Sunday, November 25, 2012

SBI Magnum Emerging Businesses Fund Gives 42% Return

Did you know that a humble Mutual Fund can give investors 42% annualized return? Well that feat has been achieved by SBI Magnum Emerging Businesses Fund and it puts a number of high-flying Portfolio Managers to shame. We explore how this feat was achieved
SBI Magnum Emerging Businesses Fund’s NAV as of 24.11.2011 was Rs. 41. Today, it is Rs. 56.49. That means investors have gained a hefty 37.78% return on their investment in a year’s time.
If you had invested in a SIP of Rs. 1,000 per month, can you guess what your return would have been? 42.69%!
Well, that’s no mean feat considering that I haven’t been able to achieve that in my own portfolio despite being constantly on the lookout for multibagger stocks.
Credit goes to Fund Manager R. Srinivasan who followed the simple technique of first identifying the sectors that were in fashion and then taking concentrated bets on the leaders in that sector.
So, which are the top-most sectors that are in vogue today: Consumption, Financial services and automobiles. SBI Magnum Emerging Businesses Fund simply loaded up nearly 43% of its funds in these sector sectors. Of this, Consumer goods got the highest weightage of 16.41%, followed by financial services of 16.35% and automobiles at 11.07%.

The other interesting aspect is that R. Srinivasan was not afraid of investing in high PE stocks. He selected the best stocks in the consumption sector such as Page Industries, Hawkins Cookers & VST Industries. VST Industries has been the outperformer with 71% return followed by Hawkins (42%) and Page Industries (36%). In the financial sector, Srinivasan loaded up on Muthoot Finance and Shriram City Union Finance. While Muthoot Finance delivered about 25% return, Shriram City Union Finance gave blockbuster returns of 75% on a YOY basis.
Srinivasan is obviously also a believer that SpiceJet is a potential multibagger and has invested 5.07% of the Scheme’s funds in that stock.

Interestingly, SBI Magnum Emerging Businesses Fund’s stellar performance is not a flash in the pan. Its’ past performance has been as impressive with a CAGR of 22.99% since inception. That’s no mean feat as any portfolio manager will tell you!
Also interestingly, SBI Magnum Emerging Businesses Fund outperformed the more fancied IDFC Sterling Equity Fund managed by star fund manager Kenneth Andrade and also HDFC Mid-Cap Opportunities Fund (G). On a YOY basis, IDFC Sterling Equity Fund managed only 29.3% while HDFC Mid-Cap Opportunities Fund eked out returns of 23.6%. Both were way below SBI Magnum’s 37.78%.
Now, the question is about the future: Yes, taking a concentrated bet on a few stocks in a few sectors is risky. But the question you have to ask yourself is whether the great Indian consumption story is getting over in a hurry. Given the huge population of high income individuals that the Country is generating and their propensity to consume branded products, stocks like Page & Hawkins are bound to do well. Also, the finance sector is set to take out once the interest rate regime is relaxed. So, there is no need to be wary. If you are looking for a Mutual Fund, SBI Magnum Emerging Businesses Fund is an excellent choice.

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