Peak valuations in markets warrant attention to stocks which have growth potential and are attractive on relative valuation. Among the large-cap schemes which not only look at companies from growth potential but also on ratios such as price-to-book value and relative market capitalisation is ICICI Prudential Value Discovery Fund.
The scheme has consistently followed this style of investing and has rewarded investors by recording commendable performance especially in the long-term. In the past five-year and ten-year periods, the scheme has delivered 20.9% and 15.3% returns while its benchmark BSE 500 has delivered 14% and 6.4% returns, respectively, in the same periods.
One of the key features that has been the hallmark of the scheme is it is not tied down to size of a company. The scheme's fund manager Mrinal Singh is in constant search of attractive valuations. Since the past one year, large-sized companies have been far more attractive than their mid-sized counterparts, the scheme has enhanced exposure to large-sized companies.This ensures margin of safety and also to a large extent, predictability of earnings in comparison with mid-sized companies.
In the past six months, the fund manager has invested in companies which may look contrarian (IT, Pharma) to the street's consensus but have the promise of stable earnings, established market share, strong brand value and encouraging past financials. A few of the prominent companies which reflect this line of thought are Sun Pharmaceutical Industries, Indian Oil Corporation, Bharat Forge, and Infosys.
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