A common link among the companies bought by managers in October is their size.
Getty ImagesDespite the valuations not being cheap, money managers at leading fund houses, by asset under management (AUM), preferred these stocks because of the clarity on earnings prospects.
Mutual fund managers have mostly stuck to the so-called ‘quality’ blue-chip stocks in October. Despite the valuations not being cheap, money managers at leading fund houses, by asset under management (AUM), preferred these stocks because of the clarity on earnings prospects. A common link among the companies bought by managers in October is their size: either they are the dominant players or close to the dominant player in their respective sectors. Here are five companies which saw heavy buying by some of the top fund managers.
After a fall of 5-6% in the two months ended October, ITC delivered a financial performance which addressed any serious concerns about its earnings growth. The company recorded its highest-ever net profit in a quarter in the September 2019 quarter. This is largely because of the change in corporate tax rate. The cut was supplemented by stable performance of its various business verticals. One of the reasons why funds have been bullish on the stock is ITC is one of the few FMCG firms which have been able to manage the slowdown relatively better.
For a long time, the street has been bullish on L&T. Hence, a fall of 2-3% in the broad market volatility encouraged fund managers to enhance their exposure to the stock. Two distinct advantages merit investments in L&T. One, the company has been vocal about refraining from bidding for new orders. This gives clarity to analysts that it is not aggressively and mindlessly bidding to grab orders at the cost of balance sheet. Second, L&T has a robust order book of Rs 303222 crore. It has given an encouraging revenue growth guidance of 12-15% for FY20.
In the two months ended October, a fall of 5-8% in the share price of SBI, largely due to broad market volatility, encouraged managers to enhance exposure. A key factor that has resulted in high interest in the bank’s stock is its strong financial performance in the Sept 2019 quarter. The bank’s profits grew three times to Rs 3011 in comparison with the same quarter last year. This was largely due to higher net interest income and improvement in asset quality. Talks of the bank selling 14% stake in SBI Cards through an IPO have also generated interest in the stock.
A big fall of 16% in a single trading session, the highest in the last six years, provided fund managers an opportunity to add to their positions. The stock fell after a letter by anonymous employees surfaced, accusing the CEO and CFO of unethical practices for several quarters. For September 2019, Infosys’ margins expanded for the first time in five quarters.
AXIS BANK CMP: Rs 716 Bought by: ICICI Prudential MF
With the management transition done, analysts expect current business transformation to yield better growth. Loans and advances continued double-digit growth, with retail loan book growing at an impressive 23% YoY. Analysts believe the bank’s growth trajectory along with its focus on asset quality, balance sheet and healthy margins will be the key to drive value.
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