ValuePickr Forum

Expectations Value

I agree. Though I have responded to Nityanand, I will publish the Nifty 50 stock expectations on google spreadsheet and give the link here. If I get more requests thru DM or on this thread, I will respond by adding those stocks in the spreadsheet.

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Just a quick question, if the Yes bank comes up with more NPAs in next few quarters then the growth rate which you are mentioning will not be possible then how your model calculates the future growth in that case?

All I can say is that the provisions do impact the calculation of future expectations for banking and finance companies. Expectations are derived based on the price and performance.

I have published two new posts:

  1. Expected Earnings Growth for the NIFTY 50 stocks
  2. EVM Portfolio for 2019.

I have also updated the 03. Case Study - Nifty 50 - 2012 - 2018 post to include historical data from 2012. This will give a very clear picture of how the EVM works.

Do go thru the posts and let me know your feedback.

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Portfolio performance for the 4 months (June-Sept 2019) updated on the blog:

In a nut shell: Model portfolio of 2019 is down about 40 basis points. You can check the detailed performance here. This excludes the dividends we have earned and also misses out on Aarti Surfacants (de-merged from Aarti Industries), which is yet to be listed. Post these adjustments we will probably be just in the positive.


After 8 months, the EVM portfolio has delivered a 12% return. The large & mid cap fund has delivered >17% return while the small cap portfolio has delivered 4.5% returns. The returns include dividends and do not include taxes.

While not exactly per expectations, I hope that next 4 months will be better.

The entire portfolio will be churned after 1 year.

Detailed portfolio performance can be tracked here:


February was a good month until the last week when Corona virus hit the markets. Portfolio returns have beaten the comparable indexes by a pretty decent margins. Hopefully the next 3 months will bring in more cheer.

Detailed portfolio performance can be tracked here:

EVM PERFORMANCE AS ON MAR 31 2020 Returns Till-Date From 31st May 2019 Incl. Dividends CAGR Comparable Index Comparable Index Returns Portfolio Alpha
EVM Combined Portfolio -15.27% -20.36% NIFTY 500 -28.84% 13.57%
EVM Large & Mid Cap Portfolio -9.58% -12.77% NIFTY 200 -28.47% 18.89%
EVM Small Cap Portfolio -23.82% -31.76% NIFTY SMALLCAP100 -45.81% 21.99%

March 2020 is a month that will not be forgotten for a long time. EVM is being tested with the worst possible test cases, destructive testing if I may call it. The portfolio is down by 29% from the last month end and the small cap portfolio has seen big cuts (35% down month-on-month).

The portfolio also under performed the indexes. The situation is very very unnerving but I will stick to the model.

I changed the comparable index for small cal to Nifty Small Cap 100 since that seems to be the more widely accepted index. Not much impact on index returns.

Detailed portfolio here:


Reproducing my blog post on the portfolio performance:

The last 2 months have been quite a roller-coaster. What seemed to be a good quarter till mid-Feb changed course due to the Covid19 pandemic.

As on mid-February EVM recorded its highest returns this year (close to 18%). This though was short-lived. The world acknowledged the Corona pandemic and the markets took a tumble. Indian markets followed suit and are down close to 35% from the recent peak. The EVM portfolio could not avoid this fall and are down almost the same from their peak.

Here is the individual portfolio performance as on 31-Mar-2020:

A few questions pop-up,

  1. Why did I not sell out?

  2. What is the plan?

  3. Has EVM ever been tested for such scenarios?

  4. Are you buying anything?

  5. When do you book profit in this model? Should you not book the profit once desired benchmark is reached?

  6. There will be industries impacted (next 1yr or so) more than others due to covid… Will you be tweaking model to keep those out for 2021?

Let me try to answer them.

Ans 1:
EVM is a tested model. Its performance till mid-Feb was according to expectations. The stronger companies had delivered on their operating results and that reflected in their stock prices. What has happened due to Covid-19 was a shock to the system, not just the markets but to the entire social setup.

I cannot predict the market direction nor do I try to do that. I use the model to identify the stocks best suited to meet the expectations and then allow them the year to prove themselves. Even today, I do not know whether the market will go up or down though most pundits and experts are forecasting huge downside. Since I cannot make such a forecast, I will prefer going on with the way the model has been setup and tested.

This is probably the worst test of the model, but I am happy that it is happening so early in the life cycle. Lets hope for the best.

Ans 2:

EVM recommends selling out when we have better investment ideas, which will be available when we will have the year-end results. As we get the results and the model identifies companies for investing, we will sell our current position even if we have to take a loss.

Ans 3:

EVM has been tested for scenarios from 2000. So it has seen draw downs in 2001 and 2008. But in both these cases the market did not fall so rapidly. What we are experiencing today is quite unprecedented. The fall is fine, the speed of the fall unnerving.

Ans 4:

No, I am not buying anything. EVM was created to ensure that we follow a disciplined approach to investing. Every time the market corrects, investors are faced with questions like:

  1. Should I sell my portfolio now?

  2. What stocks should I buy?

  3. Is this the right price for the stocks?

  4. Should I wait on the sidelines? Is the market expected to correct further?

  5. What if the stocks I select do not perform? How long should I wait?

EVM based investing avoids getting in to such issues. We stick to the recommendations as and when the model identifies them.

Ans 5:
Any kind of investment style you adopt, your returns will never be linear or consistent. If you book profits too early in a good year, once you have a bad year, your average returns will fall big time. You need to let your profits run as high as they can to have a decent CAGR, because fore sure, there will be a bad year around the corner.

The other issue is, once you withdraw cash from the best investments (assuming you invested in them because they were the best possible options), you will invest in the second best, even though they are cheaper.

I am aware that you can wait till the market falls and you will invest at the rock bottom, but then, not everyone has that skill. I do not want to presume that I have that skill and take calls. I will rather stick to the disciplined way of investing as tested using the model.

Ans 6:
The model will take care of this situation. Price will drive the expectations and I select stocks with positive (growth) expectations only. Hence companies which are expected to perform bad operationally are filtered out.

Why am I so confident of EVM? That’s because I am confident of not having skills to identify the right stocks at the right price at the right time and more importantly knowing exactly when to sell. I can fool the world with thesis on stocks but I cannot fool myself!

Lastly, stay indoors, stay safe!!


Portfolio performance as on April 30 2020

EVM PERFORMANCE AS ON APR 30 2020 Returns Till-Date From 31st May 2019 Incl. Dividends Annualised Comparable Index Comparable Index Returns For The Same Period Portfolio Alpha
EVM Combined Portfolio -0.83% -0.91% NIFTY 500 -18.28% 17.45%
EVM Large & Mid Cap Portfolio 4.97% 5.42% NIFTY 200 -17.69% 22.66%
EVM Small Cap Portfolio -9.53% -10.40% NIFTY SMALLCAP250 -33.20% 23.67%

A decent recovery in the month of April, but not yet out of the woods. Small caps have not recovered as much as the large caps have.
Will sell the entire portfolio on May 31st and buy the new recommendations that the model delivers the same day.

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Wanted to know what your model projects next FY for the firm - Varun Beverages.

It’s the franchise bottler for Pepsi ( we know how that stock has been compounding in US market ) in many geographies including India. Pepsi does this to reduce Capex and become asset light

Around 10-15% of their sale does come from Hotels + Resteraunt + Malls and Q1 was also a lost summer season.

It’s currently at a PE of 40 and does have Debt on its books - Which are not too much of a concern unless 2 quarters are completely lost

Do let me know what price and valuation your model projects for this firm

Ashish, Good performance in a bad year. What an acid test you model has gone through. Would be keen to understand if buying/selling once a year only helps in these kind of markets. Or would you tweak the model for that extra alpha in these extreme gyrations.

Hi Mukund,

Once the results for Varun Beverages are out, I will be able to determine the expectations that the market has from the company. Will let you know then. If your analysis says that the operating performance has a good chance of meeting the expectations, it is a buy.

My model cannot project a price or valuation. What I have realized is that those do not matter as long as the company meets the expectations of operating performance. If you have not yet gone thru the blog, I will suggest you go thru it once, especially the posts that prove this theory.

Hi Aravind,
The test was more than I ever imagined and there is still one more month to go.

The One year hold is a part of the model. Every year during company appraisals, a different set (mostly) are rated in the highest band. Something similar happens in the market. Companies that were rewarded last year have their expectations sky rocket. Another set of companies are better placed to meet the expectations, the model identifies such companies. The have a better chance of performing well than the ones we held previous year.


Full Year Performance of EVM:

EVM PERFORMANCE AS ON MAY 29 2020 Returns Till-Date (From 31st May 2019 Incl. Dividends) Annualised Comparable Index Comparable Index Returns For The Same Period Portfolio Alpha
EVM Combined Portfolio 0.55% 0.55% NIFTY 500 -20.22% 20.77%
EVM Large & Mid Cap Portfolio -0.90% -0.90% NIFTY 200 -19.66% 18.76%
EVM Small Cap Portfolio 2.71% 2.71% NIFTY SMALLCAP250 -34.62% 37.33%

I will sell all these stocks on Monday (to ensure that I complete 1 year of holding period and get benefit of long term capital gains tax).

The model has started identifying new stocks (most results are delayed hence the process is a bit delayed). Will buy the new recommendations and hold for 1 year again. Hoping for a better 2020-21!!

This year was a tough one. Just before Covid the portfolio was up 17-18% only to fall to -17%. Since then to recover and close in green feels good. Lot of events transpired, the general slowdown in the economy, the frauds and the NPA, big financial institutions failing, trade wars, assassinations, oil collapse and so much more. If someone would have told me that all these will happen in 2019-20, I would have never invested in markets. But markets overall have proven to be much more resilient than me as an individual.

Greed and fear are mostly talked about emotions in the market. I believe HOPE trounces all other emotions, much more than greed and fear.

There are many ways to make money in the market. Some of my near and dear friends, make a lot of money thru short term trading (day trading to 2 month holding period). What helps them make money is their temperament and discipline.
I realized very early that I do not have those skills. I also understood that standard valuation methods work only as exceptions. Forecasting is a futile activity and any calculations based on a forecast are inherently wrong.

What then could I do to still work it out in the stock markets? My data analysis background helped to create the Expectations Value Model. It has survived a brutal test but can certainly be improved.

My 2020 portfolio will be based on EVM 2.0. I will also publish the 2020 portfolio later.

This has helped to add a couple of percentage points to the returns. So overall returns are now in the range of 3%.

After surviving Corona, Lowest GDP growth in India for over 10 year, Trump, China-US Trade war, Brexit, Oil collapse, real estate collapse, large companies being closed/bankrupt (Yes Bank, DHFL), Mutual Funds closure, Floods & Riots, Kashmir & CAA, and many more issues, the EVM portfolio still managed to close in Green for 2019-20. 3% returns for such an year is a confidence booster.


With the delay in the results this year, the EVM portfolio took longer than usual to be constructed. Most of the stocks were bought end of June, instead of end of May. So, as on today, it has completed 1 month (though a few stocks were bought earlier). Here is the link to the detailed portfolio:

Current returns = 11.3%


Hi Ashish,

Would it also be possible to add any 1-2 line remarks on why you think these companies will deliver better results than market expectations for this FY. Keen to know your thought process on the same as I hold few of these stocks myself

All I can say is the model determines whether the expectations fall in the realistic range of what the company can achieve. Anything beyond the range is rejected.

This year, the number of companies filtered is pretty low. That is not a good indication on the overall health of the market.