Mi ATH2

I am thrilled to announce the launch of a new smallcase – Mi ATH2

The smallcase Mi ATH2 is a high risk concentrated non discretionary 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 strategy will suit a portfolio allocation of 5 to 15L and this ideally should be a smaller component in your larger equity portfolio.

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.

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 11 odd years.

The three sets used are rolling returns of 1 year, 3 years, 5 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 Returns (%) (Calendar year. Last date 14 July 2021)
Average CAGR : 25.73% / Average ROMAD 3.18
Max Loss : 26.12% / Max Gain : 122.49%

Year	Returns (%)	MDD	ROMAD

2010	-1.30%	12.30%	-0.11
2011	-26.12%	28.70%	-0.91
2012	42.22%	3.83%	11.02
2013	-7.74%	16.41%	-0.47
2014	54.61%	9.15%	5.97
2015	20.37%	12.07%	1.69
2016	-9.51%	20.29%	-0.47
2017	68.61%	9.59%	7.15
2018	-24.61%	26.63	-0.01
2019	10.49%	7.43%	1.41
2020	122.49%	22.66%	5.41
2021*	59.23%	7.91%	7.49

3 Year rolling Returns (%) (Calendar year. Last date 14 July 2021)
Average CAGR : 28.46% / Average ROMAD 5.89
Max Loss : 7.27% / Max Gain : 380.14%

3 year rolling	To	Returns (%)	MDD	ROMAD

2010	2012	-2.03%	35.31%	0.06
2011	2013	-7.27%	29.18%	-0.25
2012	2014	112.91%	21.60%	5.23
2013	2015	97.73%	16.41%	5.96
2014	2016	91.54%	16.57%	5.52
2015	2017	225.06%	17.23%	13.06
2016	2018	108.55%	26%	4.18
2017	2019	71.48%	21.05%	3.40
2018	2020	112.02%	27.62%	4.06
2019	2021*	380.14%	21.43%	17.74

5Year rolling Returns (%) (Calendar year. Last date 14 July 2021)
Average CAGR : 30.64% / Average ROMAD 12.81
Max Loss : NIL / Max Gain : 684.57%

5 year rolling	To	Returns(%)	MDD	ROMAD

2010	2014	47.42%	35.31%	1.34
2011	2015	98.74%	29.18%	3.38
2012	2016	163.76%	21.06%	7.78
2013	2017	429.68%	16.57%	25.93
2014	2018	341.33%	26%	13.13
2015	2019	229.72%	26.99%	8.51
2016	2020	486.41%	26.99%	18.02
2017	2021*	684.57%	28.05%	24.41

Observations:

What is evident from this study is that over a 5 yr period the minimum CAGR in any 5 year period was 8.08% was achievable. Even in 3 years rolling period except 2010-12 at -0.68% and 2011-13 at -2.49% all other 3 year periods were positive and were above the 19.7% mark

Over the last 10 years, in 1 year returns the strategy was in the red for 5 of those 10 years, in the 3 years study only two such periods and over 5 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 11 years which was the start of CY 2011 , in one year you would have been at -26%, at end of 3 years at CAGR of -2.49%, at end of 5 years at CAGR+14.73% or an investment of INR 100 at start of 2011 would have become INR 198 by the end of 2015 in the worst 5 year period.

This is just a study to reassure oneself the efficacy of using such systems over time. Back tests can be indicative and guiding in nature but in way can predict what happens in the future.

Table of Contents