General Trading Chat

ncube

Well-Known Member
Did some number crunching this weekend.I compared all Nifty 50 constituent stocks with BSE Sensex ( as the scanner I used did not compare it with Nifty but it did with BSE Sensex which is ok for our purpose ).The aim of this analysis is invest in only stocks which outperform the index to generate a decent alpha by avoiding underperforming stocks. The idea is inspired by Coffee Can investing.

This analysis was done on 1 yr, 3yrs,5 yrs and 10 Years timeframe . I was surpised to find that only 11 stocks,out of 50, outperform BSE Sensex on all the four time frames....they are the wealth compounders....we can do this analysis every quarter to weed out underperformers and add outperformers in the folio...

The stocks are :

1)Asian Paints
2) Axis Bank
3)Bajaj Finance
4) Bajaj Finserv
5) HDFC Bank
6) Hind Unilever
7) ICICI Bank
8) Kotak Mahindra Bank
9) Tata Consultancy Services ( TCS)
10) Tech Mahindra
11) Titan Company

Stocks like Bajaj Auto,Hero Motocorp, ONGC,Tata Motors ,Vedanta fail on most timeframes ,so they are the wealth destroyers and to be avoided.

Smart_trade
@Smart_trade Sir, have you considered any fundamental filters such as revenue growth, ROCE etc or is it just the momentum across these 4 time-frames?

If it is pure momentum based strategy then we may also need to consider the following 2 points:

1. As Index return is used as reference, there are chances that the index would be influenced by selected few stocks. Last year by the time I realized the divergence I had already taken a hit and I had to remove index filter from my strategy, fortunately this year rally brought me back to break even. But one difference was that I had most of my stocks outside the index, however I feel If we need to use the index return filter then it would be better to use equal-weight index return for reference.

2. As we plan to re-balance every quarter we need to consider the impact of momentum in each time-frame. In this case the 1yr momentum will be the most sensitive and impact the quarterly re-balance. Impact from 3,5 & 10 yrs momentum will not be much as they would have already accumulated enough momentum over the years compared to the index returns. Hence during quarterly re-balance few of the good stocks will under-perform index but over the 1yr time period they would perform well, hence we have 2 options either define an additional rule before dropping the stock from the portfolio or re-balance yearly.
 
@Smart_trade Sir, have you considered any fundamental filters such as revenue growth, ROCE etc or is it just the momentum across these 4 time-frames?

If it is pure momentum based strategy then we may also need to consider the following 2 points:

1. As Index return is used as reference, there are chances that the index would be influenced by selected few stocks. Last year by the time I realized the divergence I had already taken a hit and I had to remove index filter from my strategy, fortunately this year rally brought me back to break even. But one difference was that I had most of my stocks outside the index, however I feel If we need to use the index return filter then it would be better to use equal-weight index return for reference.

2. As we plan to re-balance every quarter we need to consider the impact of momentum in each time-frame. In this case the 1yr momentum will be the most sensitive and impact the quarterly re-balance. Impact from 3,5 & 10 yrs momentum will not be much as they would have already accumulated enough momentum over the years compared to the index returns. Hence during quarterly re-balance few of the good stocks will under-perform index but over the 1yr time period they would perform well, hence we have 2 options either define an additional rule before dropping the stock from the portfolio or re-balance yearly.
1) No this does not consider any fundamental filters such as revenue growth,ROCE etc.....that we have to do additionally.This list is just outperformers to index in various timeframes.

2) Re-balance every quarter will not be on quarterly timeframe....that means at end of every quarter we will run 1yr,3yrs,5 yrs and 10 yrs ....underperformer will first underperform on 1 yr timeframe and then on other timeframes.

Points mentioned by you are very valid points.

ST
 
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ncube

Well-Known Member
1) No this does not consider any fundamental filters such as revenue growth,ROCE etc.....that we have to do additionally.This list is just outperformers to index in various timeframes.

2) Re-balance every quarter will not be on quarterly timeframe....that means at end of every quarter we will run 1yr,3yrs,5 yrs and 10 yrs ....underperformer will first underperform on 1 yr timeframe and then on other timeframes.

Points mentioned by you are very valid points.

ST
Yes Sir I understand, every quarter we check the returns for 1,3,5 & 10 yrs, but as I said it will just be quarterly increment over each timeframe and under-performance will happen first on the 1yr time frame. We can consider this similar to the moving average of returns measured quarterly. Other timeframes like 3,5&10 yrs return will have huge difference with the index returns as they would be strong performers and their accumulated returns would not underperform the index.
 

toocool

Well-Known Member
1) No this does not consider any fundamental filters such as revenue growth,ROCE etc.....that we have to do additionally.This list is just outperformers to index in various timeframes.

2) Re-balance every quarter will not be on quarterly timeframe....that means at end of every quarter we will run 1yr,3yrs,5 yrs and 10 yrs ....underperformer will first underperform on 1 yr timeframe and then on other timeframes.

Points mentioned by you are very valid points.

ST
dear smart trade

i am getting confused in major high and major low identification , is there any thread which shows charts to identify these properly , what are its rules etc , please share

thanks
 

siddhant4u

Well-Unknown Member
https://economictimes.indiatimes.co...icators-drop-experts/articleshow/68783864.cms

In proportion to the gross domestic product (GDP), household savings declined to 17.2 per cent in 2017-18, the lowest rate since 1997-98. According to the Reserve Bank of India's data, as household savings have declined, these - not corporate demand - have pulled down investments by 10 basis points during 2012 to 2018.

On the direct tax front too, the collections have not been as per the target. Direct tax collections, reported on April 1, fell short by Rs 50,000 crore on account of poor personal income tax collections, thereby failing to meet the revised target of Rs 12 lakh crore for the 2018-19 fiscal. Sources said the target of personal income tax of Rs 5.29 lakh crore was not met by almost the same shortfall amount of Rs 50,000 crore, which dragged down the direct tax collections for fiscal 2018-19.
 
dear smart trade

i am getting confused in major high and major low identification , is there any thread which shows charts to identify these properly , what are its rules etc , please share

thanks
Simple rule is the meeting point of visual uptrend and visual downtrend are major highs and meeting point of visual downtrend and visual uptrend are major lows.I think Subhadip’s thread shows major highs and lows on chart / diagram to explain the concept.....

Smart_trade
 
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