Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial

Portfolio: Changes in the Premium Momentum Portfolio – Mar 2020


[This is a Premium Unlocked Post]

“War is long periods of boredom punctuated by moments of sheer terror.” – old combat adage

Some folks have adapted this to the stock market. Ridiculous, if you stop to think about it. Not that we were getting bored after a decent January 2020, but the last week of February sure delivered terror in liberal doses.

And we might just be getting started, with coronavirus cases now being confirmed in the US. I’m guessing a handful of cases there might be far more consequential to the stock market than when (not if) large-scale cases are confirmed in India.

Feb 2020 Performance

Portfolio: Changes in the Premium Momentum Portfolio – Mar 2020

We just about stayed above the waterline in Feb 2020, with a marginal +0.7%.

13 of our 20 stocks were negative for the month. 3 of them (IGL -13.9%, AMBER -12.9%, TATACONSUM -11.6%) in double-digit territory. On the plus side, three stocks bailed us out (NAVINFLUOR +27.1%, TRENT +23.9%, ALKYLAMINE +10.8%).

Note ALKYLAMINE (+10.8%) came in as an out-of-turn rebalance on 7th Feb to replace AVANTIFEED (-22.3%). The inconvenience was worth it.

What’s happening in this rebalance

This one is a hard rebalance. For two reasons:

  1. The overhang of the last week and potential risks from the virus make it tempting to think: exit, move to cash, and wait. But in the momentum strategy we don’t try to anticipate macros or other factors (which is a big reason why it works)
  2. The universe of potential stocks that qualify for momentum has shrunk significantly. For instance, 1 in 2 stocks was trading above its 200-Day Moving Averages in mid-Jan 2020. Now only 1 in 4 stocks is above that threshold. (see chart)

Portfolio: Changes in the Premium Momentum Portfolio – Mar 2020

If this universe keeps shrinking which means markets continue their free fall, we will exit and move to cash. Plan to be nimble, especially over the next couple of months.

With that context, this month we are retaining 12 stocks and replacing 8.

Stocks we are exiting

Portfolio: Changes in the Premium Momentum Portfolio – Mar 2020

Stocks we are adding

Portfolio: Changes in the Premium Momentum Portfolio – Mar 2020

Portfolio for March 2020

Portfolio: Changes in the Premium Momentum Portfolio – Mar 2020

A minimum lot costs ~₹1,50,000. This is up from last month’s minimum but this kind of change month-to-month is inevitable because we are not optimizing to keep lot size consistent but to find the stocks that give us the best chance of delivering market+ return.

Our suggestion is to allocate a minimum of ₹ 3,00,000 to this strategy to be able to stay invested consistently irrespective of lot size. DM me on slack or on #helpdesk for help on figuring out the right allocation to momentum.

kite cart users: Link to fresh buys and changes will be posted on #actionable. smallcase users: Will receive an email to rebalance.

For queries, reach out on #helpdesk


Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial