Monthly Communiqué Portfolio Management Services Regn No. PMS INP 000000670 October 2014 Dear Investors and my dear advisor friends, It's the time in the market that matters, not timing the market! I am sure anyone who has ever read anything about investing into equities has read the clichéd "equities are for long term" statement a zillion times. Most of the time these statements are also backed by a lot of statistics which prove that if you try to time the market for its bottoms and peaks and by mistake or by a stroke of bad luck, if you missed the best 10 days then your returns would be quite a few percentage points lower. Equally, on the other hand, you will find a lot of articles and data which will tell you that when there is profit to be had, take it off the table. There is no definition of long term and if you had invested in CNX Nifty exactly on August 31, 1994 and withdrew 10 years later on August 31, 2004 you wouldn't even beat PPF or Bank's Saving Accounts returns as CNX Nifty had given mere 2.19% compounding returns for this period. I have no love for this kind of analysis because I have one of those habits where I read the preface, introduction, foreword, afterword everything in a book before I actually read the book. First year of management studies I read a book called “Statistics for Management” written by Levin-Rubin. The introduction to this book says that there are three types of people in this world – liars, damned liars and then there are statisticians. So much for using numbers to prove a point in favour or against long term investing. I believe in logic. And hence, I will spare you the horror of reading graphs, charts and tables. I do believe that while investing in equities one must invest for the long term and really one has no idea when the market will do what you have been waiting for it to do. I read a famous statement by John Maynard Keynes which said that “The market can remain irrational longer than you can remain solvent” and then there's another equally apt one which goes something like “Markets go up till the last person has bought and markets keep going down till the last person has sold”. These statements mean that if you have a definite time horizon to your investment which is not sufficiently long term in nature, then forget fundamentals, your future will depend on gyrations of the stock market. So what is the definition of long term? Our industry started off by saying that long term means 3 years; if you go by taxation policies for investing, long term means one year, after a real bad fall in markets sometimes people tend to say long term means five years!!! Look, let me be honest, there is no fixed definition of long term. And only put that money into equities, which you are OK to forget about for next few years. Money which will be needed in a visible time frame, should never be allocated to equities. After hearing this kind of statement from me, a lot of times people talk about investing in equities as if they have alternative options. Let me quote a hypothetical situation, if you have a saving of Rs 5 lacs now or if you get an inflow of Rs 5 lacs and you need it to be Rs 10 lacs in the next 5 years, you may need somewhere in range of 15% compounded returns to meet that goal. There are very few asset classes including equities which will absorb a sum like 5 lacs and still leave you the scope to reach your goal. And what is the point thinking that if I keep in a bank at least it will be safe! Yes, it will be safe, but the goal will remain a goal and not a score. The best of companies are in business for decades. It takes decades to implement a business plan, exploit a market opportunity to the fullest and to build a scale business. If you think that Flipkart is the new kid on the block, think again – they started 8 years back in 2006! Our Investment philosophy - BUY RIGHT : SIT TIGHT QGLP ‘Q’uality ‘G’rowth denotes growth in earnings and susained RoE ‘L’ongevity ‘P’rice denotes quality of the business and management denotes longevity of the competitive advantage or economic moat of the business denotes our approach of buying a good business for a fair price rather than buying a fair business for good price Buy and Hold: Focus: 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. 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 stock Characteristics Sit Tight Approach (Continued overleaf)
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NEWS LETTER PMS October 2014...HDFC Bank Ltd. Supreme Industries Limited Lupin Ltd. Larsen & Toubro Ltd. City Union Bank Ltd. Housing Development Finance Corporation Ltd. Bata India
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It's the time in the market that matters, not timing the market!
I am sure anyone who has ever read anything about investing into equities has read the clichéd "equities are
for long term" statement a zillion times. Most of the time these statements are also backed by a lot of
statistics which prove that if you try to time the market for its bottoms and peaks and by mistake or by a
stroke of bad luck, if you missed the best 10 days then your returns would be quite a few percentage points
lower. Equally, on the other hand, you will find a lot of articles and data which will tell you that when there is
profit to be had, take it off the table. There is no definition of long term and if you had invested in CNX Nifty
exactly on August 31, 1994 and withdrew 10 years later on August 31, 2004 you wouldn't even beat PPF
or Bank's Saving Accounts returns as CNX Nifty had given mere 2.19% compounding returns for this period.
I have no love for this kind of analysis because I have one of those habits where I read the preface, introduction, foreword, afterword
everything in a book before I actually read the book. First year of management studies I read a book called “Statistics for Management”
written by Levin-Rubin. The introduction to this book says that there are three types of people in this world – liars, damned liars and then
there are statisticians. So much for using numbers to prove a point in favour or against long term investing. I believe in logic. And hence, I
will spare you the horror of reading graphs, charts and tables.
I do believe that while investing in equities one must invest for the long term and really one has no idea when the market will do what you
have been waiting for it to do. I read a famous statement by John Maynard Keynes which said that “The market can remain irrational
longer than you can remain solvent” and then there's another equally apt one which goes something like “Markets go up till the last
person has bought and markets keep going down till the last person has sold”. These statements mean that if you have a definite time
horizon to your investment which is not sufficiently long term in nature, then forget fundamentals, your future will depend on gyrations
of the stock market. So what is the definition of long term?
Our industry started off by saying that long term means 3 years; if you go by taxation policies for investing, long term means one year,
after a real bad fall in markets sometimes people tend to say long term means five years!!! Look, let me be honest, there is no fixed
definition of long term. And only put that money into equities, which you are OK to forget about for next few years. Money which will be
needed in a visible time frame, should never be allocated to equities. After hearing this kind of statement from me, a lot of times people
talk about investing in equities as if they have alternative options.
Let me quote a hypothetical situation, if you have a saving of Rs 5 lacs now or if you get an inflow of Rs 5 lacs and you need it to be Rs 10
lacs in the next 5 years, you may need somewhere in range of 15% compounded returns to meet that goal. There are very few asset
classes including equities which will absorb a sum like 5 lacs and still leave you the scope to reach your goal. And what is the point thinking
that if I keep in a bank at least it will be safe! Yes, it will be safe, but the goal will remain a goal and not a score.
The best of companies are in business for decades. It takes decades to implement a business plan, exploit a market opportunity to the
fullest and to build a scale business. If you think that Flipkart is the new kid on the block, think again – they started 8 years back in 2006!
Our Investment philosophy - BUY RIGHT : SIT TIGHT
QGLP
‘Q’uality
‘G’rowth denotes growth in earnings and susained RoE
‘L’ongevity
‘P’rice
denotes quality of the business and management
denotes longevity of the competitive advantage oreconomic moat of the business
denotes our approach of buying a good business for a fair pricerather than buying a fair business for good price
Buy and Hold:
Focus:
We are strictly buy and hold investors and believe thatpicking the right business needs skill and holding onto these business toenable our investors to benefit from the entire growth cycle, needseven more skill.
Our portfolios are high conviction portfolios with 20 to 25stocks being our ideal number. We believe in adequate diversificationbut over-diversification results in diluting returns for our investors andadding market risk.
Buy Right stock Characteristics Sit Tight Approach
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 inthe strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 30th September 2014. Past performance may ormay not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
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 inthe strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 30th September 2014. Past performance may ormay 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%
Auto & Auto Ancillaries
Banking & Finance
FMCG
Diversified
Engineering & Electricals
Pharmaceuticals
Cash
Eicher Motors Ltd.
Page Industries Ltd.
Bosch Ltd.
Bajaj Finance Ltd.
Voltas Ltd.
Ipca Lab Ltd.
Next Trillion Dollar Opportunity Strategy CNX MIDCAP All Figures in %
Banking & FinanceAuto & Auto AncillariesPharmaceuticalsFMCGInfotechFurniture / ThermowareEngineering & ElectricalsRetailCash
28.9914.1213.1012.598.396.165.985.311.04
Sector Allocation
Standard Deviation (%)
Beta
15.93
1.00
Performance Data BSE 200IIS
14.25
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 inthe strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 30th September 2014. Past performance may ormay not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
*Above 5% & Cash
Eicher Motors Ltd.
Page Industries Ltd.
Tata Consultancy Services Ltd.
Bajaj Finance Ltd.
Ipca Lab Ltd.
HDFC Bank Ltd.
Supreme Industries Limited
Lupin Ltd.
Larsen & Toubro Ltd.
City Union Bank Ltd.
Housing Development Finance Corporation Ltd.
Bata India Ltd.
9.81
9.17
8.39
7.35
7.04
6.28
6.16
6.06
5.98
5.78
5.57
5.31
Top Holdings
Top Holdings % Allocation*
*Above 5%
Period
Invest India Strategy BSE 200 All Figures in %
% o
f re
turn
s
6.30
10.67
23.18
45.39
18.14 18.14
12.96
0.56
4.07
21.28
42.50
18.7117.02
10.49
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
1 Month 3 Month 6 Month 1 Year 2 Year 3 Year SinceInception
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 inthe strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 30th September 2014. Past performance may ormay 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%
Period
Focused Series IV BSE 200 All Figures in %
% o
f re
turn
s
4.48
13.39
28.31
54.57
32.6226.61
13.85
0.564.07
21.28
42.50
18.7117.02
8.99
0.00
10.00
20.00
30.00
40.00
50.00
60.00
1 Month 3 Month 6 Month 1 Years 2 Years 3 Years 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 inthe strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 30th September 2014. Past performance may ormay 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
4.89
9.96
23.11
55.51
29.62
24.30
8.95
0.564.07
21.28
42.50
18.7117.02
6.33
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 SinceInception
Eicher Motors Ltd.HDFC Bank Ltd.Axis Bank Ltd.Bajaj Finance Ltd.Tech Mahindra LimitedCummins India Ltd.Lupin Ltd.Ipca Lab Ltd.Tata Consultancy Services Ltd.Larsen & Toubro Ltd.Supreme Industries LimitedBata India Ltd.
12.719.887.807.387.056.816.596.176.135.855.475.16
Standard Deviation (%)
Beta
24.36
1.00
Performance Data BSE 200Bulls Eye
21.72
0.77
Top Sectors
Sector 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 inthe strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 30th September 2014. Past performance may ormay not be sustained in future. Returns above 1 year are annualized. Please refer to the disclosure document for further information.
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 inthe strategy. The Above returns are calculated on NAV basis and are based on the closing market prices as on 30th September 2014. Past performance may ormay 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
58.54
25.3 22.2
11.514.23
24.79
42.5
18.71 17.02
6.47 9.19
20.05
0
10
20
30
40
50
60
70
1 Years 2 Years 3 Years 4 Years 5 Years SinceInception
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 containedin 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 andshouldn'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 OswalAsset 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 thisinformation. The statements/graphs contained herein may include statements of future expectations and other forward-looking statements that are based on our current views andassumptions 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 suchstatements. 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 formand/or redistributed without prior written consent of the Motilal Oswal Asset Management Company Limited. Readers should before investing in the Strategy make their owninvestigation 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 ofthe strategies of the Portfolio Management Services will be achieved. Clients under Portfolio Management Services are not being offered any guaranteed/assured returns. Pastperformance 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 orreturn. 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 orcomplete, 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 fromthe 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 ofappearing 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 thatprevent 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 aforementionedstatements 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 riskreturn, 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 variousfactors 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 isadvised 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 orredistributed 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 anyform and/or redistributed without' MOAMCs prior written consent. Distribution Restrictions - This material should not be circulated in countries where restrictions exist on solicitingbusiness 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 forany 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 oncarefully before investing.
The given stocks are part of portfolio of a model client of Value Strategy and NTDOP Strategy as on 30th September 2014. The stock forming part of the existing portfolio under Value Strategymay 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 beconstrued as recommendations from MOAMC.