Stocks with strong fundamentals and better growth prospects are likely to gain whereas those with weaker fundamentals and poor earnings visibility might face the wrath of investors.
In this scenario, 'stock picking' should emerge as the key differentiator between out-performance and underperformance. The ability of a fund manager to pick winners among stocks will determine the 'alpha' that he is going to produce which will ultimately determine the out-performance and/or underperformance of the scheme.
By definition, value style funds are meant to be better 'stock pickers'. Value investing, as a process, involves better understanding of a company's business and ascertaining its intrinsic value through rigorous research and then looking for an opportunity to buy that stock at a price lower than its intrinsic value. Value investors are not momentum players. They pick stocks that are trading at a considerable discount to their intrinsic value, thereby enhancing the margin of safety.
Value investing has 2 important benefits
In this scenario, 'stock picking' should emerge as the key differentiator between out-performance and underperformance. The ability of a fund manager to pick winners among stocks will determine the 'alpha' that he is going to produce which will ultimately determine the out-performance and/or underperformance of the scheme.
By definition, value style funds are meant to be better 'stock pickers'. Value investing, as a process, involves better understanding of a company's business and ascertaining its intrinsic value through rigorous research and then looking for an opportunity to buy that stock at a price lower than its intrinsic value. Value investors are not momentum players. They pick stocks that are trading at a considerable discount to their intrinsic value, thereby enhancing the margin of safety.
Value investing has 2 important benefits
▪ Looks to invest in stocks which are trading at a discount to their fair value, it gives margin of safety to the portfolio of the investors over a long term.
▪ It may also help in reducing volatility in the portfolio.
Here, we present an article on Top Value style funds. (See Note and Disclaimer)
Data Source: valueresearchonline
UTI Dividend Yield Fund
The fund in last 1 year has generated an annualized return of 45.58% as on 18th June 2010.
Performance Analysis
The fund has consistently given an above average performance and has also out-performed its benchmark BSE-100 in the periods 3 months, 6 months, 1 year, 2 years, 3 years and 5 years registering an annualised return of 21.17% in last 2 years while in the same period the category average returns is 17.50% and its benchmark has given 6.85% return.
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Table I below shows the growth of Rs100000, if invested in UTI Dividend Yield Fund on 18th June 2007.
| Return 3 Years | |
| Absolute % | Annualised % |
| 70.33 | 19.42 |
| Amount Inv 18-Jun-07 | Current Corpus 18-Jun-10 |
| 100000 | 170327 |
Risk Return Analysis
The fund has registered a Sharpe Ratio of 0.53 while the category average is 0.38 which shows the fund's capacity to generate above average returns. It also has a standard deviation of 30.81% which is lower than the category average of 34.62% and has a beta of only 0.83 which shows that it is a low risk and less volatile fund when compared to its peer group. See Table II
| Scheme Name | Sharpe | Std Dev | Beta |
| UTI Dividend Yield | 0.53 | 30.81 | 0.83 |
| Category Average | 0.38 | 34.62 | 0.92 |
It is low risk and low volatile fund coupled with a capacity to generate above average returns. For definition of Sharpe ratio, Standard Deviation and Beta see bottom of the page.
Portfolio Analysis
The fund as per May 2010 has 89.21% exposure to equity in the form of 54 stocks in its portfolio, 1.45% in Debt in the form of short term deposits and holds 9.34% of the portfolio in cash. The fund has diversified its equity portfolio by investing 67.82% in Large Cap stocks, 22.73% in mid cap stocks and 8.87% in small cap stocks.
Its Top 5 stocks include Infosys Technologies Ltd.(6.12%), ICICI Bank Ltd. (4.80%), NTPC Ltd. (4.75%), ONGC Ltd. (4.30%), GAIL (India) Ltd (3.97%).
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Src: Economictimes.Indiatimes Via Valueresearchonline