@visuarchie
Sir,
Request please add look back dates.
Thanks.
Ok, will add look back dates next week onwards. This week, look backs considered are
1y - 04/08/2023
6m - 02/02/2024
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Not sure where the error is coming from as the look back dates are fine.
I think you are missing something on the 6m look back. For example, DOMS has the 7th rank on 6m and combined with (12m date of 12/12/2023 only) has a ranking of 19.
@visuarchie I have been tracking NUVAMA since last week and it has given a big rally already, adding it next week, means adding at an ATH, is that ok?
And, have you tried monitoring the ranking daily or twice a week, rather than end of the week? If yes, did you feel any difference?
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@stuti_agarwal My view - you should be happy to invest in companies at 52wh high or ATH. If you want to make money, you want companies to grow and break old records. Otherwise, there is no growth.
No, I have not tried mid week. If one does it mid week, you are prone to spikes and might miss out proper moves. That is why we have look backs of 6m and 1y.
A weekly rebalance itself involves a lot of churn. Monitoring it more often, might lead to higher churn.
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Thank you very much sir
Hello Sir @visuarchie ,
By understanding your strategy , I remembered the then famous trader NICOLAS DARVAS ,
I hope you know him
Thanks
Hello, I know the name, but I do not know much about the person or his strategy.
@visuarchie , Hi Vishwanath ji…sorry took a long break of 11 days of asking you my stupid questions. I was on a meditation course. Back with a new zeal to pick ur brains…
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We are following this momentum strategy. What we should call ourselves, momentum investors or momentum traders? Which title suits better? And is there any difference?
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You have mentioned many times that u selected 20 stocks or 25 stocks to diversify and balance the concentration risk. This is the same argument given by value investors as well. But we are going against many of the cherished notions of value investors…like investing at 52 week high, or All time high , or selling even in a week etc, which value investors cannot do even in their dreams. Then why follow their diversification rule? Cant we just invest in Top 10 stocks? Have you checked the effect of top 10 or top 20 and seen a drastic volatility? By following this strategy, we are already playing with fire, then a little bit of 5 or 10 additional stocks, will it make any difference in handling risk or volatility?
My specific question is because on this monday , I am.thinking of reducing the number of stocks to 10 instead of current 15 of each small cap and microcap universe, thus totalling my stocks to 20. We will always be in top 10 powerful stocks of that particular universe…what worst will happen then?
@Mudit.Kushalvardhan Trust you are back with full vigour after your meditation.
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We are clearly momentum investors. Even though we rebalance on a weekly basis, our look back periods are 1 year and 6 months. There are several scrips that are part of the pf for over 4 months now. CHOICEIN has been in the pf since Jan 2024. We are not short term traders.
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The number of stocks in the pf are influenced greatly by the universe and the rebalancing frequency. A typical large cap pf can manage with just 10 stocks, but as we start going down the market capitalisation, number of stocks have to increase to manage volatility. Several points that we need to ponder.
- A typical number of the top decile is normally recommended.
- Rebalance frequency - with large caps you can go with monthly RBs, while for lower market caps, it is better off with weekly.
- Worst Rank Held (WRH). This is an important part of the pf maintenance. You can choose double the number of stocks as you worst rank held. The number of pf churns will be largely governed by this. Example: If your number of stocks in the pf is 20, you can choose to have 20 as WRH, you will have large number of churns. If you choose to have 40 (2x the number of constituents in pf), you will have low churn, but might miss out on some of the winners.
So, in summary, my views on your specific queries,
- we are not following anyone rules; we are setting our rules. These are totally flexible and suited for the universe and the RB frequency.
- we can invest in any number that we think is appropriate. This is more related to market cap.
- I have not reduced the number of stocks in lower market cap categories. In fact, I have actually increased in my journey. Smallcap - I went from 15 to 20 and Microcap - I went from 20 to 25. We are already considering volatility in our pf selection by using this parameter called momentum ratio. This will make sure we don’t capture stocks that have sudden high spurts.
- Yes, every additional stock will help to reduce your risk.
I would suggest you do not reduce the number of stocks in your pf. If anything, I would ask you to increase.
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Update for entry on 12th August 2024 (look back dates - 11/08/2023 and 09/02/2024)
50EMA (17038) > 200 EMA (15104); hence, we can continue without any change.
Based on ranking:
- COCHINSHIP
- GRSE
- GLENMARK
- GRANULES
- KFINTECH
- HUDCO
- JAIBALAJI
- ARE&M
- DEEPAKFERT
- NATCOPHARM
- POWERINDIA
- VGUARD
- NUVAMA
- SUVENPHAR
- 360ONE
- HSCL
- INOXWIND
- DOMS
- AEGISLOG
- NBCC
Based on A → Z for easy tracking:
- 360ONE
- AEGISLOG
- ARE&M
- COCHINSHIP
- DEEPAKFERT*
- DOMS
- GLENMARK
- GRANULES
- GRSE
- HSCL
- HUDCO
- INOXWIND*
- JAIBALAJI
- KFINTECH*
- NATCOPHARM*
- NBCC*
- NUVAMA
- POWERINDIA
- SUVENPHAR*
- VGUARD
Exits:
ANANDRATHI, APARINDS, KPIL, MOTILALOFS and SCHNEIDER make an exit.
BLUESTARCO and SIGNATURE stay within the top 25 and hence remain.
Entries:
DEEPAKFERT, INOXWIND, KFINTECH, NATCOPHARM and SUVENPHAR make an entry.
AEGISLOG and NBCC cannot enter as there is no vacancy.
3 Likes
@visuarchie Sir, please share the latest Google sheet of small cap 250, it will be very helpful
Thankyou,
VAMSHI
I am learning too, so I think I can give my views too.
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Read somewhere that investing is long term trading and trading is short term investing. I like to consider myself as a speculator, as I am not looking at the value of what I am buying, and I am essentially following just the price.
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One of the ways to mitigate risk to stretch the number of stocks, diversification. It will reduce the returns, if it does not happen and the capital is distributed to other stocks which rise. But for any foreseen happenings, the absence of diversification can bring more losses. Also, in the initial days of implementing a strategy, it is better to diversify. And, there is also a chance of getting some return from the stocks which we do not want to buy but buying for diversification. Sometimes our conviction can go wrong and the least expected stock to go up can go very high, defying our understanding and interpretation.
As the learning, shape, tinkering all become into a system which has seen thick and thin, along with our active monitoring, we can think of reducing the number of what we buy and increase the position size, take concentrated bets.
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Conviction in stocks?
In rank-based momentum strategy, there is no question of conviction. You just follow the rank and invest. Kindly clarify, what you meant.
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Purely systematic, sure, we just go by ranking. But as we are also investors, and as such, sometimes we are aware of what is happening in a business, already have some knowledge about certain stocks, so we can add the element of intuition, thereby omitting a system generated stock and adding funds to the one which we have conviction. If we cant shake off the feeling, that is. Wearing the investor hat on occasion, so to speak.
If there is no such chance of adding intuition, qualitative inputs, no pattern recognition, only system generated, then we go by the system.
And, as what happens after we get the list cannot be predicted, diversification helps, particularly if we are allocating more capital.
AFAIK, people go by systems only if they have conviction as they have done the backtesting and are satisfied with the results. I have not done any, so I try to add my interpretation.
Haven’t reached the level of giving the responsibility to a system/machine, yet. Don’t know if I ever will be or if I ever want to be 
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360One has come up in the Hindenburg latest report about sebi on a negative side. Any caution with respect to it?
I don’t think any caution is necessary regarding 360ONE; have not planned any.
Looks like a bunch of apprehensions without any proof. 360ONE has responded to the exchanges also.
Let us wait and see.
Hello Sir @visuarchie - trust you are doing good.
i am sure you may have answered this earlier but just wanted to make sure nothing changed - basically, if a stock keeps going down after we added we’ll not exit it until it falls out of top 25 as there is no stoploss concept here - is this correct understanding/applicable even now? the reason i ask is cochin shipyard and GRSE seem to keep falling almost since i started the pf around last month but they still need to be in the pf owing to their ranking (obviously high ranking given the runup they had in the past 6 months)
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@vamsi00797 You are right. There is no stop loss concept and the stock will remain till it falls below the 25th rank.
GRSE is down 13% for me!
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You are right. No stop loss in this strategy. In my case cochin is down by 16%. But you can twist the strategy for urself, if you are not ok with big drawdowns, like you may keep 15% or 20% as a threshold till you can take pain and then get out of that stock. I am rhinking of 15% stop loss after initial purchase , so may be selling cochin.
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