Buying the Worst

ORMI India 30 is based on a simple idea that the worst performers tend to outperform. The India 30 portfolio goes and selects the worst performing 30 stocks after they show an inflexion to reverse. This inflexion is a positive price trend and a positive Jiseki cycle.
The portfolio takes more than 150 days to turn around. This means that the stock selections tend to persist and stay in the portfolio.  As one can see that Bajaj Corp has the longest holding period of 231 days.

Now though this long period is an advantage for ORMI investors, long holding period also means comparatively less fresh entries. So in crux it takes a few months to come on to the ORMI model. Passive indices like ORMI need patient investing. To make it more fun to work with ORMI India 30, we supplement it with articles, thoughts, primers, technical updates and new research.
Today we have reviewed a part of the ORMI India 30, which we think can still be bought at current prices. The five stocks are A, B, C, D and E. The stocks are above key technical levels and are still running longs in ORMI portfolio.
In case you are still looking at more mid cap and blue chip stocks, we will be introducing ORMI India 15, which will be the best picks from CNX 100 portfolio (India top 100).

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Indexing: The INDIA 30 Orpheus Risk Management Index (ORMI) is based on proprietary algorithm.
The indices values that are disseminated today are broadly based on market capitalization methodology. Market capitalization methodology has been challenged globally for a few broad reasons. 1) As an asset strengthens it is given more weight 2) As an asset weakens it is given lesser weight. This on one side captures momentum but on the other side suggests investors to focus more on growth compared to value. This increases portfolio risk when market growth slows down or reverses, as has been the case since 2007. When markets contract, the erstwhile top performers push into red for extended period of time causing large drawdowns and emotional pain.
The India 30 Index is based on the above extreme reversion idea i.e. outliers tend to reverse, which suggests that investing is about value picking and extremes are prone to reversion. Our Index extends and fine tunes the idea first mooted by De Bondt and Thaler in their 1981 paper suggesting that 3 year worst losers portfolio tends to outperform the 3 year best winners portfolio.
Coverage India: CNX100, BSE500 traded stocks and Indian Indices.
Ayushi has done her masters in economics from Delhi School of Economics and then completed her Post-Graduation in Finance from National Institute of Securities Markets. She completed her graduation in Economics from Lady Shri Ram College. A keen econometrician, Ayushi enjoys financial modeling and risk management.