The first heartening thing is that the AUM of the PPFAS Mutual Fund has nearly doubled from Rs. 152 crore in June 2013 to Rs. 302 crore in October 2013. This is quite commendable given that retail investors have generally been out of the market. This means that big-ticket & strong hands have invested in the fund. Of course, the disadvantage of having a few strong hands (as opposed to several scattered small-ticket retail investors), is that the big guys can exit as fast as they came in if the performance does not match their expectations.
The second noteworthy aspect is that the PPFAS Mutual Fund has given a return of 6.7% since its inception (28.05.2013). This compares very favourably with the benchmark and peers. The Benchmark CNX 500 Index gave a return of only 1.02% in this period. Among the peers, HDFC Mid-Cap Opportunities and IDFC Sterling gave a return of 1.5% and 3.5% respectively. BNP Paribas Equity Fund was neck to neck with a 6.6% return. SBI Emerging Businesses was the worst performer with a loss of 9.7%.
| PPFAS | HDFC Mid-Cap Opportunities | IDFC Sterling | BNP Paribas Equity Fund | SBI Emerging Businesses | |
| Performance from 28.05.2013 to 31.10.2013 (%) | 6.7 | 1.5 | 3.5 | 6.6 | (9.7) |
This leads to the question as to what stocks have led to the out-performance. The answer is that Parag Parikh adopted the brilliant strategy of deploying his funds in buying stocks when the stock market slumped in August 2013. Evidence of this can be seen from the fact that while the cash position was 12.94% in August, it dipped to 6.18% in September 2013 and 3.93% in October 2013. In fact, Parag Parikh appears to have anticipated the crash because he raised the cash levels from 9.96% in July 2013 to 12.94% in August 2013 before deploying it in September and October 2013.
Now, I can tell you from personal experience that buying stocks when the market is crashing is the most difficult thing to do. In August, I saw my favourite stocks crumble but I was paralyzed with fear to be able to do anything. “I will buy after it falls more” I told myself. Before you know it, it is too late because the Nifty has surged 20% since that day.
The other sensible thing that Parag Parikh has done is to buy a chunk of 3,18,000 shares of Yes Bank in August 2013 when the stock went for a free fall and touched a low of Rs. 216 on 28.08.2013. Since then the stock has surged 55% to the present CMP of Rs. 350. ICRA and Gujarat Gas have also contributed with solid gains of 43% and 22% respectively.
| Portfolio of PPFAS Mutual Fund (Oct 2013) | (Rs in lakhs) | % to NAV |
| Axis Bank Ltd | 1,700.78 | 5.62% |
| Gujarat Gas Company Ltd | 1,444.17 | 4.77% |
| ICRA Ltd | 1,635.22 | 5.40% |
| IL&FS Investment Managers Ltd | 1,425.15 | 4.71% |
| Indraprastha Gas Ltd | 991.11 | 3.27% |
| Maharashtra Scooters Limited | 1,578.59 | 5.21% |
| Mahindra Holidays and Resorts India Ltd | 1,688.77 | 5.58% |
| Mphasis Ltd | 1,539.06 | 5.08% |
| Noida Toll Bridge Co Ltd | 1,721.43 | 5.69% |
| Novartis India Ltd | 291.74 | 0.96% |
| Polaris Financial Technology Ltd | 1,377.04 | 4.55% |
| Selan Exploration Technology Ltd | 392.61 | 1.30% |
| The Jammu and Kashmir Bank Ltd | 1,519.38 | 5.02% |
| Wyeth Ltd | 306.60 | 1.01% |
| Zydus Wellness Ltd | 427.50 | 1.41% |
| Standard Chartered PLC IDR | 1,173.26 | 3.87% |
| Special Situation / Arbitrage | ||
| Bharti Airtel Ltd | 279.00 | 0.92% |
| IDFC Ltd. | 475.88 | 1.57% |
| Yes Bank Ltd | 1,172.78 | 3.87% |
| Foreign Equity & ADRs | ||
| 3M CO | 1,362.40 | 4.50% |
| Anheuser Busch Inbev SA – ADR | 527.92 | 1.74% |
| British American Tobacco Plc – ADR | 1,247.04 | 4.12% |
| Nestle SA | 1,507.44 | 4.98% |
| Unlisted | NIL | NIL |
| Total of all Equity | 25,784.85 | 85.15% |
| DEBT INSTRUMENTS | ||
| MONEY MARKET INSTRUEMENTS | ||
| Collateralised Borrowing & Lending Obligation | 3,300.00 | 10.90% |
| Fixed Deposit | 500.00 | 1.65% |
| Total | 3,800.00 | 12.55% |
| OTHERS | ||
| Cash & Cash Equivalent | 695.43 | 2.30% |
| Grand Total | 30,280.28 | 100.00% |
Parag Parikh has also churned the portfolio of the PPFAS Mutual Fund a bit. Three new entrants are Selan Exploration, Wyeth Ltd and Zydus Wellness. Hindustan Unilever and Crisil, which were in the “special situations” category, and which gave quick-fire gains, have been sold and replaced by IDFC Ltd.
Parag Parikh has continued his love affair with foreign stocks and added Anheuser Busch Inbev SA – ADR and British American Tobacco Plc – ADR into the arsenal.
The other interesting point is that PPFAS Mutual Fund has about 12% (Rs. 38 crore) in Money Market instruments and about 2.30% (Rs. 7 crore) in cash. So, that is quite a bit of gunpowder available for deployment if there is another crash in the market.
mr arjun please compare it with your post on may 13.thanks!
Haha! Yes I think Mr. Arjun was being overly dismissive and mocking Parag Parikh in his initial articles. Good to see him wisening up and showing some respect now. When Mr. Parikh disclosed his portfolio holdings for the first time I knew this was a manager to follow. Here was a collection of cheap businesses that were either out of favor or under-followed but were showing great returns on capital and business economics. So in my opinion Parag is a true contrarian value investor.
Thank you for dedicating this post to PPFAS Long Term Value Fund and describing several aspects in great detail.
We just thought one clarification was in order :
‘Yes Bank’ has been purchased as an ‘Arbitrage’ trade.
Hence, though we have purchased it in the Cash Market, we have sold an offsetting quantity in the Futures Market in order to take advantage of the price differential prevailing between the two segments at that time. In other words, our yield was crystallised on the date of the transaction.
Therefore, we do not derive any incremental benefit on account of the stock price soaring after the transaction was undertaken. Similarly, we would not have suffered any loss if the stock price had fallen since then.
The same applies to Bharti Airtel and IDFC.
Dear Sir,
With interest I have read various articles on PPFAS as Long term value fund. Many things I could understand but many more I could not. Some of them are
1 Logic of no exit load–as in case of appreciation there may be run for redemption 2 Several scripts are out of favor viz Mah Holiday (illiquid timeshares, lack of growth, frequent merger/ de mergers), NOIDA Toll (future of toll collection/ due to lack of scale ability), Guj Gas/IP Gas (regulated input price), 3 Growth is in emerging markets but we have direct equity in developed markets 4 Superior returns will be at different time spans like 1yr/ 3 yrs/ 5yrs or similar to earlier PMS long term?(beyond 5 yrs) ; Regards—-Ravindra Patil