DSP Top 100 Equity Fund Institutional Payout of Income Distribution cum capital Wdrl Opt INF740K01GG5

The following text is from June 20, 2023:

Abhishek Singh’s framework is built on three fundamental pillars: a) Can the business be held for the long term? b) Is the downside risk limited? c) Are the embedded expectations conservative? Within his universe, for each name, he has embedded growth expectations as an input, which is done at a conservative level. Here he is extremely conscious of the growth numbers that are being considered for which there is a need to understand businesses and sectors holistically.

Singh looks at sectors that have a history of value creation, cash flow generation, and quality balance sheets. While scouting through companies, he prefers to look at those that have good ROIC, positive cash flows, and negligible debt. He tries to buy firms that are available at a significant discount to his estimate of intrinsic value.

Singh would refrain from buying stocks where he is not comfortable on valuations (based on quantitative parameters like price/earnings, price/book, and price/sales multiples). He also would refrain from buying names where he doesn’t have conviction with respect to the margin of safety.

Overall, Singh prefers to build a portfolio with a concentrated approach of around 30 names based on his bottom-up stock-picking skills and also taking significant sector overweight/underweight calls. We would like to hold on to our conviction as of now and evaluate how the strategy progresses and evolves over time. Hence, an Average Process Pillar rating for now.

Abhishek Singh brings his own style of investing into this fund. He relies on the investment framework that he has built to help him create a concentrated portfolio of around 30 names. There is no sector bias here. Singh will seek value wherever he can find it. But since quality companies are easier to value because of the durability of the business, predictability of cash flows, and lower tail risks, they usually would form a large part of the portfolio. That said, the portfolio may not have a consistent quality, growth, or momentum bias, but it is likely to have a value bias.

Singh rates the names in his universe basis valuation, momentum, earnings growth, quality score, and sentiment. He ranks these scores and uses them as a framework to size his position or consider them as potential exits. There is a “counter-cyclical” approach to Singh’s framework. The top ideas in the portfolio are names where the downside is limited, and the margin of safety is relatively higher.

Singh’s style involves taking significant overweight/underweight sector exposures, a result of his bottom-up stock-picking approach. There is an aggressive style to this approach, which adds to the risk. Currently, the bulk of the portfolio resides in financials (around 44%), healthcare (around 15%), consumer cyclical (around 14%), and technology (around 10%). Cash exposure in the portfolio is a result of a bottom-up organic approach, rather than a market-timing call.