 
Prashant
Jain ANOOP
BHASKER RITESH
JAIN |
The early Bird Ram Prasad Sahu & N Mahalakshmi Anoop
Bhaskar makes money by selling stocks when they have reached their
peak rather than holding on till the cows come home. To master the art of managing midcaps, one has to be on high alert all the time. Anoop Bhaskar has not only done that but managed to give 51 per cent returns over the year and nearly 70 per cent over the last three years for the Sundaram Select Midcap Fund. Based on risk-adjusted performance, which is the metric used by Business Standard for awarding the best fund manager of the year, Bhaskar’s midcap fund topped the equity funds category for 2005-06 (June end). Well, it is numbers such as these that have attracted investors , taking the corpus of Sundaram Midcap to Rs 1,100 crore, up from Rs 400-odd crore in June last year. In a year when midcaps went through heightened turbulence, and most fund managers lagged the benchmark due to over-exposure to the segment, how did Bhaskar make it to the top? The big bets His approach to investing in 2005-06 was simple – a top-down approach with intensive stock selection. The result: the fund was not only able to spot the current winners but also the potential ones. Says Bhaskar, “By identifying key trends which emerged and ride on existing trends which gained momentum during the year we shortlisted three key sectors – construction, agri-commodities and real estate.” The top contributors to gains in terms of value last year were IVRCL, Williamson Tea, Ansal Properties and Infrastructure and Unitech. In terms of absolute gains though, Bhaskar hit the jackpot with Gammon India, Usha Martin, Mahavir Spinning, SRF and Shanti Gears. Bhaskar, an MBA in finance from Symbiosis, Pune, was among the first to pick the real estate stocks. The logic was straight-forward: The Indian realty sector doesn’t find adequate representation in the markets while it forms as much as 20 per cent of the Hong Kong and Singapore markets. “In a huge country like India, where demand for commercial and residential space is constantly on the rise, this can’t be the case for long,” says Bhaskar. He believes that players with large land banks and an ability to make good use of it will unlock substantial value for shareholders. Despite the surge in prices, Bhaskar holds on to his real estate stocks – Unitech accounting for 2.07 per cent of net assets and Ansal about 1.78 per cent though he has continued to book profits in these scrips. Catch them early Bhaskar seems to have got it all right with mid-caps. In this segment, the conventional wisdom of good business – incredible management and patience – does not quite work. Instead, catching the trend early, being not just active but hyper active, and sometimes ignoring management issues are essential to get the best out. The strategy has worked very well for Bhaskar. “There is nothing called long-term investing,” says Bhaskar. His philosophy is to identify trends early so that even a mediocre sale can yield great returns. “It is more important to get the swing right than to pick the potential winners in case of commodities and core industries,” he says. He caught the commodities cycle in 2003 for sugar and the upsurge in textiles in early 2004. Construction was another sector Bhaskar fancied in 2004. Once the sectors are identified, growth stories follow. “We identify beaten down stocks with a questionable management and low institutional holdings,” he says. These are likely to be stocks which the market has overlooked,” says Bhaskar. Out before it’s over With mid-caps one can’t have a laid back approach since the flavour of the season changes rapidly. Moreover, to play market cycles correctly, one needs to churn the portfolio often enough. Bhaskar holds on to a stock for 8-15 months, unlike his peers who claim a holding period of at least three years. And then, to tackle the liquidity problem in mid-caps, Bhaskar has little tricks that work well. “The exposure to a single stock has to be within 5 per cent of total equity and 10 per cent of free float. Also, we purchase smaller lots directly from the market instead of a large purchase and this helps us exit as quickly as possible,” he says. Bhaskar has over 100 stocks in his portfolio and these help him to balance the volatility, an essential feature of midcaps. Also, he keeps the weightage in stocks constant so that profits are booked automatically when prices rise sharply. Bhaskar believes that selling is more important than buying. Despite potential, if the exit is not planned properly a multi bagger could turn out to be a nightmare. The crash of 1995 and the tech bubble in 2000 taught him some important lessons in volatility. The stocks he parted with last fiscal included BILT, Indraprastha Gas, KEC Infrastructure, ENIL, Geometric Software, SRF and Infotech Enterprises. “Luckily, we were able to exit these stocks at close to their peak levels,” says Bhaskar adding that these exits helped the fund as much as identifying them in the first place. Unlike what most other fund managers would like to maintain, Bhaskar says that it may be futile to attach too much importance to corporate governance. “As long as owners function as directors and chairmen of the board, little can be expected from “independent” directors,” he says. Thus, as a fund manager one can only check if the accounts are clean and recognise the potential governance risks while assigning a value to a stock. When
he is not filtering out the chaff to zero in on a stock or meeting
managements to weigh growth stories, Bhaskar is glued to the idiot
box or is engrossed in Donna Leon mysteries such as the Blood from
a stone or Death and Judgment. When he is done with the markets,
he wishes to become a director on boards of companies and take up
issues on corporate governance!• HOME Business Standard • FUND MANAGER • October 2006 |