HDFC Equity Fund (HEF) is among the leading diversified equity funds in the country today. The fund has an impressive track record and its portfolio is always a subject of interest within the investing community. We had done a small analysis of its portfolios over the last 5 months to get an idea of what is on the fund manager’s mind.
To be sure, HEF pursues an aggressive investment strategy. It has a concentrated portfolio of about 25 stocks with a good mix of large cap and mid caps. Each sector has no more than 2-3 stocks. The fund has been consistent in pursuing this strategy and there has been no dilution on this front.
Consistency in stock selection
| COMPANY |
JAN 2004 |
FEB 2004 |
MAR 2004 |
APR 2004 |
MAY 2004 |
| GRASIM INDUSTRIES |
9.8% |
9.5% |
9.2% |
9.6% |
9.8% |
| SATYAM COMPUTERS |
6.1% |
6.9% |
5.9% |
7.7% |
9.5% |
| SBI |
9.1% |
9.0% |
9.3% |
9.5% |
7.5% |
| BHEL |
6.3% |
7.1% |
6.4% |
4.1% |
7.2% |
| MAHINDRA & MAHINDRA |
- |
5.9% |
5.6% |
5.7% |
5.4% |
| RELIANCE INDUSTRIES |
5.7% |
4.5% |
5.1% |
4.6% |
5.2% |
| ZEE TELEFILMS |
4.5% |
4.8% |
4.5% |
4.4% |
4.8% |
| MARUTI UDYOG |
6.6% |
5.1% |
4.3% |
4.3% |
4.3% |
| BHARTI TELEVENTURES. |
2.7% |
2.9% |
3.0% |
- |
4.2% |
| AMTEK AUTO |
- |
- |
- |
3.2% |
3.9% |
(Numbers are as a percentage of net assets.)
As is evident, HEF is consistent in its stock picks with the top 10 stocks being a part of its core portfolio over the last 5 months. The top 10 stocks in its portfolio (as on May 31, 2004) accounted for 61.8% of net assets. This is on the higher side for a ‘diversified’ equity fund. We maintain that a diversified equity fund should have not more than 40% of its assets in the top 10 stocks. This is a level that global ‘diversified’ equity funds maintain. We plan to address this issue in another article at a later date.
Want to analyse stock portfolios of leading equity funds over the last 4 years?
The lessons for the investor from this is that he should look out for funds that have a consistent bunch of stocks that can be identified as the core portfolio. This is as opposed to having a portfolio that changes dramatically every few months, which would imply that the fund has no defined character and is more a trading vehicle rather than an investment avenue.
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