative aspect, he lays lot of emphasis on the management of the company and its track record with regards to capital allocation, competency, and corporate governance. Having said this, the strategy is not without risks. For instance, growth orientation in the strategy may impact its performance during down markets or when value investing is in favour. Also, the manager takes sector or thematic calls, which may expose the fund to above-average volatility.
Mirae Asset Emerging Bluechip Fund
- Category: Large & Mid Cap
- Investment Style: Large Growth
- Equity Holdings: 67
- % assets in top 10 holdings: 37
- Star Rating: 5 stars
- Fund Manager: Neelesh Surana (July 2010), Ankit Jain (January 2019)
- Analyst Rating: Upgraded from Silver to Gold in regular share class
- Morningstar Analyst: Nehal Meshram
- Return: -5.42% (2018), 14.72% (2019), 22.40% (2020), 21.81% (Since inception as of December 24, 2021)
Analyst View
The fund's long-standing process relies on proprietary models and research. The team combines quantitative screens and fundamental analysis to find undervalued companies with strong balance sheets, earnings growth, and cash flows We have upgraded the Process rating to High. The level of detail of the research carried out is a key positive aspect of this process.
With a view to holding a company for the long term, the team digs deeper to understand the underlying nature of a sustainable business model, such as analysing the economic value contributed over time and the dynamics of the industry in which a firm operates. Surana sticks to his convictions even if the situation is contrary to his investment decision.
L&T India Value
- Category: Value
- Investment Style: Large Blend
- Equity Holdings: 58
- % assets in top 10 holdings: 43
- Star Rating: 4 stars
- Fund Manager: Venugopal Manghat (November 2012), Vihang Naik (December 2019)
- Analyst Rating: Direct share class upgraded from Neutral to Bronze. Regular share class retains Neutral rating
- Morningstar Analyst: Kavitha Krishnan
- Return: -11.44% (2018), 4.60% (2019), 14.61% (2020), 15.61% (Since inception as of December 24, 2021)
Analyst View
Venugopal Manghat uses a bottom-up approach to select stocks and is focused on identifying companies that have a significant potential to grow in terms of its upside. Manghat looks at factors including a positive operating cash flow and discounted cash flow valuations along with other metrics like P/E, EV/EBDITA, and price/book value. Valuations are looked at both on a relative basis within the sector and on an absolute basis versus its historical valuations.
The manager undertakes a sum-of-parts valuation with a view to understand how individual businesses and valuations within a group add up. While Manghat invests in stocks that are going through temporary downturns, he will avoid investing in companies that could go through long-term phases of underperformance. The diversified approach could lead to the fund holding some illiquid names as part of the portfolio.
