Power of Value Investing

It was in 2017 that a friend who is a Research head at a boutique investment firm asked me to check out Parag Parikh Asset Management team. This was a time when I was just starting to get fascinated with personal finance space and the impact long term equity compounding  can have over personal balance-sheet. 

· Intrigued by this AMC which chose a tortoise as their mascot when other AMCs were slapping images of Bulls, gorillas & Cheetahs to promote their products I started following 0them. Various things which the fund house aspired to do resonated with the principles of value investing which the greatest investors of the world have been prescribing since decades. The messaging of the Fund Manager Rajeev Thakkar was simple, to the point and honest.

· I was sold further when the AMC demonstrated that they would walk the talk -  be it having skin in the game, not bombarding investors with plethora of schemes for AUM targets, having zero thematic portfolios - infact an aversion for such products, promising (& delivering) a falling expense ratio with increasing AUM, not having differential commissions for distributors and more importantly talking about and acting on managing risks in the portfolio.

· There has been no looking back from the time I started a SIP in their flagship flexicap scheme  in 2017 when its AUM was Rs 700 crs to now when the scheme AUM is Rs 80,000 crs and the AMC a custodian of majority of my equity savings.

· While Annualized Returns of 18% returns over a 10 year period and 25% return over a 5 year are certainly a testament to their investment philosophy, a bigger comfort is that the fund would not take actions not aligned to investor interest, would not invest in Companies with Corporate governance issues, will continue to hunt for quality management at lower intrinsic value and will keep their head in right place (& infact capitalize on opportunities) when the markets go into a tailspin.  Be it building cash to 20%+ (despite umpteen criticism from industry and investors) when the markets were overvalued to investing aggressively in the covid slump to again being back to 20% cash in a market which is overheated, PPFAS has been steadfast in their value investing philosophy. Apart from continuous critique by investors for high cash levels, they faced a lot of flak  for investing aggressively in ITC at near 10% of the portfoliol when the stock was a star of memes, investing in FAANG (at a time when they were out of favour) and exiting mid cap IT Companies which were doing very well but overvalued.

· Despite all they have been steadfast in their investment philosophy, messaging and delivery. No wonder the AMC is seeing a kind of fan following similar to the ‘Oracle of Omaha’ where unit holders are travelling from other cities to attend the annual investor meet in person.

· At a time of Gold rush when you are witnessing college grads and new investors who have not seen a down cycle trading in F&O, pursue trading as a full time activity despite warnings by regulator, when Insta professors are luring investors with promises of hot stock tips that would deliver quick returns, PPFAS Mutual Fund continuous to be a voice of reason and caution.

· In a world where liquidity rules the roost and decades of easy money have made it difficult to hunt for value, PPFAS has got an uphill task ahead alongside raised investor expectations. Given their track record of patience and sensibility, I am confident they will continue to outperform over a longer duration despite the challenging times. 

· At the end of day, savers/investors need to understand nothing has higher impact on personal finances than a robust asset allocation with diversification across asset classes (ideally with negative covariance) which reduces portfolio volatility. Having PPFAS as your custodian for equity portion is a cherry on the top. 

· While other business reporting platforms keep feeding the information hungry trading community, Mint/ Neil Borate have been true champions of the fund leading to small investors knowing more about a fund which otherwise doesn’t believe in spending on advertising and marketing. Kudos and more power to value investing.