Kalpen Parekh on Valuation
Well, I have been trying to write less – there is really not much to be written. However, Shubham Raj of ET Markets has pulled me from “Lockdown” to wrtie this post. Thanks Shubham.
SR starts by saying Kalpen Parekh says “mf have no respect for valuation”. Immaterial of what KP thinks, he is not stupid enough to make such a statement. He is one of the senior members of the Naren Fan club. The qualification in the NFC is to have some respect for valuation!
Kalpen Parekh, President of DSP Mutual Fund, said fund managers are never questioned for their choices, which is what allows them to do what they wish.
This sounds funny – coming from a fund house which has investment philosophy statement for each fund manager – rather for each scheme.
In which company to invest at what PE is the fund manager’s call. As an owner (investor) has to decide whether to stay invested or no. Also in India when one set of companies quote at a PE of 29, there is another set quoting at 2.9.
DSP itself has funds with PE of 29 and a fund with 2.9 (ok exaggeration) and I am willing to believe that KP could be invested in both (I didn’t ask him about this interview, so this is just an intelligent guess).
Knowing KP – he is a Marketing guy (not so much a Sales Guy) – will not make such a statment to hurt the industry – and he is too young to retire! Of course I keep saying that Retirement is a sum of money, not an age. He surely has enough money, but he is too young.
I have a problem with Journos – and I have done 5 training sessions for Journos. Most of them are in a hurry to do a story. I found the story funny – and I am convinced that this is Journalistic freedom that is being used.
Even in my class I make comments like “this was PJ’s wrong call” or “Naren’s optimistic call” – it does not mean I do not have respect for them. I have lot of respect for Santosh Kamath, Nilesh Shah, Srinivas Rao (ex Hdfc, now PGIM), …but i can also find flaws in their portfolio. My respect for them does not go down. So if a Journo writes a story, I would honestly want to know from where he got the story. 3 options –
a) interview with KP
b) training material of DSP
c) written replies by KP
a and c seems to be far fetched…..so b is the only source. Of course I am guessing. I guess so was the journalist. The headline of course was a SEO initiative.
God bless. Btw I have no clue who wrote this article. Lol.
https://economictimes.indiatimes.com/markets/stocks/news/indian-mfs-play-on-stories-have-zero-respect-for-valuations-says-industry-leader/articleshow/75594485.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
SS
How right and frank Kalpen Parekh is! If in a Mutual Fund industry money keeps flowing in at a time of dizzying high PE=29 levels, will the fund managers invest in value “experiments” which they think are (and actually could be) a hidden gems waiting for the value to unlock even in a bull market ? OR they will match to the index as closely as possible, so that their performance “closely matches” the index and their peer performances.
It is like zebra in lion country: If a fund manager grazes away from the herd in an already inflated bull market, but value which he seeks does not click, and market goes down under eventually, he will be dead meat. It is like pulling gun trigger on a lion in front of you, for a potential reward behind the lion, and trigger just sounds ‘click’, the bullet does not fire. (eg. Porinju can invest in Leel electricals and say it was a mistake, can a fund manager afford to do that?)
SS
Here is hunting hidden gems in a super bull market.. (When almost all gems were already discovered 2010-2020).. I would say, in this case investor is saved by dumb luck because markets rallied back in April and May. Here is a clip ..
https://www.youtube.com/watch?v=LJJpPGHTg94