@VilasKR I see some differences between my list and yours. My reference is for entry on 1st and based on close price of 31/12/2024. Lookback dates are 29/12/2023 and 28/06/2024.
@valorem This pf has returned a XIRR of 36.19% and the microcap pf is 60.79% from Nov '22 when I started this investment.
I started calculating a “NAV” around middle of this year only.
Max drawdown in both pfs is around 10% based on the NAV that I computed.
@visuarchie Thanks for sharing list. I have double checked all entry they correct still getting different ranking, If possible can you check my sheet in your free time,
Will remove post once I get reply as its not related to Smallcap momentum portfolio
@vkediaonline There is nothing like a good time. As you know it is nearly impossible to time the market. If you are willing to stay in the market for a long time and able to digest the drawdowns, anytime is a good time.
You might want to wait for sometime though.
I think we cant time the market for sure but we can time the “entry” in the market to minimise initial drawdown. As momentum is buy high and sell higher strategy, in current environment when everything is going down you might want it to be sideways at least to start the journey.
If you are up 80% and then go down say 30% it is still ok than starting with 30% drawdown.
Read the paper on same topic on ssrn (i guess it is by Rajan Raju).
Rest your choice.
@Mudit.Kushalvardhan
Yes sir that’s why i say he has capacity to digest the drawdown.
We cannot ignore the fact that his portfolios were started in late 2022 post which market gave little dip and then a stupendous run of almost 2 years.
Not discrediting him. In fact after studying factor investing for 2-3 years (started studying in 2021 with Jagadees and titman paper, subsequently built python prog and ssms database!) i still couldn’t gather courage to start.
I credit him 100% for without his threads I wouldn’t have started in December 2024.
Still will say the starting environment matters in long term if one is following his methodology of staying 100% invested all the time.
I was just informing you about his earlier returns. I have also started this strategy by taking subscription of momoscreener , but I have changed the strategy ( refined in some aspects)now after coming across some pitfalls.
There are many nuances to these kind of strategies, new things to be learnt. There is intuition which tells us not to take the forward step. But these nuances can be learnt only if we participate. Allocating funds and doing it on a minimal level will help. After gaining sufficient experience both w.r.t these kind of systems and investing, along with market environment, we can choose to stay out and work on something else.
Return goes up by 60% in a year, faces losses of 40% in a few weeks, it does not mean that only those two returns happen. There is be a possibility that, despite a weaker market, the PF may go down by 15% in some cases. Traders don’t get stopped out with each and every position unless there is a huge selling across the board. Same thing with systems, they may surprise us with in-between returns too. One can also go deep, find the reasons why certain stocks did not fall much despite a sell off.
There are many nuances and intricacies like these. Creating a system is relatively easy, but to experience all that it can give, participation is the only way.
@visuarchie ,
Hello sir, you may not agree with my refinements and at your place following the strategy to the letter , can also be a good strategy …
But I am never a follower and staunch believer of any way of investing or strategy…My underlying aim of studying /learning and implementing any strategy is always to compound my capital at higher rate of returns and minimum possible risk…So after following the strategy from august-2024 , following refinement/changes I have made. Kindly try to find faults with them, so that I can improve further:-
In Ranking momentum strategy, there is always a high chance that those stocks may enter at high ranks, whose fundamentals are not good but currently due to any reason , they are trending higher. This can be a risk as, such momentum can dissipate in short time, and even if after holding lets say for 2-3 months and being in decent profits like 40-50% , in next month or two this momentum will wipe out our all gains and we end up selling at break even or even in loss, even after holding for 4-5 months.
To avoid such situations ( you cannot avoid them altogether, but to minimise) ,
I am doing a sanitization check of few fundamental factors , like
the stock that is high in my momentum ranking, has to have atleast 15-20% sales growth in last 8 quarters, EPS also should be growing atleast 25% and above, ROE/ROCE should be above 20-25, promoter holding should be high, Debt/Equity ratio should be zero or very low, no promoter pledging, Institutions should be increasing their stakes.
After the fundamental refining, the next step is Technical refining…
I would be looking at weekly chart of last 2 years and see if I am looking at secular uptrending chart, without any hiccups, like Choicein or Anantraj…I don’t want to see a chart which goes up 2 months and then goes down 3 months…Such names can also appear in top 20 of our momentum ranking, even if we have applied Sharpe Ratio for volatility adjustment. So chart should be secular.
The other factor is when I am about to enter , that level should not be too far from breakout point or from 50 day Moving average, If I enter at very extended level, just because its high in ranking, there is a very high chance of stock coming down to touch the 50 day EMA or breakout point which can be even at or below 25% …So suddenly my stock is going down 25% from my buy point. .That is not what I want. Also when I am entering, I may try to enter at precise point, near breakout and also at very high volume than average, so I am aligning with buying with some big player who is buying at very high volume.
Now the crucial point of selling. .In rank momentum, we wait for Worst held Rank or going below 150 day moving average of going 25% below ATH, but all these criteria may take me out very late or even early sometimes… I don’t want to get into 25% losses , before the WHR comes, I may want to exit much earlier by looking at chart and seeing the clear-cut exit signals like selling at high volume or breakout pattern is getting negated. .I don’t want to wait for the system WHR.
Also if stock is doing good , I don’t want to sell only because its lower in rank…I would like to ride with it. It may be tax efficient also.
So the refinement includes
Fundamental refining
Technical refining for better entry
tweaking sell criteria for better exit
But I will keep my universe of stocks based on momentum ranking, and then apply above additional screening criteria to better my risk-reward ratio.
so basically you are using momentum as factor criteria and then following techno-funda investing which is 100% discretionary.
Unlike what Viswanath or some of us are trying to do.
No discretion. Just following the system without judgement.
Yes. Actually why a no-discretionary system based strategies were evolved for 2 basic reasons -
No single person can study fundamentals of all thousands of companies.
No single.perosn can study and track charts of thousands of companies. Hence to eliminate this workload and to avoid the human bias , system based non-discretinary methods were adopted.
But if we reduce the universe of stocks by using momentum ranking criteria to manageable number of stocks, then discretionary will be more superior approach adopted to small number of companies instead of blindly following the system.
Exits are always hard, as we know. Sometimes the price bounces back soon after our selling. So I think, if we are getting new signals to buy, then if we might feel that we sold prematurely or should have held, if there is not much volatility in the market, the new stocks can provide a similar return. Essentially the system is delivering is the returns, and not a few stocks.
I am guessing you have found your way of doing, with a systematic approach, combined with your understanding and experience, and you are satisfied with the returns and the way it is progressing.
@Mudit.Kushalvardhan As I have said previously also, each one to his own system and if they are comfortable with their strategy it is fine. I just wanted to mention a few points.
You are expanding the choice beyond momentum. Typically, there are several reasons why the prices go up and we may not be privy to all of them. They may not always be backed by fundamental reasons. People who drive the prices up know something that we don’t. I dont want to apply my judgement. I am happy to get in and out quickly.
Our lookback periods of 1y and 6m ensure that we are not catching flash in pan stocks. We are looking at stocks that are showing an increasing trend over long periods of time. Several people ask why we don’t look at shorter time frame of 1m or weeks. This is precisely to avoid situations where stocks are driven up by operators.
In the system that I follow, I have been very aggressive and do not hold stocks beyond 5 ranks. For example in 20 and 25 stock pf, I exit beyond rank 25 and 30. I dont hold until 2x of rank held. System is very nimble.
More importantly, you are applying a discretion for entry and exit.
This is something that did not work for me and hence, I did not continue. I follow the system fully. Once you start to apply discretion, then there is no end to breaking the system.
It also depends a lot on the time available. When you follow a rule based system, the time required is very low. Every week, I need to speak less than a hour to come up with changes and implement them the following Monday.
If you need to go beyond this, you need more time. If you have this, fine.
