Factor Investor Report - Sep 2021

All things factor investing

The stock ranks are back. And lots of action there as in the Factor and Sector ranks. An interesting podcast featuring the man who trademarked the term multi-factor investing. And the much awaited book from Ben Mezrich on the GameStop saga is here.

1. Factor Ranks

We rank the following factors based on long term (40 week) price performance. And on medium term (12+4 weeks) price performance.

Small Cap, Value and Momentum are at the top 3 rankings based on long term performance. However, please note we are using the Alpha30 Index for the momentum factor, which is a large cap universe. So there is momentum among large caps which is backed by the fact that market factor has climbed up a spot. Quality brings up the rear.

There is movement in the medium term ranks though. From last month Momentum or more precisely large cap Momentum has climbed from 4th to 1st place. Small Caps have climbed from 5th place to 3rd place and Momentum+LowVol combo is at the 2nd place. Value has started lagging and so has Low Volatility.

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.

Not much has changed since last month. Media has climbed two spots while pharma has fallen three. FMCG has also climbed a spot. There is more activity in the medium term ranks.

Lots of action here. Media climbs to number. However, Zee has a weightage of ~25% in the Media index, so this is being driven by one stock. IT is at number 2. Metals have fallen to 8th spot. There is however a divergence in defensives. FMCG is at number 5 while pharma is the bottom of the table.

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.

Jindal Stainless climbs up 4 ranks. JSW Energy remains at the top and is performing well. Mphasis, Radico, Century Textiles, SRF and SPARC have made good moves in a month.

4. Reading/Listening Corner Corner

Gregg Fisher, Multi-Factor Pioneer, Talks Investor Behavior, The Future Of Value, Investing In Innovation & Lessons From 20+ Years as a Quant.

You can hear the podcast here

Giving value a pass, BAAP investors hunt for quality picks to add to their portfolios

Classic value investing has got a drubbing in the post-2008 world. This year, it has made a comeback. However, not many believe that it will live up to its past glory. Most value chasers have become quality investors, who are now happy paying any price for good fundamentals. Read here

The Antisocial Network by Ben Mezrich

Ben Mezrich offers a gripping, beat-by-beat account of how a loosely affiliate group of private investors and internet trolls took down one of the biggest hedge funds on Wall Street, firing the first shot in a revolution that threatens to upend the financial establishment. It started on a subreddit forum called WallStreetBets – a meme-filled, freewheeling place where a disparate group of investors shared their shoot-the-moon investment tips, laughed about big losses, and posted diamond hand emojis. Until some members noticed an opportunity in Game Stop – a flailing bricks and mortar video-game retailer – and somehow rode a rocket ship to tens of millions of dollars in earnings overnight, simultaneously triggering unfathomable losses for one of the most respected funds on the street.

Disclaimer: Nothing in this blog should be construed as investment advice. This is purely for educational purposes only. Please consult an investment advisor before investing.