We recommend building a long term stocks portfolio in this service.
This plan is most suitable for long term investors for whom capital protection is of utmost importance along with consistent above average returns.
There are only two risks in stock markets – if we manage them well, we can not only protect our capital, but can also consistently beat the market returns. The first and the biggest risk is that markets will sink – like what happened recently due to corona virus. The second risk is that the stock that you purchased will crash or will generate poor returns. Good news is that both these risks can be eliminated to a great extent.
Our performance proves that this philosophy is correct. Our returns as on Apr 23, 2020 were 40.5% vs -9.5% of Nifty in same period since launch of portfolio service in May 2018. Or in other words, our returns were 50% more than the market returns in less than two years. These are not trading or speculation returns, they were generated from high quality stocks that have superb long term growth potential.
But one thing must be understood that to beat markets with such a significant magnitude, one needs an unconventional strategy. Just doing what everyone else is doing can never lead to a consistently superior performance.
Almost all mutual funds and PMS compare their returns with a benchmark. And suppose if Nifty falls 30% and their returns is -25%, they will boast they have beaten the markets by 5%! The fact that investors may even lose their shirt is sadly not relevant to them. We do not compare with any benchmark, our aim is that in case of downside, we should be able to protect the capital, and in case of an upside we should outperform the normal benchmarks.
We have chosen the toughest path of protecting capital during bad times and creating alpha in good times. And we are successful at it.
How it Works:
In this plan, we recommend to build a long term portfolio that will protect capital as well as generate above average returns.
1. Stocks selection:
There are two aims of stock selection - to generate long term above average returns, and to reduce risk.
Selecting stocks: Stock selection is an extremely complicated task and needs indepth analysis. Our analysis includes numerous factors like future demand outlook, global factors, geo-political events, domestic political environment, technological developments, cross-industry linkages, competition, imports, trade and tariff, regulatory environment, social trends, environmental issues, currency impacts, inflation outlook, interest rate outlook, underlying threats, potential opportunities, and so on.
In case of stock selection, the focus is on -
- Long term growth
- Highest level of proven promoter integrity
- Capability to withstand recessions
Some of our stocks have near monopoly in their markets, some are strongly positioned at the beginning phase of an industry specific growth story – like Bharti was at the beginning of telecom revolution.
Stock Specific Risk Reduction: There are two well-known strategies to manage stock specific risks – first is to diversify by investing in several companies. A portfolio of about 15-25 stocks in different industries is best for risk reduction. Over diversification by investing in a very large number of companies in portfolio will drastically reduce its ability to beat the market returns. And investing in very few companies will reduce the effectiveness of diversification, increasing stock risks. Second strategy is to invest in ONLY those stocks which have very low risk of sinking in case of a recession, have very high management integrity, have long term growth potential, face little threats of any kind, and are available at low valuation. None of our stock has ever been subject to any scam or any serious price erosion.
Sample stocks: We are giving below a sample of our stock selection to show that your investment will not just be safe but will also see ample long term growth.
Example 1: CDSL
There are only two companies in this field – CDSL and NSDL, third cannot come, it has long term clients assuring regular flow of income, costs are mostly fixed whereas income will grow, excellent profit margins, massive growth potential in future from new opportunities as well as existing businesses, currently India has ~4% of population having demat accounts whereas the norm is 30-50% in developed countries – extremely under penetrated market offering great growth potential…
Company has assured revenue, huge growth, and very low risk
Example 2: Sanofi
India is the world capital for Diabetes and similar lifestyle diseases. Sanofi is a leader in lifestyle drugs with excellent demand for its products. Since last several years its products are showing rising demand even when other pharma companies are not doing well. This segment is set to grow for decades as Indians get more income, do less physical work, higher work pressure causes anxiety, more fast and junk food is consumed….
Company has stable revenue, huge growth, and very low risk
Example 3: Company #3
When Monsanto had introduced BT Cotton hybrid seeds in 2002, it created a cotton revolution in India. The production jumped 3 times in next decade and India changed from being an importer to an exporter of cotton. A similar but even bigger revolution is set to take place for the next decade which will immensely benefit this company. This business has extremely tough entry barriers, ensures assured income, and huge growth potential looking at the large population of India.
Company has stable revenue, huge growth, and very low risk
The stocks in the portfolio may be held for 1 - 3 years but in case of major risks or change in underlying fundamentals, we may exit earlier from a stock.
2. Market Timing, Capital Protection, & Alpha
(Market Timing means predicting when there will be a big correction or when a big long term rally will begin)
(Alpha is a technical term which indicates the excess % returns generated by a fund manager compared to the market returns. All fund managers aim to create high alpha)
Benefits of market timing?
It is obvious that if you can skip a 20-30% market crash, your returns will be great! Just have a look at our performance, we started forecasting major market turning points since 2014 and did it for free till 2019. Even though there was no serious crash or recession during this period, we were able to generate 30% more compared to market returns!
A simple calculation that shows benefits of market timing (refer Market Signals for data)
Nifty in 2014: 6500
Nifty in July 2019: 11946
Nifty returns = 5446 or 83.8%
Our returns = 2070+520+2214+804+746+1040 = 7395 or 113.8%
So, the additional advantage of market timing = 113.8 – 83.8 = 30% (Alpha generated by us)
And note that this is when there was no serious correction or recession during 2014 - 2019.
If you look at our current portfolio returns, it will become clearer. We had started our portfolio advisory service in May 2018, and since than it has generated 40.5% compared to -9.5% of Nifty, as on April 23, 2020. A big difference of 50% in just two years!
One big reason of this superior performance is that we had recommended to exit 85% of funds in February this year and the rest in first week of March, thus protecting our clients’ capital from this severe corona disaster.
Is it possible to time markets: why most people find it impossible?
It is a very sad development that due to vested interests; mutual funds have made people believe that it is impossible to time the markets and one should always stay invested. Mutual funds make money only when people stay invested in funds. You will rarely find a mutual fund manager recommending exit from equity funds, even if there are obvious and grave dangers ahead!
Is it possible to time the markets? Yes, we have been doing it 100% correctly since 2014. But one must note that it is not possible with traditional fundamental analysis or technical analysis. Occasionally you may find that some economist has correctly predicted a recession, but none of these people have been consistently correct!
How can it be done?
How do we do it? Well, the ONLY way to consistently predict the major turning points is to develop an algorithm. It is difficult to explain algorithms here, but in brief – these are quantitative tools that work as a set of rules. Once certain conditions are met, an algorithm will give an unambiguous buy or sell signal. It has an unbeatable advantage that it is 100% objective, there is no role of subjectivity. A robust algorithm will always deliver consistent performance – like the one we use. It took over five years to build and test this algorithm, before putting it to use in 2014.
Since we cannot divulge our algorithm’s internal functioning, we had decided to freely publish its outcome so that investors can build trust on its capability. All the buy/sell signals on Nifty were posted online and results have been compiled in one place at - Market Signals.
You will be surprised to see this article - The next Recession & a 75% Correction – Are you Prepared? We had posted this market warning on Feb 14, 2020 itself! Our algorithm was flashing a sell signal but there was no indication of a severe corona threat at that time. But since there was a clear signal for a big correction, so we compiled possible reasons and posted that article. Though environmental threat was mentioned in that article but not specific to any pandemic. What we want to convey is that we can identify major turning points well in time even if the threat is not known (Black Swan events). Same holds true for identifying major rallies (e.g. is the corona correction over, or it will slide further after this bounce back?).
Multiple Cross Checks on Algo Signal:
If we get a long term entry signal in Nifty from our algorithm, then we do not just blindly follow it. It is cross checked with Bank Nifty, Nifty 500, sectoral indices, Dow Jones Index, crude oil, and Copper, and if we find that majority of these are also indicating an entry position then only we consider recommending a long term buying. And before finally recommending to our subscribers, we also check top 20 stocks in Nifty Index in the similar manner. So our recommendation is not based on analysis of just Nifty alone. It is based on confirmation from major indices, key sectors, metals and energy trends, and the top stocks. One may expect some error from a single index, but a long term entry signal in majority of all these can hardly be a coincidence.
What you get in this plan:
- You will get details of our model stocks portfolio which mentions recommended entry price and proportion in the portfolio. Plus during every year you will receive 12-15 stock recommendations. There is no target price given by us, we will inform when to exit.
- You will get research notes including investment rationale and growth drivers for all portfolio stocks and for all other recommended stocks (sample on site - Sanofi)
- You will be informed about buying and selling decisions by WhatsApp
You will be informed about major market signals by email and WhatsApp, whenever a big change in market direction is expected.
- Every Monday you will get a weekly newsletter with a concise market view
How to Avail this Service
First register on our website and then subscribe online.