Mutual Funds

Invesco India Contra: Outshines benchmark with smart moves - Buy

Nalinakanthi V | Updated on March 09, 2018 Published on April 02, 2017

Invesco eps

The fund, which invests in offbeat themes, goes for both value and growth stocks

Equity investments are not just about buying the right theme and the right stock but also about getting the timing right. This is even more true for cyclical themes, where timing the entry and exit plays a key role in returns. Invesco India Contra, has managed to deliver consistent performance by timing its investments well.

For instance, over the last five years, the scheme’s annual return has been higher than its benchmark S&P BSE 500 Index almost 80 per cent of the time.

The scheme, over a five-year period, has delivered annual returns of almost 20 per cent. This is over 6 percentage points higher than its benchmark. This is despite an expense ratio of 2.39 per cent, higher than the 2.13 per cent for SBI Contra.

Though the fund's mandate is to invest in contra themes, it has been a bit conservative lately and has pursued a blended strategy - investing in both value and growth stocks. This has helped the fund deliver consistent outperformance.

Over the last four months, the fund has increased exposure to banks and non-banking financial companies, which is largely in line with other diversified equities.

Commodity bets

That said, it is also betting on the commodity cycle revival and has hence added stocks in the metals and minerals space to its portfolio.

Similarly, notwithstanding the concerns over US visa regulations, the fund has largely maintained its holding in the IT space.

The scheme’s conservative approach is evident from its strategy to invest over two-thirds of its assets invested in large-cap stocks and weighted average market capitalisation of over ₹90,000 crore.

This has helped the fund remain sturdy and has helped it contain the downside well during down-cycles.

For instance, during the December 2007-February 2009 period, the scheme’s NAV fell less than 54 per cent, much lower than the 60 per cent decline in the benchmark BSE 500 Index.

Besides downside protection, the fund has also been able to deliver good returns during recovery phases.

Sample this. During the August 2013-March 2015 period, even as the benchmark gained about 75 per cent, Invesco Contra Fund’s NAV saw a 2.3 fold jump.

The portfolio’s weighted average price earnings ratio is about 20 times; this is lower than the 26 times for the BSE 500 Index.

The fund has had a new manager. Taher Badshah, who joined Invesco as Chief Investment Officer early this year, has been managing the fund since January 2017, along with Amit Ganatra, who has been managing the fund since August 2012.

It may help to track the performance of the fund closely, in the light of the change in manager.

Published on April 02, 2017

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