UNIFI Capital Pvt. Ltd. Deep Value Discount (DVD) PMS


Key Attributes

Inception Year: 2013

Number of Stocks: 15 - 20

MD & CIO: Sarath K. Reddy

About the Company:

Unifi is essentially a value investor in growth businesses. They place Value first but always also demand growth potential in a business they own. They believe that stock performance, particularly in mid and small firms, needs a catalyst; and often the best catalyst is an attractive price combined with growth.

Unifi believes that both micro (firm level) and macro risks are critical in determining outcomes. They carefully evaluate the fundamentals of each business that they own, and in addition ask the question if the prevailing and expected conditions in the economy will act for or against their interest. At times, while making longer term investments, they consciously trade off adverse macro conditions for terrific entry valuations.

Investment Objective

The objective of Unifi Deep Value Discount Fund or DVD Fund is to achieve above-average returns with below-average risk by exploiting inefficiencies. Few segments of the market tend to be mispriced in spite of visible growth prospects, resulting in such stocks trading at a deep discount to their intrinsic value. Reasons could vary from inadequate understanding of a business by most analysts, low relative market cap and liquidity or the lack of correlation to benchmark indices.

Unifi Capital actively manages seven bottom up equity approaches that sift through opportunities across the breadth of the markets. Across the funds, the mandate is to participate in opportunities that arise from a mix of emergent themes, corporate actions and of course attractiveness of core fundamentals. The objective of all the respective funds under management is to deliver superior risk adjusted returns from an absolute perspective.

Investment Philosophy

Unifi Deep Value Discount Fund or DVD Fund PMS follows a Fundamentally Driven philosophy. This is a buy & hold strategy where investments are based on sustained growth of the Indian economy. Here, the time frame is 2-3 years.

UNIFI provides PMS services that have all thematic portfolios.

Unifi Deep Value Discount Fund or DVD Fund follows the following philosophies:

Focus on absolute returns.

Intrinsic value is not a single, precise number; rather, it is a range.

Buy at a discount to intrinsic value, conservatively calculated.

Look for situations where the market is not only ignoring the future, but also a bit of the present.

The combination of both a bargain price at the time of purchase and the value add from retained earnings over the holding period will contribute to investment returns.

Aim to be rational, not merely contrarian.

Cheap price in relation to value is often the single biggest catalyst.

Investment Approach

  • Unifi Deep Value Discount Fund or DVD Fund concentrates on exploiting inefficiencies in the market. Market inefficiencies typically arise in the following situations:
  • Over-reaction to a short-term negative event, a poor earnings report for example.
  1. From Contrarian Investment, Extrapolation and Risk (Lakonishak, Schleifer and Vishny):
  2. “Putting excessive weight on recent past history, as opposed to a rational prior, is a common
  3. Judgment error in psychological experiments and not just in the stock market.”
  • A sector that is currently temporarily depressed.
  • A business that is in the midst of a turnaround.
  • Widespread market dislocation driven by a geo-political/economic shock.
  • Institutional imperative of benchmarking that causes portfolio managers to chase businesses with good recent business performance and sell those that haven’t.
  • Large corpuses under institutional management that suppress the incentive to seek out small companies that aren’t widely followed or understood.
  • Institutional reluctance to purchase, and disclose, companies with recent “negative” headlines.
  • Indiscriminate selling e.g. a margin call on a promoter pledge.
  • Corporate restructurings such as demergers or spin-offs.
  • High-uncertainty but low-risk situations.



Performance Table #


Trailing Returns (%) 1m return 3m return 6m return 1y return 2y return 3y return 5y return 10y return Since inception return




Disclaimer

#Returns as of 30 Apr 2022. Returns up to 1 Year are absolute, above 1 Year are CAGR.



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