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Wednesday, July 7, 2010
DSP BLACKROCK MICRO CAP FUND
CHOTA PATAKA BADA DHAMAKA
My recommendation and pick for this month is the DSP BlackRock Micro Cap Fund.
The Fund has been a clear out performer since its launch. In spite of the markets going into a tailspin immediately after the Fund's launch, the Fund has managed a impressive 15% absolute return. The Fund which was a close ended has become a open ended now and has been ranked NO.1 by money control in the Equity Diversified Category and has been rated 5 Star.
Now, as you can make out by its name itself, this Fund invests in Very Small Companies (by market capitalization). Even here DSP zeroes on a lot more 'micro'. And DSP has announced in clear terms that it will put a ceiling of 500 crores on this Fund, so that it can be managed easily. A Smaller size will enable the Fund house to be quick footed and will have little problem in entering/exiting a stock.A Bigger Fund size will require the fund to look beyond micro companies.
Micro caps are under-researched and if picked at the right price can be multi baggers. DSP Blackrock has a good pedigree and has proved its mettle before and has a high focus on investment processes and relatively lower dependence on any STAR manager.
DSP BlackRock Micro Cap Fund.has targeted to invest in Small Companies which are market leaders in that field which will not only reduce risks but bring in assured returns.
Typically Small Cap Fund will be highly volatile and hence works wonders when you invest through SIP.
The Fund is heavyweight on Industrial Capital Goods which account for about 14%. As you can expect, the Fund boasts of stocks which you rarely find in other funds. Some unusual stocks which the Fund holds are...Whirlpool, Jubilant, Zuari Inds, TRF, TTK Prestige, etc.
However, the Fund has restricted its investment to fewer than 40 stocks.
The Fund is managed by Apoorva Shah who has done wonders withDSPBR Top 100 Fund.
Micro cap stocks comprise a large pool of varied, uncorrelated stocks which are relatively unknown and under-researched. Building a portfolio of such companies requires proven expertise in equity fund management and stock-picking. DSP Merrill Lynch Fund Managers Ltd. have however done well in the 3 years since the Fund has been launched.
A major problem with these small caps is their liquidity especially when the markets are going downhill. Hence, it is essential that you have a long term vision when investing in this Fund and keep booking profit whenever you feel the time is right.
Those who wish to take advantage of the private-equity style of investing in which one enters companies with potential and exits after they have grown into winners, can look at this fund.
The Fund will be a good addition to aggressive investors who are willing to ride out volatility associated with small caps.