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Most equity funds hold large-cap or mid-cap stocks in their portfolios. There are very few that invest out-and-out in small-cap stocks. If you are a high-risk investor wanting a piece of the action in the sizzling small-cap space, then you can buy units of DSPBR Micro Cap.
Super track recordThe fund invests at least 65 per cent into small-caps. Over the last three years, it has delivered an average annual return of 47.3 per cent as against its benchmark’s (S&P BSE Small Cap index) 28.2 per cent.
On a one-year rolling return basis, it has outdone its benchmark 98 per cent of the time in the last three years. It has also outperformed other small and mid-cap funds (by 14-24 percentage points) over three and five-year periods.
The fund manager follows a bottom-up approach to stock picking. In the last one year, stocks in the fund’s portfolio such as Navin Fluorine, APL Apollo Tubes and 8K Miles Software have doubled, spicing up returns.
Other stocks — Atul Ltd, KPR Mill and Aarti Industries — have delivered returns in excess of 60 per cent.
Over the past year, the fund bought into stocks such as Cera Sanitaryware, V-Guard Industries and Thyrocare Technologies, while exiting Bharat Financial Inclusion, Strides Shasun and City Union Bank.
The fund, though, has lost money in DCB Bank, Eveready Industries, Aarti Drugs and Ipca Laboratories over the past year.
The fund manager typically has an investment horizon in the 1-4 years range. In the last three years, APL Apollo Tubes, Somany Ceramics and Symphony have turned multi-baggers. As per the latest portfolio, its top three stock holdings are Sharda Cropchem, SRF and KPR Mills.
Mitigating riskThe fund has an asset size of ₹2,777 crore. As per the fund’s mandate, at least 65 per cent of fund portfolio should be invested into companies that are outside the Top 300 bracket (in terms of market capitalisation).
This pegs the risk higher, which the fund mitigates by holding a large number of stocks. It has increased the number of stocks in its portfolio over the last two years from 50 to 61 as of now.
The fund has also put restrictions on high-value new subscriptions — capping the daily investment at ₹2 lakh (per day per folio).
The fund also moves into cash to tide over volatile times. It recently increased its cash exposure levels to 5 per cent. But during the market fall of 2008 (November ’08), the fund had upped its cash holdings to as high as 31 per cent.
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