Mirae Asset Emerging Bluechip Fund: betting on future MS Dhonis

MS Dhoni—Captain cool—announced his retirement from the international cricket recently. In his initial days, many had questioned his batting technique and opined that he might struggle once bowlers identified flaws in his technique.  Before he smashed 148 runs against Pakistan at Visakhapatnam in 2005—innings that got him in the limelight— he had barely played four one-day international matches and scored 22 runs in total. After this inning, spectators and experts gradually changed their opinion about his batting.

Silencing all his critics, MSD became the captain of the Indian cricket team in 2007. Thereafter, he never looked back. Selectors spotted his talent early and his performance proved them right. He became the second Indian captain, after Kapil Dev, to have led the world cup winning squad.

As in cricket, identifying future leaders is indeed a skill when it comes to stock picking.

But one mutual fund scheme seems to have mastered this art—Mirae Asset Emerging Bluechip Fund. Its 10-year performance speaks volumes about the fund management team.

As per the portfolio disclosed as on July 31, 2020, the fund holds 57% of its assets in large-caps, 35% in mid-caps, 5 % in small-caps and 3% in other assets, including cash & cash equivalents.  In other words, Mirae Asset Emerging Bluechip Fund held 92% of its portfolio in the top 250 stocks as on July 31, 2020.

That said, the fund has rarely taken cash calls and has preferred to stay invested under all market conditions.

Performance highlights

Consistency in the performance of Mirae Asset Emerging Bluechip Fund can be attributed to the fund management’s steadfast approach and astute stock picking abilities. Going by the historical stock picking traits of the fund, Mirae Asset Emerging Bluechip Fund takes a long-term view on stocks and follows the buy-and-hold strategy. The fund management team exercises utmost care before adding any stock to the portfolio but once added, it allows a reasonable time to a stock to perform.

Although the stock picking approach of the fund has been bottom-up, the fund has been mindful to top-down trends as well.

It has remained upbeat on financials, consumer goods and IT over the past 4-5 years. It’s noteworthy that within the financials, the fund has reduced weightage of Public Sector Banks (PSBs), smaller private sector banks and Non-Banking Financial Companies (NBFCs) during the on-going pandemic. On the other hand, it’s increased the exposure to life insurance companies within the financial universe. Despite the weightage of private sector banks being at a 1-year low in July 2020, it still remains the top sector in the portfolio by far.

With respect to consumer goods, the fund has avoided going gung-ho on expensive FMCG stocks, especially in the consumer food category. Exposure to IT stocks was at a 1-year high in July 2020.

Mirae Asset Emerging Bluechip Fund appears optimistic on select PSU stocks that are available at deep discounts despite growing at a reasonable pace. Moreover, on the backdrop of lower interest rates, the fund has gradually increased exposure to auto and ancillary businesses over the last few months.

Fund positioning

We recently interacted with Mr Neelesh Surana—CIO of Mirae Mutual Fund. According to him big businesses are likely to become bigger in the post pandemic world. Although the future trajectory of COVID-19 is anybody’s guess at this juncture, the lower interest rate regime is likely to prevail, which may result in the higher conversion of EBITDA to cash flows. Strong rural growth and government’s reforms measures, including the Atma Nirbhar Bharat, may offer growth tailwinds. Lower crude oil prices are expected to help reduce the Current Account Deficit (CAD) as well.

In a nutshell, Mirae Asset Emerging Bluechip Fund has been primarily betting on consumer facing businesses having high entry barriers that have a low penetration so far, and enjoy the high Return on Equity (ROE).

Should you invest in Mirae Asset Emerging Bluechip Fund at this juncture?

If you have an investment time horizon of 3-5 years and are ready to take calculated risks, Mirae Asset Emerging Equity Fund has a role to play in your overall asset allocation. Given that many stocks have gone back to their pre-COVID levels in the absence of earnings growth, you may stagger your investments over the next 8-12 months or even longer. You may prefer SIPs (Systematic Investment Plans) or STPs (Systematic transfer Plans) to take advantage of market volatility and send the ball out of the park.

 

You may also like to read: Standing out or outstanding: Stock preferences of HDFC Mutual Fund

 

Disclaimer

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

Consult your financial advisor before taking any investment decision.

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflicts of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.

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