Icici Prudential discovery does not have too great a RECENT track record. If you see its latest portfolio, you can see Sun Pharma, Ntpc, Itc, as the prime reasons for the under-performance. Is this bad luck or poor stock selection? If it is a VALUE DISCOVERY fund, is there really any value to be discovered in these shares? I do not know.

what has saved I Pru discovery is Hdfc bank, Bharti Airtel, Indian Oil, TCS, Vedanta, Indigo, Axis bank.

However, the weightage of Sun Pharma, Itc, Ntpc was much higher than the weightage of the shares that did well. If I were running a ‘discovery’ fund, I would find it difficult to include shares like Hdfc bank, TCS, etc. in a Value discovery fund. These shares were not typical value for a long time. Funnily in case of Indigo all the VALUE came from the  GROWTH of its business.

Ntpc maybe a good share, but this share has not done well for a very long time. I fully agree that it is a good Value discovery sharee, but being a PSU, discovery never happens! However, on the same breath I will have to admit that IOC has the same characteristics – and the value got discovered.

I did not like the portfolio much ( but one should like the process and the results). Over a long period of time a fund should not underperform by such a big margin. Naren was born as a value investor and he is ruthless on his own selection process, and he loves criticism. Singh has had the tough job of taking over from Naren – in 2011. S had a lot of mid cap and small cap in the portfolio, but then shifted to a large cap portfolio. Of course I Pru discovery is market cap agnostic. So S found value in large cap rather than in the other categories. Not a bad strategy, but it has not worked well in the choice of scrips. We can see which are the shares which did well, and which did badly.

Is it a sizing problem? Well it looks like. If he had less of M&M, ITC and Ntpc and had more of Hdfc bank, Indigo, IOC, Hcl, Axis bank.

I will never forgive a fund manager for wrong sizing. That is the privilege of idiots like me who just handle our own money. I can make a mistake of buying 200 Bharti Aritel and ride the journey from 80 to 1200. That is a sizing mistake.

I do not like the sizing in the I Pru portfolio. Also I would have hated the I pru discovery filled up with top performing shares. That is the job of say Icici Pru top 100 or Franklin India blue chip (that fund needs a post too!).

I would wait with S’s portfolio for longer. I believe that as investors we expect too much of ‘adherence’. I do not want to. I would happily suffer under-performance for long periods of time. However I am very worried about shares like Ntpc. Having said that I would surely have missed IOC. Sounds odd we get conflicting lessons from the markets – even if the promoters are the same.

If you travel through out the country you will believe that IOC must be part of every portfolio, even at current prices. However, you discount the rogue promoter. Well, you suffer do you not?

Now come to FIBC. A few years ago it was stuffed with ‘Navratnas’ – and obviously it underperformed. I was seeing the portfolio now – it again has many psu shares. Well, I have no clue how to react.

Conclusion: I am sticking around with Icici Pru discovery and Franklin India bluechip till 2022. Next review later.