I am thrilled to announce the launch of my new smallcase – Mi ATH2
The smallcase Mi ATH2 is a higher risk concentrated momentum portfolio. It is designed to chase highly liquid stocks that are hitting new All time highs or Multi year 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 .
Mi ATH2 is a momentum portfolio of 10 stocks carved out of the listed NSE stock universe above a market cap of INR 500 cr . The strategy is an extension of similar (not same) logic used in the popular Mi ATH strategy (not available for new subscription currently) . It may have some overlapping stocks with Mi ATH but it is likely to remain more volatile since we are dealing with under 1000 cr market capitalization stocks also here.
This is how the CAGR outperformance stacks up over last nearly 10 years
| Mi- | NNF Index | Nifty Index |
| 16.6% | 10.5% | 8.10% |
Nifty Next 50 Index
Nifty Next 50 universe is described by the National Stock Exchange website as “a well-diversified portfolio across sectors with top 5 sectors accounting for 76% exposure. The index in all has exposure to 14 sectors with 11 sectors having individual weight lesser than 10% each. This makes NIFTY Next 50 a well-diversified index strategy which may appeal to proponents of investment diversification”.
The Nifty Next 50 index is rebalanced by the exchange every 6 months. The current allocation of sectors and top stocks as of Oct 2020 is as follows
The performance of the Nifty Next 50 has dragged in the last few years with last 5 year returns of 6.74% vs 14.78% since inception in 1996. It is very likely that reversion to mean of returns will happen in the next few years and this index will outperform the Nifty in doing so. In the past over long term the Nifty Next 50 being more nimble than Nifty 50 stocks have outperformed in a big way ( see stats above). Yet there are shorter periods when the high concentration within Nifty ( example Reliance in 2020) have skewed the Nifty more as in the last few years. It may be time for outperformance again.
NNF10 Performance
The Strategy NNF10 is a momentum portfolio of 10 stocks from the Nifty Next 50 universe. The portfolio always has allocation to 10 stocks and never goes to cash. It also always has a 10% allocation at the start of each month to each of its constituents. The portfolio is balanced based on the closing prices on the last trading day of each month and the rebalance sent out for execution on the first day of the next month. The logic of the strategy is the classic momentum way to weed out losers and include winning stocks . You can say this is akin to the Darwin’s Theory of Evolution -Survival of the Fittest.
The strategy will require 5 min of your time on each first trading day of the month and you are all set to go. The smallcase smooth integration with top brokers ensures that this entire process is seamless and smooth. Your stocks remain in your brokerage accounts totally in your control and you retain full power to liquidate this portfolio at any point you like.
The performance of the strategy has been thoroughly tested on actual index constituents (survivorship bias free data) over the last 10 years. The data used is from March 2011 to Oct 2020 both included. This period of nearly 9.67 years have given us a CAGR of +16.69% vs +10.47% on the Nifty next 50 index. That is a HUGE outperformance !! The max drawdown too has come in at near 24% for the strategy vs 32% for the index. So on the upside the strategy beats the index, and on the downside, the strategy beats the index. Versus the Nifty, NNF10 numbers are even more stark ! Nifty has clocked a CAGR of just 8.08% and Max DD of near 29% in the same period. So the strategy is certainly outperforming all the relevant benchmarks by a wide margin!
The spread of monthly returns of NNF10 vs the Next 50 Index can visually show you the outperformance as well.
Rolling returns
The three sets used are rolling returns of 1 year, 3 years, 5 years starting 1 Apr 2011
One year Rolling returns ( Apr 2011 to Oct 2020)
| NNF10 | NNFIndex | |
| FY1112 | -4.3% | -1.9% |
| FY1213 | 16.6% | 7.4% |
| FY1314 | 27.6% | 20.0% |
| FY1415 | 48.2% | 44.4% |
| FY1516 | -0.3% | -3.5% |
| FY1617 | 51.3% | 33.9% |
| FY1718 | 15.0% | 13.6% |
| FY1819 | -0.6% | -0.9% |
| FY1920 | -11.5% | -25.3% |
| FY2021* | 26.5% | 29.5% |
Three year Rolling returns ( Apr 2011 to Oct 2020)
| NNF10 | NNFIndex | |
| FY11-14 | 42.3% | 26.5% |
| FY12-15 | 120.3% | 86.1% |
| FY13-16 | 88.4% | 67.1% |
| FY14-17 | 123.4% | 86.5% |
| FY15-18 | 73.4% | 46.8% |
| FY16-19 | 73.0% | 50.8% |
| FY17-20 | 1.2% | -15.9% |
| FY18-21* | 11.4% | -4.2% |
Five year Rolling returns ( Apr 2011 to Oct 2020)
| NNF10 | NNFIndex | |
| FY11-16 | 110.2% | 76.2% |
| FY12-17 | 232.3% | 140.5% |
| FY13-18 | 227.8% | 154.4% |
| FY14-19 | 155.5% | 110.0% |
| FY15-20 | 52.6% | 8.6% |
| FY16-21* | 93.8% | 45.8% |
Observations:
What is evident from this study is that over a 3 yr or above period the minimum returns are positive and in any 5 year period the minimum total returns on the strategy is 52.6% .
If you stayed long enough with the strategy over 5 years one would have got a minimum return of CAGR 8.82% or a max CAGR of 27.1%
One needs to let the strategy play its cycle and within a few years you will be able to find that the strategy OUTPERFORMS its benchmarks easily.
The strategy is LIVE now, open for subscription at introductory prices for a short time. Few hundred users have already registered in the last couple of days!
This is just a study to reassure oneself the efficacy of using such systems over time. Future performance is no guarantee but one can certainly say that if India markets have to perform, it will not happen without the Nifty Next 50 stocks which are the prospective candidates for inclusion in Nifty some day !
Thanks for reading. Do share your comments or critique.
