Unlike those critical investment strategies, value investing seems simple and credible. It doesn't ask you to have an extensive background dealing with finance, however the basics just help. Value investing is one sort of investment strategy which aims to look-up at those stocks of various companies which are trading at some significant discount, to their intrinsic value. If considered generally, then value investing works with a goal of finding companies whose stock price doesn't reflects their fundamental worth.
Moreover, it is quite different from growth investing as here; the emphasis is not laid upon extracting those stocks which have strengthened earnings growth potential. However, as India is a growing economy, value investing is not treated up with the due importance, as much as growth investment is. There are very few funds which go up with this investment strategy as their primary choice.
Why choose value funds?
The value funds can play a key role in enhancing your stock portfolio due to many reasons. This is because, when you deal with any kind of mutual fund, they bring in diversification, professional portfolio management along with liquidity, either on the active or on the passive basis, same is the story here. These are unlike the growth funds where the vast majority of the value funds fall within the large cap category due to their focus levied on the dividend paying companies.
These dividends also facilitate the investors with certain measure of the current income that too, in addition to the capital appreciation. This is a combination of dividends and stability which makes the funds a creative choice for a lot many conservative investors, especially those who actually need some extra income on the top of growth. When compared with the traditional equity mutual funds, value investing brings in the benefit of lower downside risk along with the lower volatility. It can also serve the individuals with a better risk rewarding profile within an overvalued market where the stocks might have run up quite much to carry the higher downside risk.
Some of the Indian funds that deal with value investing include-
L&T India Value Fund
This fund is managed by Karan Desai and Venugopal Manghat which aims on the long term capital appreciation generally with a higher focus on the undervalued stocks. This fund is market cap agnostic as it also holds around 35-40% in the large caps, around 25-40% within the midcaps and the leftover in small caps. The major companies or the sectors on which it focuses could be classified within turnarounds, cyclical, and some other special situations as well.The fund has been capable of yielding good results and returns up to 18.22% with higher protection from the downside risk which is evident from the sortino ratio of 1.35, as it when compared, goes quite high than the benchmark.
ICICI Prudential Value Discovery Fund
This fund is managed by Mrinal Singh and its major objective is to invest in value stock that has attractive valuation when they are compared with the book value or the earnings. It somewhere finds the growth stocks as attractive valuation, so it's not a pure alternative of value investing. The fund's holdings have recently changed and increased to 83% weight age on the large caps and rest on the midcaps.The fund has delivered great performance in the past 3 years where its Sortino Ratio was 0.87 vs 0.66 that of the benchmark and the returns were near to 10.31% of the benchmark of S&P BSE 500.
Aditya Birla Sun Life Pure Value Fund
Managed by Milind Bafna and Mahesh Patil, this fund goes on with an objective of continuous long term capital appreciation through the investing stocks which are being undervalued by the market. This fund majorly holds on the midcaps which contribute approx 40-60% of the whole portfolio, along with the large caps, of 20-30% and remaining ones as small caps. Within the 7 years history, this fund has been the consistent one going along with the value investing approach that too in the stage of higher returns within some years by the growth investing approach. Its last 3 years performance generated some returns of 19.16% along with significant alpha 13.82% and sortino ratio of 1.34 vs 0.60.
So, these are some of the high yielding value investing funds that prevails in India. This fund could actually assist the investors in generating higher returns if they have the right mindset and they don't get carried away by their emotions as this approach is not as common as it seems.