UTI Fund Manager's Secret: Ditch the Hype, Invest in Value for BIG Long-Term Gains!

V. Srivatsa, equity fund manager at UTI Asset Management Company, shared his investment philosophy, emphasizing the enduring value of traditional large- and mid-cap funds over fleeting thematic trends. He advocates for a disciplined approach focusing on valuation and diversification for long-term wealth creation.

Srivatsa noted that while themes like consumption, driven by GST benefits, appear strong, many associated stocks are trading at high valuations, limiting upside potential. He finds the automobile sector more attractive due to reasonable valuations. He recommends limiting thematic fund allocation to 15-20% and focusing primarily on diversified funds like large- and mid-cap or flexi-cap funds.

His strategy is value-driven, seeking companies trading below their long-term valuation averages. Currently, UTI AMC has an overweight position in the IT sector, citing multi-year low valuations and stable earnings. They previously found success by increasing exposure to undervalued large-cap banks and pharma stocks in earlier cycles.

In mid and small caps, Srivatsa looks for growth-oriented companies at reasonable valuations, especially those overlooked by the market and showing operational improvement. His core principle remains not to overpay for growth, always maintaining a margin of safety. Risk is managed through careful position sizing, limiting small-cap exposure to around 1%.

Impact This news provides investors with a clear, strategy-backed approach to navigating market complexities, promoting patience, discipline, and a focus on fundamental value. It can lead to more robust portfolio construction and potentially better risk-adjusted returns for long-term investors. Rating: 7/10.

Difficult Terms

Valuation Discipline: Investing based on a company's intrinsic value and financial health, rather than market sentiment or hype, ensuring assets are purchased at a fair or undervalued price. Diversification: Spreading investments across various asset classes, sectors, or securities to reduce risk. Thematic Funds: Mutual funds that invest in companies within a specific theme, such as technology, consumption, or clean energy. GST (Goods and Services Tax): An indirect tax levied on the supply of goods and services in India. Earnings Growth: The increase in a company's profit over a specific period. CAGR (Compound Annual Growth Rate): The mean annual growth rate of an investment over a specified period longer than one year. Free Cash Flow Yields: A measure of how much cash a company generates relative to its market capitalization, indicating financial health and potential returns. Alpha: A measure of an investment's performance on a risk-adjusted basis, often used to refer to the excess return of an investment relative to the return of a benchmark index. Margin of Safety: The difference between the intrinsic value of a stock and its market price, providing a buffer against errors in judgment or unforeseen events.