Smallcase Mi_ST_ATH : A historical returns analysis over 20 years

The smallcase Mi_ST_ATH is a concentrated momentum portfolio of up-to 10 stocks. It is designed to chase highly liquid stocks that are hitting new All time highs and then trail the gains till the stocks start to drop off using proprietary exit methodologies. The entries and exits are all non-discretionary and the portfolio is provided as an advisory smallcase at weekendinvesting.smallcase.com

In this blog piece I would like to compare a back-test of rolling returns on the strategy as per the existing data set for the last 20 years.

The three sets used are rolling returns of 3 years, 5 years and 10 years.
The assumptions are an ideal world with no cap gains tax and no slippages. Charges of brokerage and statutory nature are applied as they exist today for discount brokerage.  A risk free liquid return of 5 pct annualized is assumed when capital is not at play. The data set used is that as it exists today so some survivor-ship bias error can be there.

1 Year rolling CAGR (%) (Calendar year. Last date 17 Nov 2019)
Average CAGR : 27.59%
Max Loss : 43.35% Max Gain : 117.12%

2000 -11.91
2001 0.98
2002 -0.53
2003 117.12
2004 12.04
2005 48.4
2006 20.51
2007 106.78
2008 -43.35
2009 41.69
2010 13.52
2011 -11.58
2012 39.29
2013 5.41
2014 79.15
2015 50.17
2016 -11.83
2017 111.72
2018 -27.89
2019* 12.11

 

3 Year rolling CAGR (%) (From – To Calendar year / Last date 17 Nov 2019)
Average CAGR : 28.15%
Max Loss : 3.97% Max Gain : 73.25%

2000 2002 -3.97
2001 2003 29.71
2002 2004 32.83
2003 2005 53.19
2004 2006 26.63
2005 2007 43.67
2006 2008 6.8
2007 2009 19.07
2008 2010 1.03
2009 2011 15.21
2010 2012 12.71
2011 2013 12.59
2012 2014 52.1
2013 2015 42.66
2014 2016 38.5
2015 2017 73.25
2016 2018 31.37
2017 2019* 19.36

 

5 Year rolling CAGR (%) (From – To Calendar year / Last date 17 Nov 2019)
Average CAGR : 28.87%
Min Gain: 5.4% Max Gain : 60.81%

2000 2004 15.85
2001 2005 29.32
2002 2006 33.56
2003 2007 48.35
2004 2008 15.47
2005 2009 20.3
2006 2010 17.19
2007 2011 12.75
2008 2012 5.4
2009 2013 19.79
2010 2014 28.69
2011 2015 39.03
2012 2016 39.09
2013 2017 60.81
2014 2018 45.14
2015 2019* 31.1

 

10 Year rolling CAGR (%) (From – To Calendar year / Last date 17 Nov 2019)
Average CAGR : 25.81%
Min Gain : 17.6% Max Gain : 33.16%

2000 2009 18.4
2001 2010 22.92
2002 2011 20.71
2003 2012 25.73
2004 2013 17.61
2005 2014 25.93
2006 2015 27.02
2007 2016 26.31
2008 2017 32.99
2009 2018 33.16
2010 2019* 33.13

Observations:

What is evident from this study is that over a 5 yr or above period the minimum CAGR in any 5 year period was 5.4% and for 10 year period a minimum of 17.6% CAGR was achievable. Even in 3 years rolling period expect one start case of 2000-2002 of -3.97% CAGR, all other 3 year periods were positive and only one of them being in single digit returns.

Over the last 20 years, in 1 year returns the strategy was in the red for 7 of those 20 years, in the 3 years study only one such period and over 5 and 10 year study there were no loss periods. Thus long term continuation of strategy yields positive returns.

Assuming even if one started at the worst time in the last 20 years which was the start of CY 2008 , in one year you would have been at -43%, at end of 3 years at CAGR of +1%, at end of 5 years at CAGR+5.4% and at end of 10 years at CAGR of +32.99% or an investment of INR 100 at start of 2008 would have become INR 1730 by the end of 2017, such can be the power of compounding.

If you stayed long enough with the strategy over 10 years one would have got a minimum return of CAGR 17.6% or a max CAGR of 33.1%

This is just a study to reassure oneself the efficacy of using such systems over time. My own capital is deployed the most in this smallcase and i am awaiting the fruits of this portfolio as much as hundreds of other users.

Thanks for reading. Do share your comments or critique.

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