Morgan Stanley has created two sets of investment portfolios to “play” the poll results (MoneyControl)
Heads
The first is if there is a strong election result. Is basically a basket of high-beta, high-leverage, cyclical, strong short momentum stocks likely to outperform as the market gains conviction in a strong poll result.
Theme: Morgan Stanley’s Strong Election Picks Dec-2013
This portfolio’s beta is around 1.14. But if you are going to be bullish, why hold yourself back? The Market Fliers Theme does a better job of pushing the pedal to the metal, so to speak, with a beta of 1.84. High beta has been flying lately, the theme is +14.89% since inception, vs. the Nifty’s +4.31%
Tails
And the second is if there is a fragmented election result. Basically a good quality GARP basket, low PEG, high ROE, low beta and strong long-term momentum.
Theme: Morgan Stanley’s Fragmented Election Picks Dec-2013
This portfolio’s beta is around 0.54. But if you are going to play defense, commit! The Market Elephants Theme, with a beta of 0.27, barely has a pulse but beats the Morgan Stanley portfolio on both Sharpe and Information Ratio.
So, dood ka dood, paani ka paani!
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