Top 5 smallcap PMS schemes delivered solid return to rich investors in 12 months; now own these stocks

Select smallcap portfolio money managers managed to generate robust alpha for high-net-worth individuals (HNIs) despite the ongoing volatility in the domestic equity market in the last one year. At the time when the BSE Smallcap index (up 2.5 per cent) underperformed the BSE Sensex (up 4.8 per cent) and the BSE Midcap index (up 3.8 per cent) since February 2022, Aequitas Investment India Opportunities Product emerged as the top gainer among smallcap PMS strategies.

Data available with PMS AIF World showed that the strategy delivered a 24.70 per cent return to investors in the last one year. The PMS strategy held shares from across the sectors including metals, engineering, consumer goods, chemicals and diversified, among others on February 28. 

The data further showed that Aequitas Investment India Opportunities Product held Apar Industries with a weightage of 8.70 per cent on February 28, 2023. It was by Gujarat Ambuja Exports (8.24 per cent), Power Mech Projects (6.85 per cent), Technocraft Industries India (6.26 per cent) and Jindal Stainless (5.94 per cent).

Siddhartha Bhaiya, MD and CIO, Aequitas Investment Consultancy said, “We are value investors. We always focus on investing in leaders of sectors which are overlooked by market participants. While the entire market was focused upon investing in companies which already had shown growth and thus are a part of benchmark indices and very richly valued, we were focused on companies where growth is yet to be recognised-these are companies which are available at single-digit P/Es and part of boring sectors where there is no narrative but excellent results.”

Bhaiya further added that markets are on the cusp of a sectoral rotation- where richly valued sectors will find it difficult to deliver the kind of growth that markets expect of them and will disappoint. “We are of the view that sectors like infrastructure, capex- oriented companies, B2B manufacturing, metals, commodities, energy will do well in the days to come. We constructed the majority of our portfolio in 2019 on the above lines and are glad that our thesis has worked out,” he said.

With a return of 15.60 per cent, Centrum Microcap is the next small cap scheme on the list. The investment strategy of the scheme is to build a portfolio of companies which have strong fundamentals, sound management, proven and stable business models, consistent operating performance and strong balance sheets to deliver consistent returns over the medium to long term. It also aims to protect the downside using various index or stock levels derivative strategies.

The PMS strategy had given maximum weightage to PG Electroplast (6 per cent) in its portfolio as of February 28. Camlin Fine Sciences, Rajratan Global Wires, Mold-Tek Packaging and Gokaldas Exports were among other major holdings with a weightage of 5 per cent each.

Right Horizons Minerva Under Served also managed to generate over 15 per cent return for investors in the past 12 months till February 2023. The strategy focuses on businesses within most underpenetrated categories and holds between 12-16 stocks.

While sharing his views on the strategy, Piyush Sharma, Investment Manager, Minerva India Under Served said, “Largely unpriced idiosyncrasies are the typical tailwinds for our book’s underlying earnings growth.  FY23 has been no different. As things stand, our book (ex-financials) should deliver well ahead of 40 per cent earnings growth for the current fiscal, handily outpacing Nifty50 (ex-financials) single digit figure.”

“Solid earnings have not only ensured superior headline price performance for our holdings but have also ensured that our valuation discount vs. Nifty50 actually expands further. Today, our book (ex-financials) trades at nearly 60 per cent discount compared with Nifty50 (ex-financials), despite the earnings differentials,” Sharma said.

Ambit Investment Advisors Emerging Giants and Nine Rivers capital Aurum Small Cap Opportunities gained 12.50 per cent and 8.40 per cent during the same period. Ambit Investment Advisors Emerging Giants held shares like Safari Industries, La Opala, Cera Sanitaryware, MAS Financial Services, Sundaram Fasteners, DCB Bank, Hawkins Cooker, Home First Finance, CCL Products India and Suprajit Engineering, among others on February 28.

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