Industry Updates

How does Bajaj Finserv Large and Mid Cap Fund make Strategic Use of Economic Moats

Published: February 8, 2024

Investors are often in search of investment options that not only offer growth potential but also mitigate the impact of market volatility. The Bajaj Finserv Large and Mid Cap Fund can be a suitable option for such investors, as it strategically leverages economic moats – a term popularized by legendary investor Warren Buffett. In this article, we will understand how the fund utilizes economic moats, the intricate stock selection process, and the benefits of this strategic approach.

Bajaj Finserv Large and Mid Cap Fund and moat investing

Stock selection process
At the heart of the Bajaj Finserv Large and Mid Cap Funds strategy is a meticulous stock selection process that aligns with the principles of moat investing. This involves identifying companies with economic moats. These companies have unique qualities that can shield them from competition and enable them to generate robust profits. The entire process of stock selection in Bajaj Finserv Large and Mid Cap Fund is broken down into several key steps:

1. Investment universe

The fund operates within a vast investment universe. This broad scope allows for thorough analysis and selection of companies with the potential to exhibit enduring competitive strengths.

2. Economic moat filters
High pricing power: This quality indicates a strong competitive position and is a key filter in the stock selection process. It is about identifying companies capable of setting and maintaining higher prices for their products or services.

Segment leader: Identifying businesses as leaders in their industry segments is crucial. A segment leader often enjoys a dominant market share, providing relative stability and growth potential.

Management quality and innovation: Effective leadership and a commitment to innovation contribute to a companys sustainable competitive advantage. Businesses that prioritize management quality and innovative offerings are considered valuable additions to the funds portfolio.

3. INQUBE philosophy
Bajaj Finserv Large and Mid Cap Fund follows the inhouse INQUBE philosophy. This strategic approach brings informational, quantitative & behavioural edge to the portfolio.

4. Final portfolio (40-60 Stocks)
The culmination of the stock selection process results in a final portfolio comprising 40-60 stocks. This carefully curated portfolio is designed to offer investors exposure to a diverse range of companies, striking a balance between relative stability and growth opportunities. The concentration on a limited number of stocks ensures a focused and well-managed portfolio, reflecting the funds commitment to delivering sustained value for investors.

Benefits of moat Investing
Moat investing offers several advantages to investors, making it a sought-after strategy in the world of equities:

Sustainable growth: Companies with economic moats are often resilient to market fluctuations and exhibit sustained growth over the long term. This aligns with investors goals for wealth accumulation and capital appreciation.

Risk mitigation: Economic moats act as protective barriers, shielding companies from intense competition. This, in turn, reduces the risk for investors, offering a level of stability amidst market uncertainties.

Potential for long-term value creation: By focusing on companies with enduring competitive advantages, moat investing aims to capture the long-term value creation potential of these businesses. This aligns with the funds commitment to a low turnover portfolio and a measured approach to stock selection.

In conclusion, the Bajaj Finserv Large and Mid Cap Fund stands out as a strategic investment option that leverages economic moats for sustained growth. The funds meticulous stock selection process, adherence to the INQUBE philosophy, and the final portfolio composition reflect a thoughtful approach to creating enduring value for investors. Moat investing, with its emphasis on resilience, innovation, and relative stability, continues to be a suitable approach for those seeking a strategic path to wealth creation in long term in the dynamic world of equities. You can consider starting an SIP investment in this scheme by visiting the official website of Bajaj Finserv AMC.

About Bajaj Finserv Asset Management Ltd.
Bajaj Finserv Asset Management Limited, a wholly-owned subsidiary of Bajaj Finserv Limited, has announced its presence in the investment solutions industry. Backed by one of India’s most respected and oldest brands, it offers a host of innovative products and solutions to every Indian. With a future-focused and differentiated investment strategy, its ambition is to help every Indian achieve his/her financial goals.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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