Author: shyam

Are You Feeling Lucky? The Magic Formula Edition

The markets have corrected a lot over the past couple of weeks. And some of you may be considering jumping in to “buy the dip.” If a plain vanilla index ETF like the Nifty Bees is not your cup of tea, then you should consider “Magic formula investing” – an investment technique outlined by Joel Greenblat in his book “The Little Book that Beats the Market.” This technique beat the S&P 500 96% of the time, and has averaged a 17-year annual return of 30.8%

The formula is based on a simple, combined ranking of Return on Capital (previous) and Earnings Yield (previous). You invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month period. Re-balance the portfolio once a year, selling losers one week before the year-mark and winners one week after the year mark. Rinse-repeat.

We went one step further and setup a Theme that invests in NSE stocks that fit this criteria. Check out the “Magic Formula Investing” theme – a portfolio of 10, equally weighted stocks for the value investor in you.

[stockquote]PRECOT[/stockquote]

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Are You Feeling Lucky? The Earnings Yield Edition

The markets have corrected a lot over the past couple of weeks. And some of you may be considering jumping in to “buy the dip.” If a plain vanilla index ETF like the Nifty Bees is not your cup of tea, consider these stocks, ranked based on historical Earnings Yield, as the next filter, after Return on Capital:

ARCHIES [stockquote]ARCHIES[/stockquote]
MAHSEAMLES [stockquote]MAHSEAMLES[/stockquote]
TATASPONGE [stockquote]TATASPONGE[/stockquote]
BHEL [stockquote]BHEL[/stockquote]
SASKEN [stockquote]SASKEN[/stockquote]

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Are You Feeling Lucky? The Return on Capital Edition

The markets have corrected a lot over the past couple of weeks. And some of you may be considering jumping in to “buy the dip.” If a plain vanilla index ETF like the Nifty Bees is not your cup of tea, consider these stocks, ranked based on historical Return on Capital (ROC), as the first filter:

COLPAL [stockquote]COLPAL[/stockquote]
ONGC [stockquote]ONGC[/stockquote]
ASIANPAINT [stockquote]ASIANPAINT[/stockquote]
ITC [stockquote]ITC[/stockquote]
ULTRACEMCO [stockquote]ULTRACEMCO[/stockquote]
TTKPRESTIG [stockquote]TTKPRESTIG[/stockquote]
SUNTV [stockquote]SUNTV[/stockquote]
PAGEIND [stockquote]PAGEIND[/stockquote]

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Banking Stress Charted

2s10s

The last time the yield curve inverted – the difference between the 10 year and the 2 year went negative – in recent memory was back in Feb 2012.

Surprisingly, no apparent correlation with bank stocks though.

So what gives?

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Weekly Recap: Buy One Suit, Get Three Free

NIFTY.2013-08-08.2013-08-16

The Nifty went down 1.04% for the week, but yesterday was the proverbial “Black Friday” with the index tanking -4.08% in one day.

Index Performance

Banks were the worst hit with NPAs coming to roost. Plus the CBI is investigating debt restructurings that were a bet too promoter friendly.

indexperf.2013-08-08.2013-08-16

Top winners and losers

ABIRLANUVO +8.71%
IDEA +8.83%
TATAMOTORS +12.61%
BHEL -10.09%
TITAN -9.05%
YESBANK -8.74%
Titan was the lamb to the slaughter with the RBI and the Finance Ministry hell bent on curbing jewelry sales. Idea continued to baffle sane investors.

ETFs

GOLDBEES +8.50%
INFRABEES -0.10%
NIFTYBEES -0.76%
JUNIORBEES -1.24%
BANKBEES -3.46%
PSUBNKBEES -11.62%
Banks got no respite while paper gold surged. How long before the government annexes the gold in the gold ETFs?

Advancers and Decliners

adline2.2013-08-09.2013-08-16

Yield Curve

The yield curve continued to shift up. Maturities out 5 years mostly flat but short-term looks stressed.

yieldCurve.2013-08-08.2013-08-16

Sector Performance

2-3 wheelers over-turned their last week’s under-performance.

sectorperf.2013-08-08.2013-08-16

Thought for the Weekend

Linear thinking is dangerous. It is the easiest form of reasoning, lying on the path of least resistance. The simpler the path, the more readily people will march along it. Linear arguments are easy to make, as they require the least amount of evidence — past data points with a straight line drawn through them. However, the larger the crowd that follows the wrong line of reasoning, the more people pile in, and the greater the consequences if they are proved wrong.

Source: Ben Bernanke: Buy One Suit, Get Three Free

 

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