Nothing much to report since nothing untoward happened in the last 2 weeks. Thus the portfolio remains unchanged. Am putting up my portfolio here again since its been a while. As you can see if you go back to the first post, just the 1 change ( RHIM swapped with MRPL ). Also I updated the prices for Motilal Oswal since they had a bonus issue.
Portfolio start date → Jan 23, 2024
Total returns → 37.5%
No action taken on the portfolio so again nothing much to report except that I just saw today that returns breached 50% for the portfolio. And I had started this portfolio in Jan this year thinking I am getting into Momentum at a wrong time. Markets continue to surprise.
Portfolio start date → Jan 23, 2024
Total returns → 50.5%
Ok so my portfolio ran into some pre-budget turbulence but such has been the bull run that by the time its time to take any action ( its Friday for me ), the recovery is already set in place. So no surprise that the portfolio stays as it is.
One lesson that I learnt though - Raymond ( part of my portfolio ) had a de-merger that meant that Raymond started trading ex-Lifestyle. Now have no clue when the Lifestyle business will get listed so till that time, I will need to stay put with Raymond not quite knowing if the momentum has reversed or not. Lesson learnt is to exit a stock that has been set for a demerger.
Portfolio start date → Jan 23, 2024
Total returns → 49.6%
No changes to the portfolio so not much to update. Went through some turbulence triggered by Japan and of late, some of the PSUs have given up gains from its highs. No exit signals though and hence portfolio stays as it is.
Portfolio start date → Jan 23, 2024
Total returns → 41.97%
P.S. → Actual returns would be a little more than 41.97% since the portfolio does not yet include Raymond Lifestyle that is yet to be listed.
Well, the Raymond demerger came as a welcome cherry on top to my portfolio. Raymond Lifestyle had a blockbuster listing and despite the dip post the listing, am sitting on decent gains. This has meant that the overall portfolio returns again had a spike although the broader portfolio has gone into a consolidation mode. No exits though so the portfolio remains unchanged.
Portfolio start date → Jan 23, 2024
Total returns → 49.8%
So once again a mini turbulence on 7th Oct resulting in a 3.5% cut in the portfolio on that day. But then the bull run that we are in for most part of this year, the market and the portfolio recovered in super quick time. Portfolio stays as it is - although I started this portfolio only this year, this portfolio is an extension of a manual backtesting exercise I did on paper from 2019. With just 1 stock swap this year, its been the lowest ( unless something major happens in the next 2 months ). The previous lowest was 2021 when there were 6 stocks that got swapped.
Portfolio start date → Jan 23, 2024
Total returns → 50.49%
While portfolio returns look good, I continue to ponder if just sticking to a basket of momentum index funds makes better sense? Will continue to evaluate.
So finally got to experience a bigger shakeout in the portfolio. While indexes still seem a little ok, I think the pain got a little bigger in certain pockets of the market. Some of the stocks in my portfolio were a part of it and thus I finally needed to do some swaps.
Exits →
MRPL
UCO Bank
SWAN ENERGY
Entries →
ANANT RAJ
DIXON TECH
GLENMARK PHARMA
Given the not so encouraging quarterly results ( even last quarter was just about average ), we may see a broader correction in the days to come.
Portfolio start date → Jan 23, 2024
Total returns → 39.75%
Well, the turbulence continues in the market resulting in a rebalance yet again end of last week.
Exits →
JBM AUTO
BRITANNIA
Entries →
SUVEN PHARMA
PIRAMAL PHARMA
I dont see we entering a phase of stability as yet so in a way its good that I can test the resilience of my strategy while having made some gains this year. I can afford a dent now.
Portfolio start date → Jan 23, 2024
Total returns → 38.7%
Well this complete thread does give a motivation to start.
But would be helpful if you had given exit criteria as well to get such low turnover.
Also, have you thought over “being on cash” part you mentioned as advantage over mutual fund?
Well, one of multiple criteria is the breach of 100 weekly EMA. So you can see if stocks have run up a lot, its gonna take a lot to get below this level and I would think thats one of the reasons why I dont get exits too often. This comes at a cost as well where at times, one needs to let go of a lot of gains on the stock. A recent example of this in my portfolio has been Cochin Shipyard where the stock was cut in half but the stock still stayed in the portfolio. But then there’s a tradeoff in whatever you do in factor-based investing. I just happened to make peace with this - low churn ( at the cost of giving up some gains ) works for me.
hi Sandeep…
As you are aware, I have similar strategy as you are following.
just your thoughts on my recent fine tuning.
I have taken subscription of MarketsmithIndia and also before buying from the list of momentum ranks of stocks that I get from Momoindiascreener, I also check its masterscore on marketsmith, its group rank, Relative strength number , EPS, sales, and other factors and also on chart if its in stage 2 and its extended or nearby 50 day EMA and breaking out etc.
Also I also want to avoid selling every week and every month, just because its rank has dropped, so I have decided, unless the stock doesnt go into stage 3 decisively and drops below 50 day EMA as well as May be 100 day EMA ( if its not very faar) and also not below 20-25% current ATH/52 week high, so I dont give up all the gains that I would have got , going up…
Also, correct me if I am wrong, You being a trader, after reading both the books of Minervini, I feel , his stop-loss and cutting losses at 3-5% etc is more suitable to short term trader but may not be good for a positional rader or investor with time horizon of 1-2 years…What is your view?
My 2 cents on this would be - no matter how much we try to tweak our rules, I think at the core of it, we need to remember that there’s no real magic formula ( beyond a point ) to extract the maximum returns from a stock. I have tested multiple strategies on 6-7 year timeframes and most strategies had their own ups and downs. A low-churn strategy has worked well for 2024 but would have caused a lot of pain in 2018.
To that extent, anyone who has a set of rules for factor investing, my first counter question would be if these rules have been tested for 2018-2020(Mar) timeframe…by far the most challenging and would have tested the thickest skin investors as well.
So to sum up, I would say its paramount that you close on a set of rules that you think you can stick to even during challenging times. I dont think we should keep comparing rules based on the return potential after a certain point.
This clarity of thought, that returns cannot always be maximized infinitely, but balanced with what risk we are comfortable with, is the measure that you have arrived at a stage to consistently manage money in a profitable satisfying manner. That way, you have got your priorities sorted out.
The 3-5-7% stop loss kind of strategies are for agile daily traders. Its for those who seek active income from Trading or if automated can be done in a passive way as well ( if completely rule based ).
Actually the more I think of it, this may not be a bad idea because this is something that the indexes and the funds cant compete with. The kind of Momentum investing that I have outlined in this thread has kind of lost its edge since we now have Momentum indexes as well on which index funds are available. Given the tax advantage the funds give, I am honestly contemplating on continuing with this.
There are certain things you need to consider, before discarding your strategy of momentum.
Even if momentum index funds and even active momentum funds have the advantage of capital gains taxation, their rebalancing is what makes them weak compared to your strategy. These funds have 6 monthly rebalancing period , which is in line with indexes from which they are derived. Hence if you check their portfolio, most of their stocks are already lost the momemtum and in a declining stage, but since their period of re-balancing is far away, they have to carry such stocks whose momentum is stale. But you can always have shorter rebalancing period like monthly or bi-monthly or weekly, so you can come out faster. Also even while entering, you can always avoid those stocks which are not fundamentally strong, but these funds have no such algorithm to protect them from bad stocks.
Also even while rebalancing, you can have discretion. If you have some study of the stock and know that its down temporary, you can always hold it. These funds will sell such stocks, if their algorithm says so.
Personal discretion at individual level will always triumph over rule based-, blindly following algorithm.
Shorter rebalance periods do have an advantage ( and that is where I think the edge really lies ) but not necessarily all the time. This can possibly result in a higher drawdown as well in a long drawn consolidation period. Not easy to sit through a losing streak where one has to take a loss every other week. Would have happened to most strategies in 2018. This can also result in a 2-3 year underperformance to the momentum indexes and this will bring in doubts.
Discretion is time and effort. You need to then allocate a cost to it. So this then becomes an additional cost to Taxation overheads.
If one is good at Personal discretion and analysing stocks, the way to go should be a concentrated portfolio with as minimal transactions as possible.
Again to sum up - one can potentially outperform the Nifty momentum indexes but comes at a cost. So one needs to evaluate if the cost is worth is. Most momentum indexes have annualised returns of 18-20% over a 20 year period. This is already excellent. Anything below 25% CAGR in Active Momentum investing is not worth it in my books.
