1) The document describes the investment strategy and process of the DSP Value Fund, an open-ended equity scheme that follows a value investment approach.
2) The fund uses a rigorous multi-step process combining quantitative screening and fundamental research to identify high-quality companies trading at reasonable valuations.
3) This process has led to the fund outperforming its benchmark on metrics like earnings growth, returns on equity, and dividend yield while maintaining a focus on quality and valuation.
1. People | Processes | Performance
VALUE FUND
An open-ended equity scheme
following a value investment strategy
2. 2
Eliminate
wealth destroyers
Poor governance/capital
allocation, disrupted business
models, aggressive accounting
DECADES OF INVESTING
WHAT DO ACE INVESTORS LEARN AFTER
Longevity &
Survival over
Return
Maximization
Design the portfolio
to navigate all cycles
Valuation Discipline
Pay for what it’s worth
Avoid Ruin
Cash, diversification,
hedges, position sizing
Enforce Discipline
and remove bias
Man + Machine
3. 3
Screening for
cheapest
stocks
Tends to identify
value traps
Intrinsic/Fair
Value Method
Forecasting future growth
is very subjective in
nature
Special situation/
Turnaround
Difficult to predict, such
opportunities may/may
not exist
CONVENTIONAL APPROACH
OF MANAGING VALUE STRATEGY
4. 4
DSP Value Fund
CONVENTIONAL APPROACH
OF MANAGING VALUE STRATEGY
QUALITY AT REASONABLE PRICES
Screening for
cheapest
stocks
Tends to identify
value traps
Intrinsic/Fair
Value Method
Forecasting future growth
is very subjective in
nature
Special situation/
Turnaround
Difficult to predict, such
opportunities may/may
not exist
X X X
5. 5
1. ELIMINATE POOR QUALITY
Exclude stocks which may destroy value
×High leverage••
×Excessive volatility in stock prices
×Companies with accounting and governance red flags
×Companies showing poor growth or disrupted business models
MAN + MACHINE
RIGOROUS FRAMEWORK
6. 6
×Current stock valuation (P/B) is benchmarked to long term sector averages
×Benchmarking factors in company specific fundamentals like profitability,
growth and market cap
×Based on a proprietary multivariate regression based valuation model
2. ELIMINATE HIGH VALUATION
MAN + MACHINE
RIGOROUS FRAMEWORK
7. 7
Select from remaining list by scoring stocks based on:
Profitability (high RoE)
Stable earnings growth
Favorable growth prospects
Dividend paying
Positive free cash flow generation
7
3. SELECT GOOD COMPANIES
MAN + MACHINE
RIGOROUS FRAMEWORK
8. 8
Research team inputs taken on stocks that pass all above criteria
×To avoid value traps
× To avoid cyclical companies at peak earnings
8
4. FINAL SELECTION
MAN + MACHINE
RIGOROUS FRAMEWORK
9. 9
Source: Internal, Data as on June 30, 2022.
NIFTY500
Portfolio
RESULTS OF THE PROCESS
HOW VALUE FUND IS TRUE TO LABEL, BETTER THAN BENCHMARK
3 Year Earnings Per Share Growth
Reasonable growth at reasonable prices
14
16
17
15 15
14
15
16
18 18 18
21
22
21
Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
Higher Dividend Yield
2.2
2.1
1.8 1.8
1.8 1.8
2.6
1.1
1.1 1.0 1.0
1.1 1.1
1.4
Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
10. 10
Source: Internal, Data as on June 30, 2022.
RESULTS OF THE PROCESS
HOW VALUE FUND IS TRUE TO LABEL, BETTER THAN BENCHMARK
Returns on Equity
Price to Earnings-1 Year Forward Estimate
22 23
21
23
21 21
15
27
26
22
24
23 23
19
Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
16 16 16
15
18 18
17
19 19
19
18
20 20
21
Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
Superior on quality
Better on valuations relative to Index
NIFTY500
Portfolio
11. 11
DSP PHILOSOPHY
FOR VALUE INVESTING
Quality
companies at
reasonable prices
as opposed to
mediocre companies
at cheap prices
Diversification
by investing up to
35% in Overseas
investments
Risk management
by stock/sector
diversification and
position sizing based
on underlying
stock liquidity
Combining strengths
of quantitative
(unbiased/rule based)
and fundamental
(experience)
investment
approaches
Willingness to hold
some cash when
we can’t find
suitable
investments
11
Source: The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by the scheme and the same
may change in future depending on market conditions and other factors.
12. 12
STAY IN THE GAME
SURVIVAL & RISK MANAGEMENT VS RETURN MAXIMIZATION
Outcome
100 100
Positive value
Losses -
Negative value
Reference point
Gains+
12
We feel the gain
of ₹100 less
We feel
the loss of
₹ 100 more
Good investing isn’t necessarily
about earning the highest returns,
because the highest returns tend to
be one-off hits that can’t be
repeated. It’s about earning pretty
good returns that you can stick with
and which can be repeated for the
longest period of time. That’s when
compounding runs wild
Morgan Housel
13. 13
SURVIVAL TECHNIQUES
Disclaimer: The investment approach / framework/ strategy mentioned herein is currently followed by the scheme(s) and the same may change in future depending
on market conditions and other factors.
Avoid
overpaying
Hold some
cash and
portfolio
hedges
Portfolio sizing
and liquidity
management
USD exposure,
via overseas
holdings, reduces
volatility in times
of stress as INR
depreciates
when domestic
markets fall
Diversification
across sectors
and countries
helps to tide
over cycles
14. 14
STRUCTURE
MARKET CAP
Large Cap
38%
Mid Cap
12%
Small Cap
14%
Source: Internal, Data as on July 31, 2022. The portfolio of the scheme(s) is subject to changes within the provisions of the Scheme Information document of the
scheme(s). The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of the same and the scheme(s)/
Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
Top 5 Sectors
IT-Software 9%
Pharmaceutical &
Biotechnology 9%
Diversified FMCG 4%
Aerospace
& Defense 6%
Cement &
Cement Products 4%
28%
8%
Total Domestic Equity
Arbitrage/
Cash & Eq.
Foreign
Security
Total
100%
64%
15. 15
If I have seen further,
it is by standing on the
shoulders of giants.
- Isaac Newton
Source: Quarterly Reports. Disclaimer: The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of
the same and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
16. 16
Cash is like oxygen.
If you don’t have it for a
few minutes, it’s all over.
Source: Quarterly Reports. Disclaimer: The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of
the same and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
17. 17
Innovation can be quickly superseded,
novelty does not guarantee an enduring
business model and rapid growth can
attract crushing competition.
Source: Quarterly Reports. Disclaimer: The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of
the same and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
18. 18
Interest rates have been manipulated
lower for so long that investors have
become conditioned to expect this to
continue much like Pavlov’s dogs.
Source: Quarterly Reports. Disclaimer: The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of
the same and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
19. 19
Turmoil in the world creates
exciting and abundant new
investment opportunities for
those with a long-term focus.
Source: Quarterly Reports. Disclaimer: The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of
the same and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
20. 20
In the face of todays unusually wide range of
potential macroeconomic outcomes, we do what
we have done for the last two decades: construct
a diversified portfolio of high-quality secular
growth companies by taking advantage of the
most attractive valuations as they emerge.
Source: Quarterly Reports. Disclaimer: The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of
the same and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
21. 21
THE BUSINESSES WE OWN
Overseas holdings are unique business models
Source: Internal, Data as on July 31, 2022. The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of the same
and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s). All logos used in the image are trademarks™ or registered®
trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them
22. 22
22
Source: Internal, Above-mentioned figures pertain to performance of the model and do not in any manner indicate the returns/performance of the any scheme of DSP
Mutual Fund. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. These figures pertain to
performance of the index and do not in any manner indicate the returns/performance of any scheme of DSP Mutual Fund. It is not possible to invest directly in an index.
0.51
MSCI ACWI Gross Total Return Composite of International Value Strategy
Our International Value Managers Have Proved Their Mettle
3 Year 5 Year 10 Year
14.3%
13.2%
13.1%
14% 13.9%
15.7%
16% 19%
vs
International Value Strategy
Correlation with NIFTY 500
(5yr weekly Returns)
Volatility (5yr weekly returns)
vs NIFTY 500
23. 23
What can you expect from this fund?
Potential for
steady long-term
compounding with low
drawdowns/volatility
than the benchmark
Conservative approach
to portfolio construction -
established business
models + valuation
comfort + diversification
A portfolio having
low commonality
with benchmark
24. 24
PRODUCT LABELLING & RISKOMETER
Fund Product Suitability Scheme Riskometer
Benchmark Riskometer
NIFTY 500 TRI
DSP Value Fund
(An open ended equity
scheme following a value
investment strategy)
This product is suitable for
investors who are seeking*-
• To generate Long term
capital
appreciation/income in
the long term
• Investments primarily in
the undervalued stocks
*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
25. 25
DISCLAIMER
This document is for information purposes only. In this material DSP Investment Managers Private Limited (the AMC) has used
information that is publicly available, including information developed in-house. Information gathered and used in this material is
believed to be from reliable sources. The statements contained herein may include statements of future expectations and other
forward-looking statements that are based on prevailing market conditions / various other factors and involve known and
unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed
or implied in such statements. While utmost care has been exercised while preparing this document, the AMC nor any person
connected does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages
arising out of the use of this information. The recipient(s) before acting on any information herein should make his/their own
investigation and seek appropriate professional advice. Past performance may or may not sustain in future and should not
be used as a basis for comparison with other investments. All opinions, figures, charts/graphs and data included in this
document are as on July 31, 2022 (unless otherwise mentioned) and are subject to change without notice. There is no assurance of
any returns/capital protection/capital guarantee to the investors in this/these scheme(s) of DSP Mutual Fund. For scheme specific
risk factors, Asset Allocation details, load structure, investment objective and more details, please read the Scheme Information
Document and Key Information Memorandum of the scheme(s) available on ISC of AMC and also available on www.dspim.com.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully