icici prudential pms phoenix portfolio bloomberg, capitaline, past performance of the stock/sector...

ICICI Prudential PMS Phoenix Portfolio

The opportunity called “Value”

The Information contained herein is dated and it may be noted that the trends, inferences and analysis may change in future. There is no assurance by ICICI Prudential PMS that the information in this presentation will be updated. Please refer to slide no. 23 for Risk Factors & Disclaimers.

Private & Confidential

2

Right time to invest?

• High inflation• Elevated domestic

interest rates• Subdued growth

Some GlobalConcerns

Some LocalConcerns

• Stop start growthin U.S economy

• Europeandebt crisis

• Sluggish growth inemerging economies

3

Indian Equity: “Dusk” or “Dawn”?

Possible Ramifications for India

• In sharp contrast to global economy, India continues to be among the fastest growing economies of the world

• India has emerged stronger post most crisis including: • Asian currency crisis • the recent 2008 turmoil

• In the current scenario, liquidity is an opportunist and is likely to find its way to high growth destinations such as India

• There is a higher likelihood of inflationary pressure subsiding on the back of:

• decline in commodity prices • a normal monsoon leading to easing off of food inflation

•With inflation likely to cool off, we are likely to be at the peak of the rate cycle

Some Concerns

• Stop-Start growth in U.S economy

• European debt crisis

• Slowing growth in emerging economies

• ElevatedInflation

• High interest rates

Some Historical Facts

5

2000-05 - Understanding Value Investing

BSE Sensex

2000

3000

4000

5000

6000

7000

Jan-

00M

ar-0

0Ju

n-00

Sep-

00D

ec-0

0M

ar-0

1Ju

n-01

Sep-

01D

ec-0

1Fe

b-02

May

-02

Aug

-02

Nov

-02

Feb-

03M

ay-0

3A

ug-0

3O

ct-0

3Ja

n-04

Apr

-04

Jul-0

4O

ct-0

4

5375 level 6602 level

Wipro & Infosys

BSE Sensex did not advance much during the period Jan’00 to Jan’05

During the same period, Wipro declined by ~19% while Infosys advanced merely ~8%

0

50

100

150

200

250

300

350

400

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

Wipro (Rebased to 100) Infosys(Rebased to 100)

~8%

~-19%

The sector(s)/stock(s) mentioned above do not constitute any recommendation of the same and ICICI Prudential Portfolio Manager may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future.

6

2000-05 - Understanding Value Investing

The sector(s)/stock(s) mentioned above do not constitute any recommendation of the same and ICICI Prudential Portfolio Manager may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future.

Tata Motors Tata Steel

However, during the same period, select stocks such as Tata Motors yielded disproportionate returns of ~ 139%

Also Tata Steel yielded a returns of ~ 273% during the period

0

20

40

60

80

100

120

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

273%139%

0

50

100

150

200

250

300

350

400

450

Jan-

00M

ar-0

0Ju

n-00

Sep

-00

Dec

-00

Mar

-01

Jun-

01S

ep-0

1D

ec-0

1M

ar-0

2Ju

n-02

Sep

-02

Dec

-02

Mar

-03

Jun-

03A

ug-0

3N

ov-0

3Fe

b-04

May

-04

Aug

-04

Nov

-04

Feb-

05M

ay-0

5A

ug-0

5O

ct-0

5

Some More Facts

8

2008 till date - Understanding Value Investing

Source: Bloomberg. The sector(s)/stock(s) mentioned above do not constitute any recommendation of the same and ICICI Prudential Portfolio Manager may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future.

BSE Sensex and S&P Nifty BSE FMCG, Healthcare & Capital Goods

Sensex and Nifty has fallen ~16% each since Jan 1, 2008 till 15 October 2011

During the same period, indices movement have varied with FMCG and Healthcare advancing~69% & 33% respectively while Capital Goods declining by 44%…

-16%

-16%

0

5000

10000

15000

20000

25000

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

Jul-1

0

Oct

-10

Jan-

11

Apr

-11

Jul-1

1

Oct

-11

BSE Sensex S&P Nifty BSE CG BSE FMCG BSE Healthcare

0

5000

10000

15000

20000

25000

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

Jul-1

0

Oct

-10

Jan-

11

Apr

-11

Jul-1

1

Oct

-11

33%

69%

-44%

9

2008 till date - Understanding Value Investing

Source: Bloomberg. The sector(s)/stock(s) mentioned above do not constitute any recommendation of the same and ICICI Prudential Portfolio Manager may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future.

Sun Pharma ITC

0

100

200

300

400

500

600

Jan-

08Fe

b-0

8A

pr-

08Ju

n-08

Aug

-08

Oct

-08

Dec

-08

Feb

-09

Mar

-09

Jun-

09Ju

l-09

Sep

-09

No

v-09

Jan-

10M

ar-1

0M

ay-1

0Ju

n-10

Aug

-10

Oct

-10

Dec

-10

Jan-

11M

ar-1

1M

ay-1

1Ju

l-11

Sep

-11

Oct

-11

100%

0

50

100

150

200

250

Jan-

08Fe

b-0

8A

pr-

08Ju

n-08

Aug

-08

Oct

-08

Dec

-08

Feb

-09

Mar

-09

Jun-

09Ju

l-09

Sep

-09

No

v-09

Jan-

10M

ar-1

0M

ay-1

0Ju

n-10

Aug

-10

Oct

-10

Dec

-10

Jan-

11M

ar-1

1M

ay-1

1Ju

l-11

Sep

-11

88%

However, since Jan 1, 2008 till 15 October 2011, companies such as Sun Pharma and ITC trading at 29x PE 08 and 24x PE 08 have advanced ~100% and 88% respectively

10

• Views on benchmark are different from views on stocks

• Value delivers when there is huge valuation differential, like now

• Risk aversion creates attractive investment opportunities

• The philosophy of “Buy low and hold” is the basic tenet of investment for long-term investors

• Outperformance tend to materialize when quality companies available at attractive valuation and hold them to deliver performance over time

Lessons from 2000-05 & 2008 till date

So is this the right time to invest?Be fearful when others are greedy and greedy when others are fearful

- Warren Buffet

Is there a way of capitalizing on the current market opportunity?

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• Identify ideas with deep discount to intrinsic valuations

• Look beyond index and large caps

• Look for balance of quality and valuations

• Buy with high conviction and hold through swings

• Focus on facts and fundamentals, not the ongoing noise

• Take a focused approach to construction, but diversify

• Exit if the opportunity unlocks & target value is realised

Value Investing

A few examples of Value investing

Based on parameters of what constitutes value, we have identified certain stock ideas for better clarity. This is based on the information avail-able as on September 30, 2011. The list is provided only for illustration purposes and for explaining the concept of value investing only. These sector(s)/stock(s) mentioned above do not constitute any recommendation of the same and ICICI Prudential Portfolio Manager and may or may not have any future position in these sector(s)/stock(s).

15

• The largest manufacturer of CPC in India

• Successful leveraged buy out in US

• Superior RoE consistently

• Deleveraging clearly visible

• Potential for substantial intrinsic value, as balance sheet improves

• Experienced and quality management

Rain Commodities – A case in point

Total Debt and Net Worth: Deleveraging clearly visible

107%88% 92% 82% 71% 69%

-7%

12% 8% 18% 29% 31%

20%

0%

20%

40%

60%

80%

100%

120%

FY06 FY07 CY07 CY08 CY09 CY10

Total Debt Net Worth

Price to Earnings: Almost similar to CY08

1.8

2.6

3.2

2

0

0.5

1

1.5

2

2.5

3

3.5

CY08 CY09 CY10 CY11E

Source: Bloomberg, Capitaline, Past performance of the stock/sector may or may not be sustained in future. The stock/sector mentioned above is provided only as illustration purpose and for explaining the concept of value investing. These sector(s)/stock(s) mentioned above do not constitute any recommendation of the same and ICICI Prudential Portfolio Manager and may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future

16

• One of the largest textile companies in India

• Track record of over three decades

• Capacity expansion by 20% expected over the coming years

• Sound balance sheet and decent cashflows

• Decent profitability through economic cycles

• A cyclically weak FY12 has caused concerns

• A clear value opportunity

Vardhaman Textiles …Another case


Total Debt and Market Worth: Improving net worth

Total Debt Net Worth

Price to Earnings: Clearly a value opportunity

60% 64% 61% 58% 53%

40% 36% 39% 42% 47%

0%

20%

40%

60%

80%

100%

120%

FY07 FY08 FY09 CY10 FY11

4.2

2.3

4.6

0.000.501.001.502.002.503.003.504.004.505.00

FY10 FY11 FY12E

17

• One of the largest producers of paper

• Capacity expansion on the anvil

• Good profitability and consistent dividend payout

• A well managed PSU with strong track record

Tamil Nadu Newsprint Ltd….At discount


Dividend Per Share: Strong track record

4.5 4.5

5 5

4.24.34.44.54.64.74.84.9

55.1

FY10 FY11E FY12E FY13E

The Legend of the Phoenix

The phoenix is a mythical bird with a life cycle of 500 to 1000 years. Once in every 500 years, both the nest and bird burn fiercely and are reduced to ashes. From these ashes arise the young phoenix. The Phoenix's ability to be reborn from its own ashes implies its immortality.

Introducing ICICI Prudential PMS Phoenix Portfolio, it epitomises our belief in select stocks and their capability to rise from their current undervalued position. It is our experience in managing funds over the past 15 years that leads us to being optimistic about the delivery of the stocks that comprise this deep value portfolio.

19

Investment Philosophy

• Long-term investment of funds having potential for capital appreciation following value investment philosophy

Investment Suitability

• The portfolio is suitable for investors:

• seeking a relative high-return, high-risk portfolio

• with an investment horizon of 3 years and above

Introducing ICICI Prudential PMS Phoenix PortfolioA series under “Deep Value” Portfolio

20

• Portfolio will invest in stocks that trade below our estimated fair value of the company

• The estimated fair value of a company may be judged by various quantitative valuation parameters such as:

• price/earnings

• price/book

• dividend yield

• price/cash flow,

• replacement cost,

• sum-of-part valuation etc.

• Due attention paid to the business fundamentals, management quality, corporate governance etc.

• Potential value unlocking triggers / catalysts are identified and monitored

Investment Philosophy / Methodology

The investment strategy and the composition, of the portfolio is subject to change within the provisions of the disclosure document. The quantitative parameters stated above are only for illustration purpose and may or may not be exhaustive. Please refer to the disclosure document for details and risk factors

21

Stock Selection Process

AnalyzeValuation

AnalyzeManagement

AnalyzeBusiness Models

IdeaGeneration

DecisionMaking

Analyze Potentialre-rating triggers

Value Screening

Internal / ExternalResearch

22

Portfolio features

Minimum Investment Amount INR 25 Lakhs

Additional Investment INR 5 Lakhs

One time entry load 2.25% of invested amount

Annual recurring charges* 2.00% per annum plus service tax

Exit Load 2% of portfolio value if exited before 12 months

*Charged quarterly on average NAV

This is a simplified explanation of key features of the Portfolio. The portfolio may be charged with such other additional fees and charges as per the Discretionary Portfolio Management Services executed between the Client and the Portfolio Manager.

23

There is no assurance of principal or returns in this portfolio.Investing in securities including equities and derivatives involves certain risks and considerations associated generally with making investments in securities. The value of the portfolio investments may be affected generally by factors affecting financial markets, such as price and volume, volatility in interest rates, currency exchange rates, changes in regulatory and administrative policies of the Government or any other appropriate authority (including tax laws) or other political and economic developments. Consequently, there can be no assurance that the objective of the Portfolio would achieve. The value of the portfolios may fluctuate and can go up or down. Prospective investors are advised to carefully review the Disclosure Document, Client Agreement, and other related documents carefully and in its entirety and consult their legal, tax and financial advisors to determine possible legal, tax and financial or any other consequences of investing under this Portfolio, before making an investment decision. The Stock(s)/Sector(s) mentioned in this material do not constitute any recommendation of the same and the portfolios may or may not have any future positions in these Stock(s)/Sector(s). The composition of the portfolio is subject to changes within the provisions of the disclosure document. The benchmark of the portfolios can be changed from time to time in the future. Trading volumes, settlement periods and transfer procedures may restrict the liquidity of investments in portfolios. Different segments of the Indian financial markets have different settlement periods and such periods may be extended significantly by unforeseen circumstances. The inability of the Portfolio Manager to make intended securities purchases due to settlement problems could cause the portfolio to miss certain investment opportunities. By the same rationale, the inability to sell securities held in the portfolio due to the absence of a well developed and liquid secondary market for debt securities would result, at times, in potential losses to the portfolio. The stocks./sectors mentioned in the document may or may not form part of the Portfolio. Individual returns of Clients for a particular portfolio type may vary significantly from the data on performance of the portfolios depicted in this material. This is due to factors such as timing of entry and exit, timing of additional flows and redemptions, individual client mandates, specific portfolio construction characteristics or structural parameters, which may have a bearing on individual portfolio performance. No claims may be made or entertained for any variances between the performance depictions and individual portfolio performance. Neither the Portfolio Manager nor ICICI Prudential Asset Management Company Ltd. (the AMC) its Directors, Employees or Sponsors shall be in any way liable for any variations noticed in the returns of individual portfolios. The Client shall not make any claim against the Portfolio Manager against any losses (notional or real) or against any loss of opportunity for gain under various PMS Products, on account of or arising out of such circumstance/ change in market condition or for any other reason which may specifically affect a particular sector or security, including but not limited to disruption/prohibition/ discontinuation/ suspension of trading in a particular Security including any index or scrip specific futures/ options or due to any act of Company, Market Intermediary by SEBI or any other regulatory authority which may result in trading in such security (ies) being completely or partially affected, to which the Portfolio Manager has taken exposure/ proposed to take exposure and is unable to take additional exposure/ restrain him from taking any position in a particular equity or related derivative instruments etc. due to any reason beyond the control of the Portfolio Manager resulting in unhedged positions or losses due to unwinding of certain positions or losses due to any reason or related to any of the aforesaid circumstances. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. The recipient(s) alone shall be fully responsible/are liable for any decision taken on the basis of this material. All recipients of this material should before dealing and/or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice. The investments discussed in this may not be suitable for all investors. Financial products and instruments are subject to market risks and yields may fluctuate depending on various factors affecting capital/debt markets. There is no assurance or guarantee that the objectives of the portfolio will be achieved. Please note that past performance of the financial products, instruments and the portfolio does not necessarily indicate the future prospects and performance thereof. Such past performance may or may not be sustained in future. Portfolio Manager’s investment decisions may not be always profitable, as actual market movements may be at variance with anticipated trends. The investors are not being offered any guaranteed or assured returns. The AMC may be engaged in buying/selling of such securities. Please refer to the Disclosure Document and Client Agreement for portfolio specific risk factors. Risks attached with the use of derivatives: Derivative products are leveraged instruments and can provide disproportionate gains as well as disproportionate losses to the investor. Execution of such strategies depends upon the ability of the fund manager to identify such opportunities. Identification and execution of the strategies to be pursued by the fund manager involve uncertainty and decision of fund manager may not always be profitable. No assurance can be given that the fund manager will be able to identify or execute such strategies. Derivative products are specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but of the derivative itself. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price or interest rate movements correctly. There is the possibility that a loss may be sustained by the portfolio as a result of the failure of another party (usually referred to as the “counter party”) to comply with the terms of the derivatives contract. Other risks in using derivatives include the risk of mis pricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Thus, derivatives are highly leveraged instruments. Even a small price movement in the underlying security could have a large impact on their value. Also, the market for derivative instruments is nascent in India. The risks associated with the use of derivatives are different from or possibly greater than the risks associated with investing directly in securities and other traditional investments. In the preparation of this material the AMC has used information that is publicly available, including information developed in-house. Some of the material used herein may have been obtained from members/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates. Information gathered and material used herein is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will assume any liability for the same. We have included statements/opinions/recommendations in this material, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and also PE ratios, EPS and Earnings Growth for forthcoming years and similar expressions or variations of such expressions, that are “forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, the monitory and interest policies of India, inflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices, the performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry. All data/information used in the preparation of this material is as on November 2008 and may or may not be relevant any time after the issuance of this material. The Portfolio Manager/ the AMC takes no responsibility of updating any data/information in this material from time to time. The Portfolio Manager and the AMC (including its affiliates), and any of its officers directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner

icici prudential pms phoenix portfolio bloomberg, capitaline, past performance of the stock/sector...

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