So here it is. We now celebrate the first anniversary of our new Momentum based investing strategy and its time to take a quick look at how it has done!
Before we do that, here is a quick recap on how we shaped our Momentum portfolio strategy.
A few days post demonetization (8-Nov-16), we fully exited the older Momentum portfolio which had given us annual returns of 30%+ in three years.
Soon we kick started the new Momentum strategy (strong movers, lot of technical confidence), shortlisting close to 30 stocks to get as much diversification possible. Ask any seasoned investor and the answer why 30 stocks would be concentration always hurts and its to get as much diversification of various industries as possible.
We started off with a single tranche of Rs. 150,000/- on the 22-Nov-16 with 3 more tranches of Rs. 150,000/- added on 13-Dec-16, 16-Jan-17 and 20-Feb-17. We monitored the holdings on a daily basis, allowing us the cushion to re-balance or weed out the losers. Even a massive loss on Divi’s Lab didn’t hurt performance too much.
We decided to exit completely on 23-May-17 (close to when the markets started to show cracks). We closed the portfolio with a healthy absolute returns of 24%. (Read post)
Then came the rejuvenation: we moved to a single tranche of around Rs. 1.8 lakh or so. We kickstarted it on 5-Jun-16. Momentum 2.1 has seen a re-balance on the first Monday of every month and has given an absolute return of 22.46%.
A year later, we still have 30 stocks, and the cumulative performance is around 64% in one year has been pretty good. Not including dividends, of course.
Our Momentum portfolio has given a total return of 63.82% for the period 22-Nov-16 to 27-Nov-17. On comparing this to the Index – the Nifty has given a 31.60% return while the Nifty Next 50 has given a 44.92% return.
Winners vs Losers
Divis Lab has been the biggest loser; this was when the stock fell massive due to the US FDA issues on its Vishakapatnam establishment, and we were quick enough to cut our losses. Today, with an active eye on the Momentum stocks – there are no more big losers like Divis that are part of the Momentum portfolio.
While Avanti Feeds is also part of the Momentum 2.1 portfolio. our biggest winners Rain (added on 7-Aug-17) and MindaInd (entered at 440 and exited at 551 while the re-entry has been at 628).
The Drawdown Bleed
We saw a max drawdown of around 7%. Meaning, if you entered this portfolio at any point, you wouldn’t have lost more than 7% from the time you entered. Here’s a bleed chart that shows you how much you’d have seen in losses (marked to market) depending on when you entered.
We saw just one negative month. The indexes did see a few jitters but on a monthly basis our portfolio did very well. (In fact, today, on Nov 30, the portfolio was up over 1% while the Nifty was down 1%)
We took a few put options to hedge on a temporary basis. The put options we took provided a small cover for the time we took the positions, and we didn’t do too much – just three positions in the whole year.
How does it work from here?
We’re still doing a change on the first Monday of each month. And we have two “doublers” – in the form of Minda and Avanti, and only four net losers. Even if you consider that a short term portfolio has to pay taxes, we’ve outperformed by so much that even if you paid the 15% tax, you’d still be ahead of a Nifty or Next 50.
The next year will be fun too! Looking forward to a wonderful time ahead. Remember, this is super-risky, and you have to be very very careful. So don’t bet on momentum if you can’t afford to lose a good chunk of the money.