Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
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Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 10.6741Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 10.6893Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 10.5364Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 10.5532Motilal Oswal Dynamic Fund (Div-A) - 13.5064Motilal Oswal Dynamic Fund (Div-Q) - 12.0966Motilal Oswal Dynamic Fund (G) - 14.9036Motilal Oswal Dynamic Fund-Dir (Div-A) - 13.6715Motilal Oswal Dynamic Fund-Dir (Div-Q) - 12.2594Motilal Oswal Dynamic Fund-Dir (G) - 15.7315Motilal Oswal Equity Hybrid Fund - Direct (G) - 14.9593Motilal Oswal Equity Hybrid Fund - Regular (G) - 14.3119Motilal Oswal Flexi Cap Fund(D) - 24.9521Motilal Oswal Flexi Cap Fund(G) - 33.1944Motilal Oswal Flexi Cap Fund-Dir(D) - 24.9694Motilal Oswal Flexi Cap Fund-Dir(G) - 35.5144Motilal Oswal Focused 25 Fund - Direct (D) - 20.4246Motilal Oswal Focused 25 Fund - Direct (G) - 34.8895Motilal Oswal Focused 25 Fund (D) - 18.3723Motilal Oswal Focused 25 Fund (G) - 31.3034Motilal Oswal Large and Midcap Fund - Dir (D) - 15.0008Motilal Oswal Large and Midcap Fund - Dir (G) - 15.0008Motilal Oswal Large and Midcap Fund (D) - 14.57Motilal Oswal Large and Midcap Fund (G) - 14.57Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0068Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0442Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0694Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0083Motilal Oswal Liquid Fund - Direct (G) - 11.1042Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0066Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0434Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0663Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.0154Motilal Oswal Liquid Fund - Regular (G) - 11.0628Motilal Oswal Long Term Equity Fund (D) - 18.9673Motilal Oswal Long Term Equity Fund (G) - 24.1448Motilal Oswal Long Term Equity Fund -Dir (D) - 22.5586Motilal Oswal Long Term Equity Fund -Dir (G) - 26.3202Motilal Oswal Midcap 30 Fund (D) - 21.9396Motilal Oswal Midcap 30 Fund (G) - 35.9137Motilal Oswal Midcap 30 Fund-Dir (D) - 22.6487Motilal Oswal Midcap 30 Fund-Dir (G) - 39.3237Motilal Oswal Multi Asset Fund - Direct (G) - 10.7049Motilal Oswal Multi Asset Fund (G) - 10.5652Motilal Oswal Nasdaq 100 FOF - Direct (G) - 21.7182Motilal Oswal Nasdaq 100 FOF - Regular (G) - 21.4982Motilal Oswal Nifty 50 Index Fund - Direct (G) - 13.1123Motilal Oswal Nifty 50 Index Fund (G) - 13.0304Motilal Oswal Nifty 500 Fund - Direct (G) - 15.2785Motilal Oswal Nifty 500 Fund (G) - 15.1033Motilal Oswal Nifty Bank Index Fund - Direct (G) - 12.6493Motilal Oswal Nifty Bank Index Fund (G) - 12.505Motilal Oswal Nifty Midcap 150 Index Fund (G) - 17.9037Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 18.1149Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 13.6955Motilal Oswal Nifty Next 50 Index Fund (G) - 13.5607Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 18.3538Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 18.5688Motilal Oswal S&P 500 Index Fund - Direct (G) - 14.0875Motilal Oswal S&P 500 Index Fund (G) - 13.9767Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 9.91Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 9.9314Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 9.9171Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.0598Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 9.921Motilal Oswal Ultra Short Term Fund - Dir (G) - 14.0415Motilal Oswal Ultra Short Term Fund (Div-D) - 9.8772Motilal Oswal Ultra Short Term Fund (Div-F) - 9.8877Motilal Oswal Ultra Short Term Fund (Div-M) - 9.8777Motilal Oswal Ultra Short Term Fund (Div-Q) - 10.0212Motilal Oswal Ultra Short Term Fund (Div-W) - 9.8807Motilal Oswal Ultra Short Term Fund (G) - 13.6038

Quality - A Reality Check

Blog Blog Details
  • January 17, 2020
  • Akash Singhania|
  • Executive Group Vice President - Fund Manager
There is an ongoing debate on whether Quality has become very expensive and led to polarization in performance. Though this polarization is the result we have seen in the last two years, here we take a deep dive to understand the basis behind it and ask whether it is a bubble.

Is quality defined - What is quality is not defined by anybody. If on one end there is quality, then on the opposite end there has to be non-quality or junk. There is a lot of discussion on what happens when we buy quality but much lesser on what happens when we buy junk. Is investing in junk really an option for the long term?  Again, there is a lot of discussion on buying quality but much lesser on buying false starts.

Is quality quantitative or qualitative - The market participants will agree that high return ratios, positive free and operating cash flows, no leverage, no pledge – these are the things that make quality, parameters one can easily check, but it is only partly true. We think it is not only about these financial metrics; quality encompasses a much larger embodiment that includes various other parameters. While corporate governance has been a trending topic in the past, other factors that merit attention include culture of the company; alignment of culture with strategy; management integrity, thought leadership and track record of execution; discipline, fairness, transparency and disclosures by the management; reliability of guidance and the conduct they have in their businesses. These are softer qualitative aspects which also go into defining quality. 

Is quality of growth and earnings relevant – Quality is normally assumed to be of either business or management.  In addition, the quality of growth itself is important. One should assess whether companies have cyclical businesses or structural and secular growth businesses and whether they have volatile earnings or consistent and stable earnings. A long runway where competitive moats have increasing trajectory offers longevity of growth. Capital efficiency in business and prudent capital allocation will ensure sustainable growth.  Earnings beat and surprises compared to consensus estimates will lead to valuations automatically coming down. 

Is quality external or internal - A lot of analysis takes place on macros and betting on things which are not in our control. Whereas, a good part of quality incidentally happens to be internal, inward-looking and company specific. When we invest in companies with growth and quality together, there could be points of time when growth could be low due to tighter external environment. But once the external environment eases, or these companies take their own internal steps to counter it, the returns usually compensate for the lost period.
 
Is margin of safety present in quality - It has always been perceived that price is a measure of valuation and margin of safety is measured by price we pay and value we get. If one pays a low price, it means you get value and there is margin of safety. We believe that investing in quality itself is a big margin of safety. If one invests in quality stocks, the risk of permanent loss of capital reduces significantly which offers margin of safety.

Is high PE (price/earnings) symbol of quality - Whenever there is a discussion about high PE and quality, it gets co-mingled. It is not necessary that quality has to be high PE or that high PE has to be quality. That correlation should not be made causation.
 
Is positive returns indicator of quality - It is convenient to presume that companies whose stock prices went up in the last one year are quality companies. This is not the case. Quality is measured by the strength in fundamentals of a company and not by the recent price rise. 

Is growth vs value replaced by quality vs value – Amongst the various styles of investing, growth vs value has been among the most discussed one.  The narrative has recently shifted to quality vs value. Historically, its either growth or value, one of the two styles perform. Quality, in our view, should be taken as non-negotiable in either style.

Is risk in growth correction or quality consolidation - Value is dependent on earnings growth we get in the future, over the next few years. A company estimated to grow profits at 20%, if delivers flat or negative growth, then it’s a risk because along with earnings, valuation multiples will also go down. On the other hand, quality stocks normally face time consolidation which is not as concerning as growth correction in most of the cases. 

Is growth expensive or is quality expensive – In a growth starved environment, growth stocks will obviously get a premium. It’s important to dissect whether its growth stocks or is it quality stocks which are trading at premium valuations. In most of the cases it is those companies which have a steady combination of both, and attributing it to only one of the two is erroneous.

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