In an interview with Outlook Money, Vinit Sambre, Fund Manager, DSP BlackRock, speaks about investment managers on what worked in his favour. Excerpts:
Tell us the stock selection philosophy for this fund?
We use the bottom up stock selection. We pick companies which have high quality management, decent cash flows, strong ROCE, and those that have a competitive advantage. We follow a buy-and hold strategy. We also look at some cyclical businesses which are at the cusp of a turnaround, where ROCEs are slated to move up in the foreseeable future.
What has been the stock picking lesson that you have learnt while managing this fund?
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The elimination process is more important than the selection process. It is very important to ignore the noise and focus on fundamentals of each investment. Also, patience is a virtue. Once a good investment is identified after thorough research, it is very important to display patience and keep building conviction in the name.
Is there enough depth in the Indian stock market to have a micro-cap fund?
Micro-cap is definitely an interesting space to be in. India has many enterprising people with aspiration, with immense potential to grow. Micro-cap allows investors to participate in this growth and benefit from the same. As an emerging economy, India has the potential to keep growing at a high rate for a sustainable period of time if we have the right leadership. We believe we have all these ingredients now and, hence, we remain positive on this category. As far as the depth of the market for micro-cap is concerned, it is a function of economic growth which we believe is on the cusp of a long-term improving trend.
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What do you do with stocks in your portfolio that grow from micro-cap?
DSPBR Micro Cap Fund has to mandatorily invest 65 per cent of its assets in micro-cap companies at all times. There is leeway to have small/mid-cap names to the extent of 35 per cent. Companies that outgrow the category and become small-cap or mid-cap may continue to be part of the fund as long as the mandatory requirement is not breached.
How do you narrow down stocks that enter the portfolio?
The focus is to identify strong businesses which we believe has the potential to outperform over the medium- to long-term. We focus on management quality, ROCE, cash flows, among other parameters. Also, it is very important to eliminate ideas which do not meet some of these requirements.
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