Principal
Emerging Bluechip Fund had a very impressive 2020.
Not only
has it performed well, it has outperformed most of its peers by a big margin.
The fund
was launched as a mid cap fund but was converted to a large & mid cap fund
after SEBI’s recategorization exercise in 2018.
Principal Emerging Bluechip Fund
|
Fund Manager |
Mr Ravi Gopalakrishnan |
|
Category |
Large & Mid cap |
|
Date of Inception |
12 December 2008 |
|
Benchmark |
S&P BSE 200 India TR INR |
Principal Emerging Bluechip Fund is one of the
oldest mutual fund schemes in India with an impressive track record to back its
longevity with performance.
It was initially launched as a Mid cap fund but was
later converted to a Large & Mid cap fund after SEBI’s new rules with regards
to classification of mutual fund categories kicked in.
Additional reading: Click Here to read our complete review of Principal Emerging Bluechip Fund
Fund Overview
Keeping in line with SEBI rules regarding
classification, the fund has to invest a minimum of 35% each into large cap stocks
and mid cap stocks.
This strategy was of course put into place after
the new rules laid down by SEBI but prior to that the fund was a Mid Cap fund
investing primarily in mid cap stocks.
The Fund was launched during the latter half of
2008 amidst the financial crisis that had engulfed the global economy.
The Fund is better suited for investors with a long-term
view who are ready to ride out volatility in the short term and can therefore expect
the fruits of their patience in the long term.
The fund is currently managed by Ravi
Gopalakrishnan who has been at the helm since October 2019.
Features of Principal Emerging Bluechip Fund
Principal
Emerging Bluechip fund is a large & mid cap fund, by mandate it needs to
invest a minimum of 35% each into large & mid cap stocks.
The
remaining 30% is at the discretion of the fund manager.
The fund
follows a bottom up approach to stock selection.
The fund has a diversified portfolio and does not take
concentrated positions, which is why mid and any small cap investments do not
exceed 3 to 3.5% of the portfolio.
Key
Ingredients of Principal Emerging Bluechip Fund
The fund is a large & mid cap fund but more likely to be
biased towards large cap stocks at most times.
For October end 2020, the fund had the highest allocation to
Consumer goods, Information Technology and Financial Services.
The portfolio is overweight on Pharma, Industrial
Manufacturing and Chemicals while underweight on Metals, Oil & Gas and
Power vis-Ã -vis the benchmark i.e. Nifty Large Midcap 250.
Compared to its peers, the fund has a less proportion of
common stocks.
As on 31st October 2020, the top 10 stocks held
an aggregate of 34% of the overall portfolio.
Principal
Emerging Bluechip Fund portfolio
Every mutual fund scheme will have certain themes and stocks
that would work for it and certain that won’t.
What
worked
For the period January 1 to October 31, 2020 the fund’s
allocation to sectors like Technology and Healthcare has worked out really well
for it.
In the Technology space companies like Dixon Technologies,
TCS and Infosys have helped the fund post stellar returns.
In the Healthcare space it is companies like Divi’s Laboratories,
Dr Lal Pathlabs and Torrent Pharma that have contributed to high performance.
The Basic materials sector includes companies such as Atul
Ltd and Navin Fluorine.
Additional reading: Click Here to read about the various Types of mutual funds
What did NOT work
For the period January 1 to October 31, 2020 the fund’s
allocation to sectors like Financial Services and Communication Services had a
negative impact on the fund.
These sectors where the fund had invested in includes:
- ICICI Bank
- Bajaj Finserv
- Federal Bank
Sector
Allocation
The top holdings of the fund are across the following
industries:
- Banks
- Financial Services
- Software
- Pharmaceuticals
- Chemicals Consumer Durables
Leading private banks and high quality NBFC’s make up the
Banks and Financial Services sector whereas mid cap pharmaceutical companies comprise
the exposure to Pharmaceuticals in the portfolio.
Overweight Sectors
The fund is currently overweight on
- Chemicals
- Pharmaceuticals
- Consumer Goods
Chemicals
The fund has been overweight on this since mid 2019.
The gradual shifting of companies from China is expected to
benefit Indian companies in more than one way.
Along with this Indian companies have increased their
exposure globally to companies in the agriculture and pharma sector which would
increase their margins too.
Navin Fluorine and Fine Organics are some of the top
holdings in this space for the fund.
Pharmaceuticals
Pharma stocks prior to covid were going through a lull period and
have only picked up pace in the second quarter of 2020.
Like chemicals space, pharma companies can too expect a
gradual shift in demand from China based companies to India based.
Over the years Indian pharma companies have ramped up their
manufacturing capacity.
This along with reduced pressure on pricing caps should help
companies increase their margins considerably.
Consumer
Goods
Consumer goods, especially Consumer discretionary goods took
a major hit due to lockdown.
However subsequently, increased sales in automobiles and
electronics goods are a good sign.
With new restrictions imposed on the import of fully
imported electronic gadgets like Tv’s and mobiles, Indian companies have
received a major boost.
Dixon Technologies and Page Industries are the top holdings in
the fund for this sector.
Underweight Sectors
The fund is presently underweight on Financials.
Banks and quality NBFC’s would only get stronger as the
economy continues to open up.
Due to negative perception around this sector during the
lockdown, quality stocks in this sector are still available at attractive
valuations.
What
to expect going ahead?
Presently Principal Emerging Bluechip Fund is positioned to
take advantage of the various schemes of the Government of India like
Aatmanirbhar Bharat and Make in India.
Post covid recovery of both the economy and market would be
another factor to consider.
The fund expects Consumption theme to be a long term
attractive bet, post the short to medium term recovery due to covid crises.
The overall portfolio has been set up in and around the themes
mentioned above.
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