Gallop ahead with India Opportunity Portfolio December 2019
1 About the strategy India Opportunity Portfolio (IOP) is a small and mid cap oriented strategy Invest in emerging businesses having growth potential with economic moat Aims to identify the next leaders in respective segments to create long term wealth Positioned to take the benefit of the rising Banks, Capital Markets, Consumer-oriented businesses, Pharma and Healthcare Services Investment Manager Motilal Oswal AMC is the pioneer of PMS business in India with over 16 years of track record One of the co-founders, Mr. Raamdeo Agrawal is one of the most honored and trusted names in the investing world It has a unique positioning of being “Equity only AMC” with defined “Investment Philosophy” Trusted by over 42,000 HNI investors and with around Rs. 16,000 Crs of assets as on 30th November 2019 High quality concentrated portfolio of 23 stocks Index agnostic: ~91% away from benchmark Nifty Smallcap 100
Source: Motilal Oswal Wealth Creation Studies 11% (24) 33% (3) 68% To Mini Mid Mini Market return: 10% 2010-15: Median return CAGR 38% 100 200 1,492 Total stocks Mega Mid From (3) -32% (102) 4% (1,465) (71) (32) From For any given 5 year period, maximum wealth is created when a small cap company becomes Small and Midcap – Largest Wealth Creators 2 Past performance may or may not be sustained in future. Mega Mega Mega 100 200 1,908 Total stocks Mega Mid (3) (64) -32% (88) -19% (1,841) 0% (26) -13% (88) 9% 11% Mini, Mid, Mega crossovers - 2000-05, 2005-10, 2010-15 (1,039) 19% (28) -4% (90) 21% (58) 57% (59) 21% (17) 55% (1) 158% To Mini Mid Mini Market return: 5% 2000-05: Median return CAGR Note: Figures In brackets indicate number of companies -3% (93) 9% To (89) 24% (25) 61% (66) 27% (9) 46% (2) 76% Mini -40% Mid Mini Market return: 22% 2005-10: Median return CAGR 100 200 1,098 Total stocks Mega Mid From (13) mid/large cap and a mid cap becomes large cap
Under Owned: Lower Institutional Holding May be small currently, but are part of a large profit pool. Nifty Smallcap 100 39 16 8 Have the potential to scale in established, organized sectors. Can be market disruptors in existing sectors. This gives them the bandwidth to scale. Index Operate in industries/businesses where large cap and mid cap companies have negligible presence. There are niche businesses in sunrise industries (an industry that is new or relatively new, showing high growth potential). Source: Bloomberg and Internal research Data as on 30.06.2019. 3 Nifty Midcap 100 Average Analyst Coverage Ownership Pattern amongst Index Constituents (%) 42 Nifty 50 Promoter Group Institutional Retail Index Nifty Midcap 100 Nifty Smallcap 100 55 Nifty 50 50 41 28 24 16 17 26 Under Researched: Limited Analyst Coverage Bottom up Stock Picking Important in Small Cap
4 130 Jun-18 May-18 Apr-18 Mar-18 Feb-18 Jan-18 120 Aug-18 110 100 90 80 70 60 50 Jul-18 Sep-18 82 Jul-19 Ni�y Midcap 100 Ni�y 50 averages Nov-19 Oct-19 Sep-19 Aug-19 Jun-19 Oct-18 May-19 Apr-19 Mar-19 Feb-19 Jan-19 Dec-18 Nov-18 63 116 Small and Midcaps – Favorable Valuations 280 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 230 Jan-16 180 130 80 Source: Nseindices.com. Data as on 30th November 2019. Past performance may or may not be sustained in future. The above graph is used for illustration purpose only and should not used for development or implementation of an investment strategy But historically, Mid cap and Small cap Indices have massively outperformed the Nifty 50 Nifty has outperformed Mid cap/ Small cap indices by 34%/53% since Dec’17 Oct-15 Apr-16 Ni�y Smallcap 100 Oct-18 Ni�y Midcap 100 Ni�y 50 averages Oct-19 Jul-19 Apr-19 Jan-19 Jul-18 Jul-16 Apr-18 Jan-18 Oct-17 Jul-17 Apr-17 Jan-17 Oct-16 Ni�y Smallcap 100
5 2 Source: Nseindices.com. Data as on 30th November 2019 Past performance may or may not be sustained in future. significant revival in performance in the last 2 years, we can expect a A�er the correc�on in small caps bouts of nega�ve returns extremes and revive sharply a�er Small caps tend to perform in -10 -29 57 7 Small Caps - Sharp Revivals 55 -8 37 -34 18 107 -71 87 42 62 Calendar year returns for Ni�y Smallcap 100 Index The above graph is used for illustration purpose only and should not used for development or implementation of an investment strategy
Jan-04 _ _ _ _ _ _ _ _ _ _ 1.00 _ _ _ _ _ _ _ _ 1.20 0.80 _ 0.48 6 Source: Nseindices.com. Data as on 30th November 2019. Past performance may or may not be sustained in future. The above graph is used for illustration purpose only and should not used for development or implementation of an investment strategy end of the range 1x. Currently the ratio is at the bottom The ratio bottoms at ~0.5x and tops at divided by Nifty 50 Ratio chart shows Nifty Smallcap 100 0.46 0.60 0.50 _ _ _ _ _ _ 0.20 0.40 _ _ Jul-04 Jan-10 Jan-14 Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-10 Jul-09 Jan-15 Jan-09 Jul-08 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 Jul-05 Jan-05 Jul-14 Jul-15 _ _ _ _ _ _ _ _ _ _ _ Jan-16 _ Oct-19 Jul-19 Jan-19 Jul-18 Jan-18 Jul-17 Jan-17 Jul-16 Small Caps – Favorable Valuations
Buy Right investors and believe that picking the right 7 and adding market risk results in diluting returns for our investors diversification but over-diversification ideal number. We believe in adequate portfolios with 20 to 25 stocks being our Focus: Our portfolios are high conviction more skill. from the entire growth cycle needs even businesses to enable our investors to benefit business needs skill and holding onto these Buy and Hold: We are strictly buy and hold Sit Tight buying a fair business for a good price good business for a fair price rather than ‘P’rice denotes our approach of buying a the business competitive advantage or economic moat of ‘L’ongevity denotes longevity of the sustained RoE ‘G’rowth denotes growth in earnings and management ‘Q’uality denotes quality of the business and is centered on 'Buy Right: Sit Tight‘ principle. At Motilal Oswal Asset Management Company (MOAMC), our investment philosophy Investment Philosophy
Aug-16 *IOP was repositioned as a Small Cap Strategy in July 2016 2.0X >3 Years > 2 Years but <3 Years <2 Years Holding Period No. of Scrips 11 6 6 Please Note: These stocks are a part of the existing India Opportunity Portfolio Strategy as on 30th November 2019. These stocks may or may not be bought for new clients. Past Growth performance may or may not be sustained in future and should not be used as a basis for comparison with other investments. The strategy may or may not have any future holdings in these stocks. The companies mentioned above are only for the purpose of explaining the concept and should not be construed as recommendations from MOAMC. 8 Wealth Creators - Buy and Hold Strategy Buy and Hold strategy with > 50% stocks held for more than 3 years Portfolio changes made to increase the earnings profile and quality of the portfolio The average holding period for stocks held under IOP Strategy is over 1.9X Absolute Aug-16 Market Cap 3,038 5,061 Market Cap Rs. Crores 30-Nov-19 Stock Initial Purchase Date Rs. Crores 24% (Purchase Date) CAGR (%) DCB Bank Mahanagar Gas 5,653 10,309 20% 2 years and 7 months
* 28% 11.0X Next Trillion Dollar Opportunity Por�olio Strategy Bajaj Finance August 2010 2,836 2,45,140 86.4X Eicher Motors August 2010 3,464 62,477 18.0X Value Strategy 39% 37% 5,682 61% 36% HPCL June 2014 14,339 43,063 3.0X 22% Kotak Mahindra Bank July-2015 1,28,554 308,574 2.4X 22% 62,477 April-2012 As on 30th November 2019 Market Cap The given stocks are part of portfolio of a model client of respective PMS Strategies. The Stocks mentioned above are used to explain the concept and are for illustration purpose only and should not be used for development or implementation of an investment strategy. The stocks forming part of the existing portfolio of PMS Strategies may or may not be bought for new clients of PMS Strategies. It shall not be considered as an advice, an offer to sell/purchase or as an invitation or solicitation to do so for any securities. Past performance may or may not be sustained in future. Motilal Oswal AMC does not provide any guarantee/ assurance any minimum or maximum returns 9 Mul�baggers across PMS strategies… Stocks Ini�al Purchase Date Market Cap Rs. Crores (Purchase Date) Rs. Crores Eicher Motors (30th Nov 19) Absolute Growth CAGR (%) Page Industries December 2007 466 24,585 52.8X HDFC Bank June-2008 40,986 6,98,110 17.0X MOAMC – Some Success Stories
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