ETMarkets Fund Manager Talk: Counter-cyclical style of investing helped this PMS give multibagger returns in 3 years

economictimes.indiatimes.com:

MUMBAI — Buying unpopular stocks and selling the popular ones is one of the key strategies adopted by Counter Cyclical PMS, which has helped its smallcap fund give multibagger returns over a 3-year period. “We try to stay ahead of the curve, by spotting promising companies early, before they come into the limelight,” says Keshav Garg, director, Counter Cyclical PMS.

“If we are able to buy a stock at trough multiples on trough earnings, then we have a potential multibagger,” he said. Edited excerpts from an interview with ETMarkets:Benchmark indices have rallied close to 16% in 5 months. How comfortable are you with the current valuations?Though valuations are nowhere as cheap as they were till a few months back, there are still pockets of undervaluation.

However, we are cautious on markets. Your smallcap fund has given multibagger returns in 3 years, according to PMS Bazaar data.

What’s driven this performance and what’s your stock-selection approach? We run a diversified portfolio of smallcap blue chip companies which are going through a downcycle in their business (QiD — quality in downturn) and are consequently available at a huge discount to their intrinsic value. Since we spread our net wide and track hundreds of companies, we were able to exit stocks that became expensive and replace them with cheaper stocks, on an ongoing basis.Which stocks/sectors within the midcap and smallcap are you extremely bullish on?Though we are bottom-up investors, we try to find value in any sector which is going through a downcycle like chemicals, API, pigments, petrochem, poultry, ceramics, textiles, tea, IT, cement, building materials, exporters, education, consumer goods, jute, metals, hospitals, conglomerates, tobacco, agro