What is Business Cycle?
Business cycle is the journey across four phases of growth in business activity, observed in acceleration / deceleration across factors such as volume growth, pricing power, competitive intensity, cost consciousness, capex intensity, ROCE and business sentiment.
This product is suitable for investors who are seeking
- To generate long-term capital appreciation/ income via investment predominantly in equity & equity related instruments related to the business cycle theme.
- To take advantage of having higher exposure to businesses and companies at the “cusp of acceleration / midst” of high earnings growth as they are about to enter/ are in a high growth phase.
- Investment horizon 3 or more years
Why Does Business Cycle Investing Make Sense?
Higher confidence on forecasts
Estimating positioning of various business cycles and their trajectory can be done with higher confidence vs the general economic cycle
Correlation with valuations
When businesses are in upcycle, investors get dual benefit of earnings growth and improvement in valuation multiples
Invest in businesses likely on the cusp/midst of favorable business upcycle, avoid businesses about to enter/in a downcycle
Ahead of the curve
Based on lead indicators, domain expertise and recurring patterns in business history - Investing opportunities can be identified ahead of time
Investments across companies and themes are not static in nature and can be rotated based on stages of business cycles.
Portfolio Strategy - HDFC Business Cycle Fund
Blend of top down and bottom up approach
Core of portfolio (>80%) would be companies likely on the cusp / midst of favorable business cycle, while avoiding companies about to enter/in a business downcycle
Investment across large, mid and small caps
Benchmark: Nifty 500 TRI
Optimally diversified across number of stocks
Non-core (<20%) portfolio would consist of
1) growth stories relatively agnostic to the business cycle 2) stocks relatively better positioned within their sector 3) tactical opportunities with favorable risk-reward
Past performance of old-running NFO Schemes
Look at the Immense Growth in HDFC NFO
The value of 1 lakh Invested during HDFC NFO and the Present Valuation
On Going Business Cycle Funds
|Launch Date||Launch NAV||Current NAV||CAGR Return||Action|
|L&T Business Cycle Fund Reg Gr||20-08-2014||10||24.72||11.33%||Invest Now|
|ICICI Prudential Business Cycle Fund Reg Fr||05-01-2021||10||13.89||19.51%||Invest Now|
|HDFC Business Cycle Fund Reg Gr||25-01-2022*||10*||10*||Starting at Rs 10*||Invest Now|
|* NFO Period Last Date NAV|
|All data as on 22-11-2022|
|All data is given for illustrative purposes only.|
Who should consider investing?
- Exposure to businesses likely on the cusp / midst of a favourable business cycle
- A fund that is agile in rotation of investments based on assessment of stages of business cycles
- A product suitable for buy and hold / SIP for long periods of time.
- Investment horizon of 3 or more years