LIC MF Long Term Value Fund: Good investment option in current market conditions

What is Value Investing?

Fund managers who follow the value investing style try to identify stocks which are trading at significant discounts to their intrinsic value. The intrinsic value of a stock is based on fundamental analysis based on various factors like the company’s competitive strengths, market share, industry growth potential, company’s revenue growth prospects, margins, leverage (debt to equity ratio) etc. The stock may trade at a price higher or lower than the fair valuation; if the market price of the stock is lower than the fair price then the stock is under-valued and vice versa. In value investing, fund managers try to pick under-valued stocks. Investments in stocks which are trading at significant discounts to fair price provide margin of safety because the downside risk is somewhat limited.

Value funds can add diversification to your portfolio

Growth and value funds outperform each other in different market conditions and valuation scenarios. Adding value funds to your portfolio can provide richer diversification to your equity portfolio.

Source: MSCI, as on 31^st December 2023

Current market valuations

The strong market rally in 2023 has pulled up valuations and the broad market index, Nifty 500 is currently trading close to its historical average valuations. In current market conditions, value funds may be suitable investment options for long term investors.

Source: MSCI, as on 31^st December 2023

About LIC MF Long Term Value Fund

LIC MF Long Term Value Fund, erstwhile IDBI Long Term Value Fund, was launched in August 2018. The name of the scheme was changed after IDBI Mutual Fund schemes got merged with LIC Mutual Fund last year. Karan Doshi and Jaiprakash Toshniwal have been managing this scheme since 31^st July 2023. The fund managers follow the value investing style for this scheme. The LIC MF Long Term Value Fund has given 14.57% CAGR returns since inception (see the chart below).

Source: Advisorkhoj Research, as on 31^st January 2024

Performance

The table below shows the returns of the LIC MF Long Term Value Fund over different tenures:-

Source: Advisorkhoj Research, LIC MF Factsheet, as on 31^st January 2024

SIP Returns

The chart below shows the growth of Rs 10,000 monthly SIP in LIC MF Long Term Value Fund since the inception of the scheme. With a cumulative investment of Rs 6.5 lakhs, you could have accumulated a corpus of Rs 10.94 lakhs (as on 31^st January 2023). The SIP XIRR was 19.23%.

Source: Advisorkhoj Research, LIC MF Factsheet, as on 31^st January 2024

SIP Returns over different investment tenures

Source: Advisorkhoj Research, LIC MF Factsheet, as on 31^st January 2024

Investment Strategy

• LIC MF Long Term Value Fund predominantly invests in well-diversified portfolio of companies after taking into consideration various factors such as Earning Potential, Asset Value, Cash Flow, Dividend Yield, Company’s competitive advantage etc.


• The scheme studies various parameters like price-to-book (P/B) ratio, price-to-earning (P/E) ratio, dividend yields (D/Y) of companies within its researched fund house universe in order to arrive at potential investment strategies


• The scheme will also look into other quantitative parameters like Return on Equity (ROE) and Return on Capital Employed (ROCE) to identify stocks which may be available at more favourable valuations when compared with peer group and stocks in applicable benchmark.

Current Portfolio Positioning

Source: LIC MF Factsheet, 31^st January 2024

Why invest in LIC MF Long Term Value Fund?

• Focus on Fundamentals - Focuses on fundamentally strong companies whose shares appear under-valued by fundamental analysis.


• Long Term wealth creation - Scheme helps investors to benefit from the long term growth potential of undervalued companies.


• Ideal for Value Conscious Long Term Investors - as the Portfolio will comprise of well researched value stocks.


• Allows style diversification -Scheme invests across sectors and market capitalisation with a strong value bias.

Who should invest in LIC MF Long Term Value Fund?

• Investors looking for capital appreciation over long investment horizons


• Investors looking for value-based investing approach


• Investors willing to invest in undervalued business


• Investor looking for diversified investment in fundamentally strong companies across market cap and sectors


• Investors with very high risk appetites


• Investors with minimum 5 year investment tenures


• You can invest either in lump sum or SIP depending on your financial requirements

Investors should consult their financial advisors or mutual fund distributors if LIC MF Long Term Value Fund is suitable for their investment needs.