The Hindu Business Line : Kotak Contra: Value-based investing

Fundamentally sound stocks with brief periods of under-valuation in the equity market provide attractive investment opportunities for funds with a contrarian approach. Kotak Contra, with its bottom-up investment approach has added some stocks to its portfolio even while pruning holding in few others. We take a look at how the fund managed its portfolio over the period January to March.

Shuffling: Kotak Contra had about 45 stocks in its portfolio with the top 10 stocks accounting for 35 per cent of the assets. During the above period, the fund reshuffled exposure in a few sectors.

Ferrous metals replaced fertilisers and pesticides as the sector with maximum allocation. Although fresh buying in metals was limited, firm metal prices aided sharp run-up in a number of stocks. Tata Metaliks was the new addition in the metal space even as Monnet Ispat was partially sold. In the fertiliser space, Indo Gulf Fertilisers and Monsanto also witnessed some pruning while the fund accumulated Coromandel Fertilisers.

The fund appeared to view the IT sector with caution and exited Tata Consultancy Services. It also cut exposure to i-flex Solutions, which is now the only representative of the software space.

Capital goods: In the capital goods space, the fund booked partial profits in Alstom Projects after it delivered well over the past quarter.

It also reduced exposure to Alfa Laval. The stock has been languishing in the broad markets for over a quarter now.

UltraTech Cement, Nitco Tiles, Dredging Corporation and Deccan Chronicle Holdings were stocks that made fresh entry into the portfolio.

With the market reaching new highs, the average price-earning multiple of Kota Contra rose sharply. It was 18.7 in March 2006 as against 10.1 in December 2005. Mr Anand Shah manages this fund, which has Rs 366 crore worth assets under management.

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