Quant’s investment philosophy is characterized by
1- Picking stocks/sectors showing earning momentum or/and valuation gap
2- Faster churn of the portfolio (maximum holding of the stocks is less than 2 years)
3- Not much weightage given to quality of business or management
I have been monitoring their portfolio for last two years and see frequent overhaul in stock compositions or allocations from one quarter to another. One would hardly recognize the portfolio today from 1 year ago. The whole operation looks more like a trading house, constantly churning into and out of stocks booking profits and redeploying cash in the new game.
Historically Quant’s investment approach hasn’t been proven to be sustainable or scalable (regardless of what their management may claim). As their AUM grows, they will be challenged by impact+transaction cost of frequent churn offsetting their outperforming gains.
Parag on the other hand is more long term and fundamental driven investors with a more stable portfolio which could be preferred by long term investors.
Given that both Quant and Parag funds have been in limelight in recent times due to peer and index-beating returns, there is something interesting about their portfolio composition. Their biggest holdings today are two stocks that have been at the center of attention of late: Reliance and HDFC bank respectively.
So far Quant has been proven right with their call, RIL giving 30% return since their increase in allocation. HDFC on the other hand has been a disappointment. Quant management has explicitly given HDFC a thumbs down while talking up Reliance prospects. It will be interesting to see if Quant reverses their stance when HDFC stock fortunes turn around.
Disc- Neither invested in any of them.
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