Getting into Momentum the ‘Wright’ Way

The Wright Momentum smallcase was launched almost exactly two years ago, in November 2020, in a market ripe for Momentum investing and the reception it has received has also been beyond exciting. The first year for Wright momentum was a dream run, with almost 100% returns within a year. However, in the last 12 months, it has been tackling volatility but has fared much better than the index.

Read the full story on Wright Research’s blog.

The month of October has not been favourable for Momentum strategies. A crash was witnessed in high-momentum stocks. Despite all odds, Wright Momentum was able to beat the market. The smallcase has been rebalanced at the start of November, keeping in mind the recent market developments.

as of November 6, 2022

The multi-baggers of Wright Momentum

Wright Momentum has had eight stocks turn multi-baggers, and three of the multi-baggers have been in the portfolio for the entire two years that the strategy has been live. If we look at the distribution of returns from the stocks in the portfolio, we’ll see that the average return has been 39%, but the distribution is skewed by only a few stocks that have turned multi-baggers.

The Multibaggers in our portfolio is widely recognised, however, momentum stocks have had many investors herding them, so many of us would already know of these stories.

The top performers of our smallcase have been: 

• Adani Enterprises
• Tata Elxsi (exited in November)
• Adani Total Gas
• Tube Investments
• Deepak Nitrite (exited a few months ago)

Auto sector’s performance and its Impact on the smallcase

Diwali came with a bang for the auto sector. Over four lakh buyers bought their dream car in 32 days between Navratri and Diwali to fulfil their personal mobility needs. This year, sales were 30% higher than the festive season last year.

This year’s festive season is considered the first normal season experienced by the industry with zero restrictions since Covid-19 hit in 2020. There is already a lot of pent-up demand for automobiles being released, and the supply chain side issues are also clearing up.

These numbers prove that the consumer sector of our large economy is gaining from strength to strength and is in the right place to buy. Wright Momentum currently has 4 auto stocks accounting for 14% of the total portfolio which is the highest weightage for a particular sector in the current allocation.

Current allocation & future outlook for Wright Momentum

The portfolio is heavily allocated towards the Automobile and Banking and Financial Services sectors, with some additions in cyclical stocks that have come in recently. Banking and Financial services have turned into the market’s favourites with fantastic earnings and strong projections. This sector is expected to be strong soon. Consumption saw a boost in the festive season, and in a moderate inflationary environment, expect auto, electronics and consumer discretionary to continue to be strong. 

Wright Research is also excited about the domestic cyclical due to the rising CAPEX in the economy, which makes them bet on logistics, oil & gas and other linked sectors.

Insights into the latest rebalance issued on 1st November

Additions in November

Deletions in November

While we saw some examples of multi-baggers which we have held onto for two years, the average holding period of the portfolio had been four months. Again the distribution is skewed by a few long-term holdings while a more significant number of stocks are churned much more quickly.

Sector-wise allocation in November

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Note: 

• The contents of this blog should not be considered as investment advice.
• Investing in stocks and ETFs are subject to market risk. Read all related documents & consider all risk factors before investing.
• Wright Research & Capital Pvt Ltd is a Registered Investment Adviser (RIA) bearing SEBI registration number INA100015717. Disclosure: https://bit.ly/wr-mo