Saurabh Mukherjea picks Berger Paints, 2 other stocks for mid and smallcap portfolios

PMS fund manager Saurabh Mukherjea, who runs Marcellus Investment, has tweaked his portfolios to add Berger Paints, Eris Lifesciences and Home First Finance to his midcap and smallcap schemes.

After growing handsomely over FY24, the wheels of the broader corporate earnings seem to have come off in the last 2 quarters with BSE500 weighted average PAT growth moderating to single digit in Q2, Mukherjea said, adding that the earnings slowdown cycle is likely to last for some time now.

Berger Paints

Berger Paints, which has seen de-rating in the last 5 years, has been added to the midcap-heavy Rising Giants PMS portfolio as well as the smallcap-focused Little Champs PMS portfolio.

Whilst there is an acknowledgement regarding the current concerns in the industry and a lack of immediate positive catalysts, the current price provides a good return opportunity from a 2-year perspective given the historical track record of the franchise in dealing with the competition and expectation of healthy structural volume growth story for the paint industry, Marcellus told investors in a communique.

Berger Paints shares are up only about 3% in the last 5 years and have lost around 20% of its value in the last 3 months.

Also read | Neither GQG nor LIC, mutual funds played Adani bull in Q3

Eris Lifesciences

Eris has also been added to both the smallcap and midcap portfolios given the pharma company's focus on the chronic segment, which generally delivers superior gross and operating profit margins compared to acute therapies.

The stock is down about 5% in the last 3 months but has more than doubled in the last 2 years.

Home First Finance

Marcellus picked up the stock in December when the stock fell following a stake sale by the promoters.

"We took this as an opportunity to buy into a great franchise, which continues to do well on all parameters (leading within the affordable housing finance space) and consistently posting RoEs of ~16-17%," Team Mukherjea said.

In the current environment, the PMS firm said asset quality risks are not visible in housing finance across players. The stock has been added to financial-led Kings of Capital portfolio as well as the small and midcap schemes.

In the last 3 months, Home Finance First shares have lost about 13% of its value.