In the absence of strong value opportunities, the default strategy is momentum – which is riding of 'long term' trends in stock prices till they run out of steam. While short term momentum has and will be arbitraged away by algorithmic trading, we believe long term momentum investing will still offer opportunities for out-sized gains in future.
My Investment Philosophy
Markets are usually efficient, but sometimes it reacts in extremes thereby making stocks under-priced vs conservative value estimates based on fundamentals. This approach was pioneered by Ben Graham in 1920s. This approach is out of favor today, we think it still has 'value'. Through fundamental research expertise, we recommend some value driven investments in sectors we understand well.
Through my smallcase, I offer a single investment strategy that combines some stocks that are undervalued and others that have a strong price momentum. Combining the two approaches adds balance to the portfolio while aiming to generate excess returns over market cycles
The portfolio focuses on companies with -
1,000+ crore market cap
High trading liquidity
Good corporate governance practices
The portfolio has not more than 15 constituents with weights based on the following factors -
Confidence levels in the investment idea
Market Cap, Trading Liquidity and Beta
Diversification across themes and sectors
Backtesting is based on the strategy's actual performance since Jan 2017. I am happy to share proof of the backtesting performance on request.
Over the last three years, the strategy generated a return of CAGR of 25% (as of launch in Jun 2021) v/s 13% return for the Nifty 50 index.
The typical holding period of a stock ranges from weeks to even a couple of years. The strategy aims to outperform Nifty 50 Index and has no guarantee of generating a specific % return.
This smallcase has a weekly rebalance schedule. Once every week, the research team reviews this smallcase and realign the weights with the selected asset allocation strategy for the next week.