ICICI Prudential PMS Core Strategies PMS

Investment Strategy: The investment strategy follows a mix of a top-down and a bottom-up approach. The top-down approach is used to identify key macroeconomic and sectoral themes and subsequently helps to identify stocks that are expected to benefit from the same. A bottom-up approach is applied based on the belief that there are always individual companies that provide attractive investment opportunities under various industries and market conditions.

The prominence given to the top-down vs. bottom-up approach would vary from time to time depending on macroeconomic, sectoral and company specific fundamentals. The Portfolio Manager would aim to give weightage to other factors like effective management, scalable businesses and pricing power of the company, sustainable competitive edge and visible brands, while selecting investment ideas.

Investment Strategy: The core investment philosophy of value investing is based on the belief that stocks cannot continue to quote at values that are significantly below their fair values over the long term. At some point in time, the markets are likely to recognize the extent of undervaluation of these companies. The same could lead to a rerating/appreciation in the company’s stock price.

There are various reasons why stocks tend to quote at low valuations. Some of these include:

An irrational market sentiment that drives down the price of a stock to a level lower than justified by fundamentals. This could occur as an overreaction to negative news or as result of market pessimism on corporate/industry fundamentals. Markets also often tend to ignore certain stocks/sectors that appear to have low growth or non-exciting stories.

Valuations not factoring in all aspects of the companies earning potential: Companies may have certain hidden assets on their books or assets whose actual value may not be factored in by the markets. This could include surplus land, equity holdings, cash on balance sheets, trademarks etc. The markets are also at times slow to factor in company developments such as operational or financial restructuring, entry in to new markets, capacity expansions, introduction of new products, change in management etc. that could potentially add significant value to the networth of the business. During cyclical downturns, a number of companies are often valued based on bottom cycle earnings, which can look very attractive as the industry cycle improves.

The Portfolio Manager aims to find a good business at a reasonable price and not a mediocre business at a bargain price. The Portfolio Manager endeavors to invest in securities with:

• Favourable long-term prospects;

• Effective management;

• Scalable businesses; Sustainable competitive edge; and

• Available at an attractive/reasonable price

Investment Strategy: The Portfolio aims to provide long term capital appreciation and generate returns by investing in under performing stocks or sectors, which are available at their intrinsic valuations and are expected to perform well in the long run. For defensive consideration, the Portfolio may invest in debt and money market mutual fund schemes.

• A focused portfolio of investment ideas, agnostic to market capitalizations. The Portfolio aims to invest across market capitalisation.

• Optimal diversification across stocks, with the opportunity to be overweight vis-à-vis its benchmark, S&P BSE 200, on certain high conviction picks, to potentially generate higher alpha.

• In case of debt exposures, the portfolio may invest in debt instruments through money market/liquid/short term mutual fund schemes of ICICI Prudential Mutual Fund.

• The portfolio may not be restricted by any particular investment style and may opt for flexibility to select stocks across investment styles.

• May aim to use cash as a hedge against sharp declines in equity in an endeavour to protect the Portfolio.