Medium Term Stock Portfolio & Recommendations
Overview
Contents
Investment Philosophy
Why Momentum?
Why keep a Stop Loss?
How are we different and How do we plan to beat the Nifty Midcap 150?
Who is it for & Who is it not for?
What do you get?
1. Investment Philosophy
Our research service is built on a systematic, evidence-based, Momentum approach.
We combine multiple proven factors including Quality, Safety, Reasonable Valuation, Momentum, and Big Money Activity to identify high-potential opportunities for the Medium Term with a holding period of few Weeks to Months. In some cases, we might end up holding the stock for over a year as well. We will re-evaluate positions continuously.
Our methodology is designed to capture meaningful upside while maintaining a strong focus on risk management (a stop loss is recommended for every position).
At the face of it, our philosophy might look like a sprint, but it is actually a marathon. While we will be making tactical moves every few months - switching positions & adjusting holdings - our target is to beat the Nifty Mid Cap 150 TRI over the long term with more calculated risks.
2. Why Momentum Philosophy?
There are several factors using which we can construct portfolios - Momentum, Value, Quality, Growth, Low Volatility etc.
Out of these different factors, Momentum has been the clear winner over the years. Performs the best in bull markets and manages to contain downsides during bear markets. Please refer the performance of different factors below.
Momentum gave the Best risk-adjusted performance over the last 14 years with fewer deep drawdowns. Worst year was -16% (2011) compared to Value's -38%.
Also, Momentum delivered multiple high-return years (50% in 2014, 57% in 2017, 54% in 2021) while maintaining stability. This is why we stick to Momentum.
3. Why keep a Stop Loss?
Stop Loss is a critical part of our Momentum Strategy and is non-negotiable. Here are a few reasons:
A Stop Loss trigger is an indication that the momentum thesis we initially identified is no longer valid. When the market tells us something, we listen. This systematic approach removes emotional decision-making from the equation, which is crucial for long-term outperformance.
Stop Loss getting hit is tough. We hate it. It is difficult to take losses. But think about Stop Loss as a place where we are strategically re-allocating to cash. Holding cash during drawdowns and unfavorable market conditions is also part of the strategy. Minimizing downside risk and safeguarding capital is crucial.
Taking Losses has another benefit too. Suppose we buy a stock at ₹100 and the Stop Loss is hit at ₹90. It is better to exit and route the remaining capital to another better opportunity than to hold on to the losing one. Our experience consistently shows that accepting a small, controlled loss is far superior to hoping for a reversal while better opportunities pass us by.
4. How are we different and How do we plan to beat the Nifty Midcap 150?
To outperform the Index, we would be doing a few things differently.
Concentration & Weightage: We will be holding a maximum of 20 stocks with a weightage of 5% assigned to each stock. That is, we will be concentrating only on the best opportunities. Midcap 150 has 150 stocks and none of them have a 5% weightage.
High Quality Focus: Although we can hold a maximum of 20 stocks as per the weightage of 5% per stock, we might not hold 20 stocks at all times. A Midcap 150 Index holds stock at all times irrespective of the market conditions. We focus only on the best opportunities. The rest of the amount is parked in Liquid Assets till we find an opportunity. The number of stocks held in the portfolio will be dictated by the market conditions and opportunities.
5. Who is it for & Who is it not for?
First & foremost, this is for DIY Investors who can keep an eye on the portfolio every day. We will be providing Entry/Exit signals through our Research APP on a timely basis. You need to keep an eye on it every day.
If you are a DIY investor looking for inputs to build your own , this service will be of use.
If you align with a Momentum Philosophy then this service is for you.
If you do not have the time to check timely notifications from our App everyday, then the service is definitely not for you. We recommend our Long Term Recommendations in that case.
We have a strict risk management practice. We exit stocks through Stop Loss Mechanism. If you are not comfortable taking a stop loss then this is not for you.
Stock Portfolios are generally volatile. If price volatility is affecting you, this is not for you.
If you are looking at quick returns and not willing to accept drawdowns, then this service is not for you.
What do you get?
Stock Recommendations
2-4 thoroughly researched stock recommendations per Month (Based on Market conditions & Opportunities)
Focus on quality companies across Large, Mid, and Small Cap segments
Stocks below a Market Capitalization of ₹2,000 Crores are avoided due to lower liquidity.
Holding periods ranging from Weeks to Months (Medium Term)
Performance & Benchmarking
People who contact our support usually ask what is our hit rate/strike rate/success rate etc. That is, out of 10 stock picks how many end up in profits and how many end up in losses. Usually, this is the number that is published by most of the Analysts. We tend to differ.
We follow a Momentum philosophy and we heavily rely on Asymmetry. That is, we are looking at a few stocks to perform big even if the rest of the stocks take a stop loss.
Through our Stock Recommendations and Model Portfolio, we look to to generate better risk-adjusted returns than the Nifty MidCap 150 TRI. Nifty Midcap 150 TRI has given a return of ~16.1% since Inception.
Capital & Knowledge Requirements
We recommend having a capital of at least ₹5 Lacs as we follow a Portfolio approach and not an Individual Stocks Approach. We are looking for outperformance over the Nifty Midcap 150 TRI.
If your total capital is less than ₹5 lacs, please park it in Mutual Funds and focus on increasing your capital. You can use our Long Term Recommendations for the same.
If you are looking for knowledge of how to select and manage a portfolio of Momentum stocks, you can join too.
There are no Knowledge Pre-requisites as such. You need to know the basics of stock market, how to operate the trading terminal, how to buy a stock and how to set a stop loss.
Subscription Details
Currently we are restructuring the service as per the new SEBI regulations. It will soon be updated (by Feb 2025). More details will be added here. Thank you for your patience.
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