Prudent and analytical are perhaps the best words to describe the decision-making approach of Invesco’s Amit Ganatra. Take for instance how he chose his stream of education. Even at the young age of 16, Ganatra was aware of his modest family background, and the need for him to start earning early. While he had scored well enough to get into the Science stream, he observed that pursuing it meant a huge upfront investment. “Plus, the results — in terms of earning potential — are back ended. Whereas in CA, the upfront investment for it was less and, hence, I completed it along with my B.Com in 2002,” says Ganatra.
It is this same approach that has come in handy for Ganatra in his career. In his role as a fund manager at Invesco Mutual Fund, Ganatra has created an enviable track record and delivered return that outperformed both the benchmark index and its peers by a huge margin. Ganatra’s India Contra Fund has been a consistent outperformer giving 20.56% annualised return, over the past five years. Even Invesco India Tax Plan and Invesco India Growth Opportunities Fund have delivered stellar performance with a return of 17.74% and 16.51% respectively in the same period. He also manages Invesco India Large-cap Fund and Invesco India Financial Services Fund that have grown by 13.88% and 19.48% respectively.
So, what is his secret sauce? The recipe is simple: he examines the business and earning cycles to take a call on a stock. When the tide is against a company, he believes it’s a perfect opportunity to take a dip. “There are times when companies are at the bottom of their earnings cycle. As a result, the market is very negative about them and, consequently, valuation cycles are at their lowest. Such combinations are fantastic buying opportunities,” he says, adding that if a company is merely facing cyclical problems and not structural, then it’s a perfect time to bag the stock. He adds that for a value strategy to work, you need to see not just price to earnings (P/E), but also the relationship between return on equity (RoE) which is an indicator of the earnings cycle and price to book (P/B) which is an indicator of the valuation cycle.
Consider how he took t