Bajaj Finserv’s new multicap fund brings a contra strategy with a twist to this mainsteam category, thus offering investors a useful diversifier to momentum based strategies that many peer funds follow.
While stock picking will be contra-oriented, Sorbh intends staying with his picks through their price discovery cycle, unlike pure contra funds which usually sell out when stocks reach their intrinsic value. The idea is to use both under and over-valuation for the benefit of his fund’s investors.
Stocks will be picked when they are below intrinsic value and when Sorbh can identify defined time-bound catalysts that can drive value unlocking. Maintaining a portfolio of stocks with different time horizons for catalysts to play out will help deliver a steady stream of alpha generation opportunities.
He sees interesting contra opportunities emerging now in FMCG space, in MNC pharma companies, in CDMO pharma companies and in chemicals businesses. If China responds to tariffs with stimulus measures, the commodities pack can become interesting contra bets.
Sorbh cautions that in contra investing, you start making money only when a stock is no longer contra – which therefore requires patience and a long term approach. However, buying stocks that are cheap and ignored –but with time-bound catalysts identified means lower risk – which therefore sets up this fund to deliver superior risk adjusted returns over time.