We started Momentum 2.0 on 21-Nov-2016. In hindsight, we couldn’t have timed the entry any better. While market dipped once again in December, it only helped us accumulate at lower prices as we were staggering our entries by buying 25% of our desired allocation every month. We bought four tranches of roughly 1.5 lakh each in November, December, January and February. After accounting for dividends, this has returned 24% in just 6 months.
Systematic investing works best when the investments are done in a downturn. When markets take off, the lower cost of acquisition yields you better returns. In this case, we saw an incredible rally had we simply bought our full quantity on the first day. But then, hindsight is 20/20.
Today, we have decided to totally exit the portfolio. Two reasons:
First: Since start of this portfolio, the highest draw-down (Peak to Trough) was 6.98% in December soon after the launch of the portfolio. Once all the tranches were deployed, the maximum draw-down was just 1.48%. But over the last 2 days, we saw higher draw-downs in the portfolio and today the draw-down hit the 5% level. While this is not end of the world kind of draw-down, we feel that due to reasons outlined in part 2 below, it’s better to be safe than sorry (or greedy).
Second: Momentum in itself doesn’t concern too much with fundamental valuations of the companies we are choosing though we do add a layer of fundamental screening to ensure that we avoid illliquid (and often manipulated) stocks. In recent times, we saw quite a few stocks that were part of the portfolio coming up with below par results or getting hit with GST specifics. (V-Guard for example).
As long as stocks continued to move higher, we were willing to lend them a long rope. But with momentum slowing down in vast majority, we believe that the time has come to cull most of them.
A bird in hand is hand is worth two in the bush goes a saying. We are happy to book the profits and wait for the next opportunity to arise.
The chart below is the equity curve of the portfolio from the first day till now. Since we bought in four tranches, our absolute return in lower that what this curve shows. If you find this confusing, read our recent article on different return measures here.
Exit from Long Term Portfolio
We are exiting Atlanta at Rs. 107/-. The stock has given us a whooping return of 43% in just six months.
The reason we had added Atlanta in our portfolio was due to arbitration awards. Atlanta has received almost half of its arbitration awards and the pricing above Rs 100 for this stock was something we were looking at. We were following a trailing stop loss of 10% on the stock. The stop hit today, and so we exit.
Our Premium Long Term Portfolio is at https://premium.capitalmind.in/capital-mind-long-term-portfolio/
Our Premium Momentum Portfolio 2.0 is at https://premium.capitalmind.in/momentum-portfolio/
Note: This is not portfolio advice. Consider this a very risky portfolio and proceed at your own risk. At Capitalmind Premium the reason we have a portfolio is to demonstrate our commitment to our analysis, and we track it closely. It is not meant to be a recommendation for anyone in particular, primarily because we don’t know your risk profile.
Holdings: Analyst and family do own some of the positions listed above. Please assume we are biased
