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Momentum Monthly Fact Sheet: Nov 2020


November 2020 Monthly Update for the Capitalmind Momentum Portfolio

Returns Update

Chart shows Capitalmind Momentum Model Portfolio returns versus the NIFTY 50 and the NIFTY Smallcap 100 (the comparison that usually appears on smallcase). Dividends have not been considered.

Momentum Monthly Fact Sheet: Nov 2020

Being up 3-odd percent should normally be an acceptable month but 2020 has hardly been a “normal” year. That is when compared to the index which was up 11% in November. Going by November performance, a more appropriate name for this portfolio should’ve been the Drowsy Portfolio.

But we’ll hold off on renaming the portfolio, just yet.

Performance since inception

Chart shows performance (annualised returns, annualised volatility and maximum drawdown from peak) since inception in January 2019.

Momentum Monthly Fact Sheet: Nov 2020

Reading this chart: Returns, higher the better (obviously), Volatility: lower the better, and Maximum Drawdown: higher the better, i.e. the smallest negative value, the best possible value being zero.

The Momentum portfolio tries to outperform the NIFTY while suffering lower drawdowns in corrections.

Summary of Nov 2020

We closed out 10 positions through the month. This includes reducing cash down in three steps down to zero and fully deploying into equities.

  • We exit 6 positions at a loss, the worst being NEULANDLAB at -16%
  • LAURUSLABS (152%) and GRANULES (63%) were the notable positive exits after having been held for over 4 months

Chart below shows these positions on holding period (x-axis) versus returns realised (y-axis). The size of the bubble depicts the relative realised return in ₹ terms. Red bubbles were realised losses. Also note these also include positions reduced to bring their weights to within portfolio rules.

Momentum Monthly Fact Sheet: Nov 2020

Open Positions

Chart shows a snapshot of open positions as of the end of November.

Momentum Monthly Fact Sheet: Nov 2020

Note this is a snapshot as of close of November, so does not include the changes to the portfolio for Dec 1st.

But what about the underperformance?

Our Momentum strategy has had an ordinary last 3 months relative to the NIFTY. We’re still up, just not as much as the NIFTY. An active strategy has to beat the benchmark by a comfortable margin to justify the cost, time and effort of implementing it. That said, periods of underperformance lasting several months are visible in backtests we ran, so this is not out of the ordinary.

So, what is the maximum period and extent of underperformance I can endure before losing faith in an active strategy?

It helps for any investor in an active strategy to answer this question for themselves. Of course, underperformance can be of different kinds: Benchmark up + Strategy up less / Benchmark down + Strategy down more.

Now, as opposed to after a stretch of outperformance is a good time to decide what works for you. There is no wrong answer.

Outlook for December

Chart below is from the ‘Does Diwali bring cheer to the NIFTY‘ article that plots median returns from investing on any day of the year.

Momentum Monthly Fact Sheet: Nov 2020

Source: Does Diwali bring cheer to the NIFTY

December historically is a good month for markets before an ordinary first two months of the following year.

Recent signs look promising in terms of the movement of the broader market i.e. the number of stocks breaking above key thresholds and filters to make a case to be part of the portfolio.

On the flip side, new Peak Margin rules that are expected to reduce volumes overall. As usual, we won’t forecast, and will follow the rules.

Other November Fact Sheets:

Chase November Factsheet

LT Portfolio November Factsheet

Previous Momentum Fact Sheets:

October Fact Sheet

September Fact Sheet

This article is for informational purposes. No stock mentioned in this post is an individual buy or sell recommendation. Momentum is a portfolio strategy that enters and exits a set of stocks based on rules. It can also be volatile in certain circumstances. Make sure to do your own diligence before investing in such a strategy.


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