Smallcap momentum portfolio

Q&A: Questions & Answers Portfolio Q&A
528

Hi @visuarchie

I am sure you would have answered these questions in the past but if you can answer these silly questions again it would really help me if I want to start it.

  1. Do you buy these 20 stocks(at least 1 quantity) on a weekly basis?
  2. How much % of allocation is given to each of these 20 stocks and on what basis? Will it change as the time progresses?

Thanks in advance for your response

529

@duvvurib Responses to your queries.

  1. When the portfolio is created, all 20 stocks are bought. Thereafter, every week we do what is known as rebalancing where the weaker stocks are replaced by stronger ones from the same universe. Typically, about 2 stocks get replaced very week.

  2. I do an equal weightage pf to start, ie 5% allocation to every stock. Thereafter, I allow the winners to run and do not disturb them. During rebalance, the stocks coming in will have the same allocation as the ones going out. For example, if the stock going out had an allocation of 4% during exit, the incoming stock will enter at 4% allocation. When I am investing lump sum, I try and bring back all stocks to the same allocation (not by selling winners).

This is my way of managing this pf. There is nothing sacrosanct about it. It can modified as deemed fit.

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530

Thanks for the responses @visuarchie . Based on your responses I have some more queries and request you to respond.
Assume that we start with Rs.5 allocation in the first week(total Rs.100). Beginning of second week , 2 stocks are getting replaced with 2 new stocks and they will get an allocation of Rs. 5 each from the outgoing stocks. For the remaining 18 stocks which are continuing to remain in the pf how much do you allocate assuming we have the same Rs.100 in the kitty? Do you assign equal weightage(100/18) to those 18 stocks?

Thanks in advance

531

@duvvurib i will try and clarify using the same numbers.

  1. We start with Rs 5 each for 20 stocks.

  2. At the end of week 1, one stock falls to Rs 4. Assume another stock goes to Rs 6.

At the time of rebalance,
We allow the winners to ride and therefore, do nothing to the stock that has gone to Rs 6.
The weakest stock at Rs 4 is replaced with another stock that comes in at valuation of Rs 4.
The value of the pf does not change before and after rebalancing.

If I have additional money to invest, I will try and get all stocks back to 5% allocation as closely as possible; doing this without selling the Rs 6 stock.

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532

Any one has idea about National Plastic Technologies Limited?

Company seems to be doing decent. How does the business and financial outlook look for the long run?

533

thanks for the responses @visuarchie