Motilal Oswal Focussed Midcap Strategy

• Quality of the Company and Quality of Management: Stable consumer-facing businesses with large business opportunities and long-term competitive advantages. Competent management runs businesses.
• Growth earnings: It is driven by volume growth, price growth, mix changes, and operational and financial leverage.
• Longevity (of Quality and Growth): Determined by the business’s long-term relevance, extending the period of competitive advantage, and maintaining growth momentum.
• Price: Reasonably priced concerning quality and growth prospects, with a high margin of safety.

This focused mid-cap fund strategy intends to Sit Tight once they have identified stocks that meet their stringent QGLP criteria. It follows a long-term buy-and-hold proceed in concentrated stock portfolios. The framework is based on the idea of identifying great businesses (defined as long-term quality and growth) and purchasing them at a reasonable price. This mid-cap fund guarantees that they only engage in high-quality businesses with appealing growth prospects by strictly adhering to the QGLP approach.

• Strategy: Growth of 20%+ at the portfolio level, with a portfolio level ROE of 15%+.
• Reversion to mean: Invest in companies whose valuations have corrected in the last two years while maintaining their earnings profile.
• Sector: Commodities and global cyclical receive little or no allocation.
• Allocation: based on convictions about companies and not necessarily on price.
• Price movement-based action: Mismatches in price and timelines should result in folio action on both sides, i.e. selling and buying. Positions are regularly trimmed if price targets exceed timelines.

Manufacturing with an export focus – 26%

A significant increase in contract manufacturing, combined with Production Linked Incentives schemes, is focusing attention on this topic.

IT Services – 15%

Covid has played a critical role in reducing the five-year spend on digitisation to less than three years. Many companies across industries were forced to migrate and embrace digital operations, resulting in increased digitisation spending.

Infrastructure – 9%

Insurance should be observed as a multi-decadal growth story. For example, Max Financials is the fourth largest private life insurer and has the best-in-class matrix. They believe it is an attractively priced opportunity, given the overhang on Axis Bank and the collapse of the hold-co structure.

NBFC – 3%

The cost of capital is decreasing, asset quality is excellent, and companies are available at reasonable valuations.

Cyclical Recovery – 16%

A cyclical recovery bet and a proxy for infrastructure or real estate play.

India’s growth story forms the central theme of this mid-cap fund.

Primary Investment universe: 101–400 stocks, based on market capitalization, with a 20% weighted average of large-cap stocks at the portfolio level.

Maintaining Positions in Businesses with Relatively Less/Low Leverage Growth Outlook of 20%+ at Portfolio Level throughout FY20-23 with Portfolio level ROE of 15%+ Reversion to Mean – Invest in Businesses where Valuations Have Corrected in the Last 2 Years While They Have Maintained Their Earnings Profile.

Finding Winners: Finding Multibaggers and stocks in the winning category across the wider markets.

Little to no allocations to commodities and international cyclical due to sector agnosticism.