ICICI Pru’s iconic Value Discovery Fund recently completed 20 years of wealth creation delivering a strong 21%+ CAGR over this period, decisively disproving in the process, the popular notion that value investing won’t work in a growth market like India.
Naren thanks all MFDs who have backed this fund over these 20 years, who have stuck with it through its periods of under performance and seen it come roaring back and who have helped materially in taking this fund to a 50,000 cr AuM level.
Naren and team have long dispensed with the old notion of intrinsic value (the bedrock of value investing) being equated with book value. They look at implied value in a stock’s price to determine whether it represents value or not. If implied value for example has very lofty assumptions on growth or margins, they avoid the stock.
Naren is finding it more challenging these days to find good pockets of value – the one clear area he sees value now is private sector banks. Otherwise, he and Dharmesh (co-manager of this fund) are staying invested in what they already own – in some cases even if they are getting a bit uncomfortable on rising valuations, are very choosy about adding any new stock and have some cash position which awaits better buying opportunities.
He believes the FII selling overhang on private sector banks will go away by November once the next MSCI weights rejig takes effect, where these banks’ weights are set to go up sizeably. That should catalyze the much awaited catch-up trade in these stocks.
Pharma and power/energy remain overweights – though here again, adding material fresh positions is not a comfortable decision given current valuations.
The fund is underweight industrials/cap goods, retailing and auto ancillaries – primarily on valuation concerns rather than any fundamental worries.