SBI Magnum Contra Mutual Fund
Investors can consider buying into units of Magnum Contra. The fund’s consistency in containing losses in tougher periods and ability to beat the benchmark by a good margin over a longer time frame buttress the case for investment.
Over a five-year period, the fund has generated a compounded annualised return of 27.4 per cent and outpaced benchmark BSE 100 by 15 percentage points. This performance places the fund in the top of diversified equity funds over the same period.
Over a three-year period the fund generated a compounded annualised return of minus 1.5 per cent but declined 1.1 percentage points lower than its benchmark. During the above time period, on a monthly return basis, too, the fund contained losses better than the benchmark in nine out of a total of 12 months in which the benchmark posted negative returns.
Performance: Over a one-year period the fund’s NAV declined 30 per cent but the fund contained downside better than the benchmark. It achieved this by moving one-fourth of the assets into cash and debt over the past few months. However, the fund trailed its peers such as UTI Contra and Kotak Contra by a good margin in the above period, perhaps due to the high cash holding.
That the fund prefers to adopt a buy and hold strategy is reflected in its portfolio turnover and SIP returns over the past seven years. SIP returns were always half of lumpsum investments and this implies that the stocks in the portfolio have undergone lesser volatility.
Portfolio Overview: The portfolio as well as the fund’s performance the last year suggests that it behaves like any other diversified equity scheme, perhaps with a less contrarian approach.
Contrarian funds invests in undervalued stocks that are out of flavour but have the ability to achieve good returns once they are sighted favourably by the market. Its only contrarian strategy currently is an average holding of 8 per cent in the auto sector for over a year.
The fund sports a well diversified portfolio. As per the March fact sheet it had 73 stocks in its portfolio. A good number of these stocks in the portfolio participated in the recent rally. The top ten preferred stocks accounted for 34 per cent of the assets and mid and small cap cornered 20 per cent of the portfolio
