Invesco India Flexicap Fund produced a commendable top quartile 1 yr performance with a strong 10% alpha over BSE500TRI despite having a high quality – high growth mandate which was outperformed by the value theme. This alpha is further noteworthy as its largest sector bet – financials –underperformed the market at a sector level. What helped was smart stock picking in the capital markets segment.
The fund house’s Contra Fund is managed with a flexicap strategy and a value theme while the newer Flexicap Fund differentiates itself with ahigh growth – high quality mandate.
Large banks are very attractive for Amit who sees a credit upcycle lifting the sector, stringent regulatory oversight helping differentiate stronger players from others and very reasonable valuations offering margin of safety. You don’t often get to play a mean reversion trade in a business upcycle – you are getting a rare opportunity here, now.
Amit is playing the power sector through a power financer which is actually growing faster than the underlying power utilities.
In an inflationary environment, Amit prefers OEMs to ancillaries in the auto space as the former have pricing power while the latter don’t.
He has been cutting back on industrials/capital goods as a profit booking discipline after enjoying the upside over the last 2 years.
Amit says in this cycle, we need to be careful to avoid growth traps. Quality alone may not do well – quality without growth will underperform (they become growth traps). The focus on quality with growth is taking him more into the mid and small caps spaces as many large cap quality stocks run the risk of becoming growth traps.