ICICI Pru Value Discovery Fund: Exploring High Potential Undervalued Stocks

Oct 20, 2022

Listen to ICICI Pru Value Discovery Fund: Exploring High Potential Undervalued Stocks

00:00 00:00

​​

Equity mutual funds follow different styles of investing, namely growth, value, or a blend of these styles. Each style of investment has its own advantages. The value style of investing is mainly suitable for pure long-term investors who prefer stocks with better margin of safety.

Value investing is all about finding the 'hidden gems' of the equity market. When the market realises the true potential of value stocks, their prices soar, and investors are rewarded with attractive gains. However, to get the optimal benefit of the future potential of value stocks, it is vital to select a Value Fund that sticks to the guiding principles of 'Value Investing' while constructing the portfolio.

ICICI Pru Value Discovery Fund is one such true-to-style value fund that has delivered superior performance across various market phases and cycles.

Graph 1: Growth of Rs 10,000 if invested in ICICI Prudential Value Discovery Fund 5 years ago

ICICI Prudential Value Discovery Fund is a true-to-style value-oriented scheme that looks for undervalued stocks having the potential to deliver superior returns. With a corpus of 25,196 crore, ICICI Prudential Value Discovery Fund is the largest scheme in the Value Fund category. The fund’s cautious approach and strong inclination towards value helped it stand strong and limit losses during the 2018 mid-cap correction as well as the 2020 market crash. Moreover, the fund has outpaced the benchmark and many of its peers in the recent bull phase. The fund avoids investing in momentum-driven bets, which helps it to outpace its peers in the long run. Moreover, its large-cap bias adds stability to the portfolio. In the last 5 years, ICICI Prudential Value Discovery Fund has grown at a CAGR of 14.3% compared to a growth of 12.2% in its benchmark. An investment of Rs 10,000 five years back would have now appreciated to Rs 19,514.

Graph 1
Past performance is not an indicator of future returns
Data as on October 18, 2022
(Source: ACE MF)
 

Table: ICICI Prudential Value Discovery Fund's performance vis-á-vis category peers

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
IDFC Sterling Value Fund 4,895 3.19 44.96 27.13 12.76 15.88 28.63 0.25
ICICI Pru Value Discovery Fund 25,196 2.80 34.41 24.22 14.30 13.42 21.06 0.26
Templeton India Value Fund 758 3.77 43.22 23.99 11.15 13.47 26.70 0.23
Nippon India Value Fund 4,638 -3.40 32.04 20.61 12.54 13.37 23.99 0.21
L&T India Value Fund 7,640 -4.01 29.32 19.86 10.91 13.53 24.63 0.21
UTI Value Opp Fund 6,789 -2.40 27.01 19.53 13.25 12.29 22.66 0.21
Union Value Discovery Fund 142 -3.35 27.42 19.09 -- -- 23.20 0.20
HDFC Capital Builder Value Fund 5,324 -2.04 27.79 17.69 10.85 12.90 24.25 0.18
Aditya Birla SL Pure Value Fund 3,916 -5.64 28.46 17.26 4.02 10.38 25.58 0.17
Indiabulls Value Fund 10 -3.89 25.02 16.54 6.74 9.27 21.52 0.18
NIFTY 500 - TRI -4.00 26.45 17.95 12.16 13.16 23.16 0.20
Returns are point to point and in %, calculated using Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on October 18, 2022
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.
 

With the recovery seen in the Value Funds category in the last couple of years, ICICI Prudential Value Discovery Fund has benefitted immensely. The fund currently stands among the top quartile performers in the category across time frames. In the last 1-year, 2-year, and 3-year time period ICICI Prudential Value Discovery Fund has outpaced the benchmark by around 6-8 percentage points. Even over the longer time period of 5-year and 7-year, the fund has managed to generate a decent lead over the benchmark and category average.

ICICI Prudential Value Discovery Fund also stands out in terms of risk-adjusted returns. Its volatility, denoted by Standard Deviation, is lower than the benchmark and its peers. Moreover, its Sharpe ratio (0.26) is among the best in the category and much ahead of the benchmark.

ICICI Pru Value Discovery Fund: Exploring High Potential Undervalued Stocks
Image source: www.freepik.com - photo created by snowing
 

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

 

Investment strategy of ICICI Prudential Value Discovery Fund

Categorised as a Value Fund, ICICI Prudential Value Discovery Fund has the mandate to invest a minimum of 65% of its assets in equity and equity-related instruments following a value investment strategy. Accordingly, ICICI Prudential Value Discovery Fund endeavours to invest in high-potential stocks available at a significant discount to their fair valuation. The scheme, through its process of discovery, seeks to identify stocks whose prices are low relative to their historic performance, earnings, book value, cash flow potential, and dividend yield. The fund adopts the 'bottom-up' strategy to identify stocks that have strong fundamentals but are trading at prices lower than its intrinsic value.

The fund has the flexibility to invest across sectors and market capitalisation. However, the fund maintains a large-cap bias wherein it allocates around 65-75% of its assets. The balance is allocated in stocks in the mid-cap and small-cap segment. In the last few months, the fund has also added a few overseas equities to the portfolio to benefit from geographical diversification. The fund strictly sticks to its investment mandate and prefers to stay fully invested in equities.

Graph 2: Top portfolio holdings in ICICI Prudential Value Discovery Fund

Graph 2 Graph 2
Holding in (%) as of September 30, 2022
(Source: ACE MF)
 

The number of stocks in ICICI Prudential Value Discovery Fund's portfolio usually ranges between 60 and 70. As of September 30, 2022, the fund held 65 domestic equities along with a few overseas equities. The top 10 holdings accounted for around 52.3% of its total assets. ONGC is currently the fund's top equity holding, closely followed by Sun Pharma, NTPC, ICICI Bank, and Bharti Airtel. The fund's turnover rate has ranged between 65-100% in the last one year.

ICICI Prudential Value Discovery Fund currently holds an allocation of 5.9% in overseas equities (including ADRs/GDRs) such as Unilever PLC, Viatris Inc., Vodafone Group Plc, and Mitsubishi UFJ Financial Group.

In the last one year, the fund has benefited the most from its holdings in Mahindra & Mahindra, ITC, Sun Pharma, TVS Motor Company, and NTPC, among others. The fund has kept itself away from growth stocks that have been major index drivers in the last few years.

ICICI Prudential Value Discovery Fund has higher exposure to stocks in the Banking & Finance sector, wherein it has allocated 23.2% of its assets. It also holds significant exposure to Pharma, Infotech, Oil & Gas, Power, Telecom, Auto, Metal, and Consumption, among others.

 

Suitability

ICICI Prudential Value Discovery Fund's track record of identifying discounted sectors and picking quality undervalued stocks has proved to be rewarding in the long run. The fund follows a 'buy-and-hold' approach and remains unmoved by the market momentum. The cautious investment strategy and exposure to undervalued and defensive sectors help the fund to limit the downside well during extreme market corrections.

ICICI Prudential Value Discovery Fund has a veteran fund manager, Mr Sankaren Naren, at helm, who is known for his high-conviction value bets. As it takes time for undervalued stocks to be discovered by the market, certain bets of the fund may not pay off immediately. Hence, the scheme may witness bouts of short-term underperformance.

Value as an investment strategy deserves patience to discover the full potential of undervalued stocks. Hence, ICICI Prudential Value Discovery Fund is suitable only for investors with a high-risk profile and an investment horizon of at least 5-7 years.

 

Warm Regards,
Divya Grover
Research Analyst

 

PS:  If you are looking for quality mutual fund schemes (including Equity-linked Saving Schemes) to add to your investment portfolio, I suggest you subscribe to PersonalFN's premium research service, FundSelect. PersonalFN's FundSelect service provides insightful and practical guidance on which mutual fund schemes to Buy, Hold, and Sell.

Currently, with the subscription to FundSelect, you could also get Free Bonus access to PersonalFN's Debt Fund recommendation service  DebtSelect.

If you are serious about investing in a rewarding mutual fund scheme, subscribe now!

Note:  This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

 

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. HelpYourNGO.com India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

  12. Suresh Lulla;

  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
  1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

  2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

  3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

  4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

Disclosure with regard to receipt of Compensation
 
  1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

  2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

  3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

  4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

  5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

General disclosure
  1. The Research Analyst has not served as an officer, director or employee of the subject Company.

  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Subject Company means Mutual Fund Schemes

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

PersonalFN' requests your view! Post a comment on "ICICI Pru Value Discovery Fund: Exploring High Potential Undervalued Stocks". Click here!

Most Related Articles

Canara Robeco Bluechip Equity Fund: Showcasing Resilience in Bearish Phases Canara Robeco Bluechip Equity Fund is a prudently managed Large Cap Fund that has a past track record of performing consistently well across various market phases.

Feb 06, 2025

ICICI Pru Equity & Debt Fund: Exhibiting Strong Performance Across Market Conditions ICICI Pru Equity & Debt Fund is an Aggressive Hybrid Fund well-regarded for its strong performance across various market conditions. 

Jan 30, 2025

Kotak Emerging Equity Fund: Positioning Itself as a Consistent Long-term Performer Kotak Emerging Equity Fund is a high-conviction Mid Cap Fund that has consistently delivered strong performance across various market phases. 

Jan 23, 2025

SBI Bluechip Fund: Showcasing Satisfactory Long-term Growth SBI Bluechip Fund is a popular Large Cap Fund whose focus on quality stocks has resulted in satisfactory long-term gains for investors.

Jan 09, 2025

HDFC ELSS Tax Saver Fund: Adopting a Blend of Growth and Value Strategies HDFC ELSS Tax Saver Fund is a Tax Saving Mutual Fund that focuses on high-conviction investments, blending growth and value strategies to identify strong stocks at attractive valuations.

Jan 02, 2025

Most Popular

Manufacturing Mutual Funds Shine. Are they Worthy of Your Investment Portfolio?Currently contributing around 17% to the GDP, the manufacturing sector is expected to grow to 21% in the next 6-7 years.

May 06, 2024

6 Equity Mutual Funds to Benefit from India’s Defence SectorThe potential to benefit by sensibly taking exposure to defence sector stocks is huge!

Apr 17, 2024

Top 5 Mutual Funds with High Exposure to EV RevolutionThis article will evaluate the top mutual funds to invest in 2024 that have a high allocation to EV stocks.

Feb 06, 2024

Top Manufacturing Mutual Funds in India to Boost Your PortfolioThis article will evaluate the top mutual funds to invest in 2024 that have a high allocation to Manufacturing stocks.

Oct 28, 2024

HDFC Mutual Fund launches HDFC Manufacturing FundHDFC Mutual Fund launches HDFC Manufacturing Fund

May 08, 2024