Factor Investor Report – April 2021
All things Factor Investing
Editor’s note
This month there is a lot of activity in the stock and sector rankings. We are making the stock ranks on a medium term look back instead of the longer term look back. So, you will see more frequent changes here. Some interesting recommendations for reading.
We would like to hear from you about anything else you would like us to write about. This report will also be available at factorinvestor.substack.com and you can write to us at investor.relations@qedcap.com
20th April, 2021
1. Invest-O-Meter
2. Sector Ranks
3. Stock Ranks
4. Reading Corner
1. Invest-O-Meter
We are seeing sideways action in the markets now. Breadth indicators are still strong but overall market is in a range. Monday gap down and recovery during the week kind of pattern is playing out in the Nifty. Stay safe in markets and when you go out.
2. Sector Ranks
We keep track of sector ranks as well to understand sector rotation. This sector ranking is done on a long term “relative momentum” basis of the respective sector indices. We also look at sector ranks on a medium term look back time frame.
Autos fall one rank in the long term sector ranks, led by fears of damage to the economy and consumer sentiment in the second wave of the pandemic. Banks remain at 3 and finance falls a rank to 5. Metals continue to be at the top of the table. Pharma climbs a couple of ranks. And FMCG climbs a notch up. If the second wave continues, then expect the defensives to come back.
Metals stay at number one in the medium-term ranks. MSME concerns drive banking down from number 4 to 7. Pharma jumps sharply from 10 to 2. FMCG climbs from 9 to 5. Showing that medium term jitters are making investors defensive.
3. Stock Ranks
An important component of our process is ranking stocks on Momentum and Low Volatility over a look back period of 6 months. In the table below we show the top ranked 20 stocks in our Mid and Small Cap universe. The rank is a combined score of Momentum and Low Volatility. It also shows the ranking of the stock one and three months ago.
Lots of action here. Kajaria is consistently at the top. Max Financials is strong. Also strength in Chemicals – Galaxy and Aarti are represented here. All in all a diversified list.
4. Reading Corner
The Changing Nature of Momentum
Investors sometimes want to pigeonhole investing factors. Doing so makes us more comfortable with the factor and makes us believe we have a better feel for the types of stocks we will get if we invest using it. With factors like value, this can be a somewhat productive exercise. Momentum is an entirely different animal, though. Investors tend to associate momentum with growth stocks. If you try to name a typical momentum stock off the top of your head, you will probably think of names like Google or Facebook or Amazon. And that is especially true in the past decade. Read on….
Block by block: How asset allocation can help maneuver market volatility and save the heartburn
Financial advisors can now use new-age investment avenues, just like LEGO blocks, to create solutions to match goalposts through asset allocation. They can finally move beyond equities and gold, and design low-cost, customized portfolios for clients, based on their goals, time horizon, and risk appetite. But there are certain things to keep in mind. Here’s a deep-dive. Read on to find out how
When the Fund Stops: The untold story behind the downfall of Neil Woodford, Britain’s most successful fund manager by David Ricketts
Neil Woodford was the UK’s most celebrated fund manager. Savers who invested £1,000 with him in 1988 saw their money increase to £25,000 over 25 years. At the peak of his career he was managing £33 billion for hundreds of thousands of investors. When he started his own fund management company in 2014, within just a few weeks it had attracted £5bn from his loyal fan base, including some of the City of London’s biggest hitters. Life was good. Away from work he was collecting high-performance supercars and chunky designer watches; he was rarely out of the saddle of his favourite horse. The BBC called him the “man who can’t stop making money”. And then it all came to a sudden stop.. Read here
We would like to hear from you about anything else you would like us to write about. This report will also be available at factorinvestor.substack.com and you can write to us at investor.relations@qedcap.com
(Disclaimer: Nothing in this report should be construed as investment advice. This is purely for educational purposes only. Please consult an investment advisor before investing.)