MoneyWorks4Me
Superstars 200 Multicap

Superstars 200 Multicap helps you build a strong portfolio using multiple methods

1. Helps you invest your current surplus in the “Best stocks to Buy today”.
2. You can invest your regular monthly savings in a recommended set of Superstar stocks
3. You will receive buy and sell recommendation on stocks from the coverage universe of 200 stocks. Our Buy list is concise and comprehensive; not just a long list of possibilities, creating confusion and defeating the purpose of advice. You can also invest in other opportunities from the coverage using the research available to you.
4. Take informed decisions using the Moneyworks4me Platform. This helps you stay on top of your investments, stay invested for the long term which is key to success in investing.
5. Get Booster stocks recommendations (typically mid and small cap) that help you enhance your returns. Booster stocks tend to report higher growth or are available at deep discount which leads to higher returns, albeit with higher volatility. You get sell recommendations when these are unlikely to enhance your portfolio returns any further
6. Superstars 200 can access thematic investing portfolio which have megatrend backing the theme to enhance returns. It includes stocks that are close to buy zone and in analyst’s watchlist. By conducting your own research on that list, you can select stocks for your satellite portfolio or do an SIP.
7. Superstars 200 can come with Portfolio Optimizer which deep dives into your portfolio to prune it, reshuffle it with stocks that are worth holding on and replace the others with our recommended stocks today.

The portfolio will comprise of mix of stable companies with high profitability and companies that are at the cusp of upcycle with strong medium term prospects. Most of the companies will be high quality when measured in Return on Capital Employed and high free cash flows. We do not participate in highly cyclical sectors like mining, metals or commodities as they do not deliver consistent returns.

At MoneyWorks4me, we believe that multi-cap approach, mix of Core and Booster stocks, helps to achieve consistent performance with relatively less volatility. There is no point investing in an asset that is so volatile and inconsistent that you cannot stay invested in it to realize those high returns.

A mix of Core and Booster stocks helps you stay invested and recover faster from correction with help Core stocks and realise healthy returns.

Market levels or single valuation metric of a broad market doesn’t tell much about return potential of all stocks in the market. It is market of stocks and not one stock market. What it means is, there are 100s of companies listed that might be at different stage in cycle. Individual stocks may have more upside potential than narrow index like Nifty 50 or Sensex 30.

A stock price moves in lines with earning growth. Even though all stocks move in same direction in short term, their trajectories vary over longer timeframe.

Let’s assume the worst period with the benefit of hindsight when Nifty peaked in Dec’07 and 3 years after that.

If we observe individual stocks, we can see that markets made high in Dec’07, went through correction of 50%, and recovered in Dec’10. During this period Nifty was flat but more than 40% of stocks earned positive returns. Out of 185 large and mid-cap stocks (BSE Group A), 78 were positive, and more than half earned >13% CAGR. Together these 78 stocks earned >17% CAGR.

This proves a point that market levels must be used only in context of asset allocation to reduce equity and add to debt. If one can find enough bargains with good future prospects, he can remain invested.

We have developed a unique measure Nifty@MRP and Sensex@MRP, which is a hypothetical value of the Nifty/Sensex if all the 50/30 stocks were fairly valued. We have analysed the actual movement of the market vis-à-vis Nifty@MRP and Sensex@MRP for more than 5 years (real time) and back-tested our hypothesis over more than a decade. This has enabled us to confidently assess whether the market is over-valued or under-valued at any point of time.

Investors often focus on price rather than looking at upside potential. We always suggest making decision based on upside potential of an opportunity set. Our Upside Potential is evaluated based on current price. You may have missed the stock at Rs. 100 but even at Rs. 200 the same stock might be offering ‘More than 15% CAGR’ or ‘10-15% CAGR’. Instead of worrying about buying high, focus on upside potential even from the current price on fresh investment. Upside Potential is given for all stocks that we cover and it is on the basis of next 5 years. Remember this is not a precise tool, but surely a very good elimination process.

1. A stock showing less than 6% CAGR over 5 years must be definitely avoided for fresh/additional purchase, while it might be fine to hold on small allocation for positive surprises.
2. A stock showing more than 10-15% CAGR and More than 15% CAGR can be considered for new purchases. If now every stock, aggregate portfolio can deliver this level of return.

Low upside potential: With our proprietary price calculator and future estimates, we update valuation of best 200 stocks across large, mid and small cap. Using the same, we compute upside potential of stocks over 3- 5 year period from current price. While one cannot be 100% confident about future upside, if the upside is significantly lower than liquid fund returns based on valuation, we choose to exit. One doesn’t have to earn the last nickel out of every investment. Our aim is to earn reasonable returns on overall portfolio, not necessarily own stocks till they peak out.

Change in future prospects: Capitalism is very competitive. As soon as a company does well, competition can come in either with similar products or disruptive one to ruin the profitability. This leads to deterioration of profits and company’s downfall. In such cases, we would like to exit the investment. Other situations we exit is when the management of the company may treat minority shareholders unfairly which can lead to steeper loss over long term.

Equity returns are not linear like Fixed Deposits. They are erratic and returns can be concentrated in few years. So even equity does not earn positive returns every year, longer term investing is highly in our favour.

Past data shows equity returns are positive in 31 out of 41 years. There will be only one year out of four years of negative return. Out of 31 positive years, Equity earned more than 20% returns in 16 years. However, the returns were quite volatile during the year. It is advised to review equity return on annual basis versus monthly/quarterly. Longer investment period of 5 years or more has very high chances to earn healthy absolute returns.

Investing is a probabilistic field where you win or lose with no guaranteed outcome. Probabilistically, if you own a portfolio of good quality stocks, bought at reasonable prices and held for long term it is fair to assume you will definitely profit from stock investing.

Historically we had 85% calls turned into profits and 70% calls beat Index return. Investing is very rewarding as the calls that deliver positive returns ranged from 100-800% returns more than compensate for losses of 10-30-50%. Winners far FAR outweigh losers. So one has to consciously avoid looking at individual stock performance and focus on portfolio returns.

Focus on long term: Equity returns are erratic; do not get impatient in down years. Even if you invested just before correction (it can happen because no one can anticipate correction) stick with equity for 3 years minimum. Add more in form of SIP during correction phase with whatever amount you can afford and lower your purchase cost. Markets tend to recover eventually which will recover your older investments and also earn handsome returns on investments made during correction.

Diversify: Most investors do not diversify adequately, instead concentrate in just 3-4 favourite stocks. Future is uncertain and you do not have all the information today. Do not leave investing to luck and get hurt concentrating in few stocks. Diversify as instructed, upto Maximum recommended allocation. While there are no guarantees on individual stocks, portfolio of stocks will deliver very good returns over time.

Ensure you act on our calls: It is not possible to develop high confidence immediately on BUY recommendation; buy the stock partially and add more, upto recommended allocation, as your understanding improves. If you miss any big winner, you will start lagging our overall performance.

Use only surplus available for 5 years+: Do not invest funds that you may need before 5 years. It is true that stocks will reward in 3 out of 4 years, but one bad year in stock market should not coincide with your goal that will make you sell your investments at loss. Set aside funds for short term goals and emergency in ultra-safe assets like Fixed Deposits or Liquid Funds.