The strong out-performance of Top Picks in January was driven by our high-conviction investment idea, Selan Exploration Technology, which has appreciated by 25.8% since the last revision of the contents of the Top Picks basket on January 1, 2014. Even after excluding the exceptionally strong gains of Selan Exploration Technology, the Top Picks basket has comprehensively outperformed the benchmark indices.
Though Selan Exploration Technology has exceeded our near term price target, but we retain the stock in our Top Picks basket due to expectations of positive developments in the company’s exploration business (that can potentially re-rate the stock; please refer to our recent update on the company).
This month we are replacing ITC with Jyothy Laboratories as part of a churn within the fast moving consumer goods sector. We would want to avoid ITC ahead of the interim budget (though there is a low probability of any further hike in excise duty this year again). On the other hand, Jyothy Laboratories is scripting a strong growth story on the back of a focused strategy of its revamped management team; the stock’s valuation is also supportive.
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