WeekendInvesting Smallcases : a primer

WeekendInvesting Smallcases

Hi folks, this blog post is a basic intro to Weekendinvesting Smallcases.  A lot of folks had come back saying they have not fully been able to grasp how this works and hence this primer.

First some basic definitions for better understanding..

What is momentum investing?
Momentum can be simply understood as a phenomenon that rising stocks tend to rise more and falling stocks tend to fall more.  Momentum Investing the way we practice it at weekendinvesting.com thus is an alternative investing style of investing in a basket of stocks that are rising, with non discretionary pre defined conditions of entry and exits.

How does a typical momentum portfolio look like ?
Three portfolios we have created as smallcases are 10 to 20 stocks each with equal weights to each stock at the start. The three smallcases are constituted from different market segments for different risk profiles. More about each smallcase in subsequent blog posts.

What is Weekendinvesting.com?
This is an SEBI registered advisory service that is focused on use of momentum for investing. Various products catering to different risk profiles are offered by the advisory.

What is a Smallcase.com?
Smallcase.com is Fintech company and is a thematic portfolio execution platform.  It has integrated its platform with most of the leading brokers so that you can execute the strategy of an advisor (like Weekendinvestng) through the smallcase platform in your own brokerage account at a very low cost. Each such portfolio is known as a smallcase. The smallcases promoted by Weekendinvesting  can be seen at weekendinvesting.smallcase.com

So now, with these introductions lets jump in to the discussion..

Investing can be done in many ways. viz  Discretionary vs Non Discretionary style of execution and/or Qualitative vs Quantitative form of analysis.

In discretionary investing, the manager has the discretion of how to invest , mostly using qualitative methods, while in non discretionary the manager invests based on a laid out investing principles and/or quantitative rules. There are cases where you can overlap the two but for simplicity we leave those out here.

The most common and conventional style of investing is a value/growth fundamental approach. One values the underlying company and buys it if seen under-valued and sells when seen to be overvalued. This approach has its own shortcomings since finding the correct valuation is not everybody’s cup of tea. Experienced value investors have also failed at this repeatedly. Additionally, with low cost global money bags sloshing around, valuations of all markets have gone much higher than historical valuation averages thus depriving real value investors of buying opportunities at cheaper or fair prices. In fact there is a chorus of concern today that value investing has changed dramatically over the last decade and may even be dead. There is a tremendous debate about this and by now you know, on which side i stand 🙂

There are other types of  investing factors as well.  So just like value or growth investing, we can also invest using singular or multiple factors like Market-cap, Quality and Momentum etc. We will restrict this discussion to momentum investing in this blog piece.

So as defined above a portfolio of stocks that are rising (in price) are chosen based on certain criterion and is reviewed on a weekly basis. Once a week, at the end of each week, the portfolio is re-balanced (reviewed). If the stocks in the portfolio still satisfy the conditions for their inclusion in the portfolio they stay, else they are sold and other new stocks which satisfy entry conditions replace them. The portfolio is started with equal weights and later each new entrant comes in at a specified allocation (say 5% allocation in a portfolio of 20). The above is how we do it at weekendinvesting.com and there are many other ways of doing this as well.

Momentum investing has been successful over the last 200 years and this has been documented well in numerous studies and research done over last many decades. Momentum investing is not prevalent because of its counter intuitive nature (buying high and selling higher VS conventional buy low and sell high). Also, there is no narrative (honey laced story) or vested interests that are tied to stock selection or exits and hence fund managers do not wish to pursue this style of investing in general or at-least do not show that they are doing so.

Weekendinvesting.com has been a pioneer in momentum products since 2016. It has launched several products that cater to different risk profiles of users. It has achieved results far in excess of the market benchmarks to date and has helped expand the market for momentum investing in the Indian markets. In an attempt to bring momentum investing to new investors and the retail users who wish to manage his/her portfolio without any back-office hassles (virtually using a single click), Weekendinvesting tied up with Smallcase.com in Jan 2019 to launch three smallcases.
This style of investing essentially democratizes the portfolio management services space that is available to only large investors and makes the same professional advisory available to smaller portfolios at lower costs.

Anybody who would like to buy a weekedinvesting smallcase, simply can go to  weekendinvesting.smallcase.com, choose the smallcase you are interested in /enter your details /chose a subscription mode/ complete the payment step and you are instantly on boarded. All of this takes less than 5 minutes. The user then funds their broking account and buys the small case with a single click of the button. Hereon, they get a mail every Monday morning for the rebalance, and a single click mirrors your portfolio to the model portfolio. That is it! Everything else is taken care of. Your money and stocks stays in your own brokerage account, and you retain full control over your portfolio at all times.

The users’ back-office reporting is taken care of by their own broker and the auto execution frees him from the hassles of the re-balancing steps. They can also see how their smallcase is performing using a performance index and a smallcase support team is always there to answer any queries within hours.

The subscriptions to these service are available on a low monthly, quarterly and annual charge basis. The recommended minimum size of the portfolio is INR 1.5-2 Lacs and above but you can also gradually build it step-wise if you like. You can choose to pay one time and renew after each period or can select a auto charge option on the subscription. The auto-charge can be stopped at any time by sending in an email. You can seamlessly move between various plans if you like at the end of the period.

Combined with the annual service plan (only), we include the popular weekend investing service guarantee. Essentially, if in any year the model returns are less than 8%, your subscription is rolled free for additional periods till such time the model achieves a minimum of 8% annualized from your start date. This is a market-wide unique offering that makes sure that the advisors’ goals remain in line with that of the user and that you pay only for performance.

I hope you liked the simple information presented here in this piece. Do send in feedback or queries if you have any. In the next blog post next week, I will introduce you to our first smallcase Mi_LT_CNX200.

Happy investing!

Details about the smallcases are at weekendinvesting.smallcase.com
Additional details at weekendinvesting.com/weekendinvesting-smallcases/
Or Email me at alok@weekendinvesting.com / Twitter @Weekendinvestng

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