The Strategy Behind the Growth & Quality Edge Portfolio

The Growth & Quality Edge Model blends the reliability of large caps with the expansion potential of mid caps, giving you a balanced approach to long-term equity investing. This model focuses on high-quality, consistently growing businesses from among India’s top 200 listed companies.

Why Large and Mid Caps?

Large-cap companies are industry leaders with well-established market positions. They generally have strong balance sheets, access to capital, and diversified operations. This makes them more resilient during economic slowdowns. Thanks to their stable earnings and mature business models, they often pay regular dividends—providing investors with both income and capital appreciation.

On the other hand, mid-cap companies are in their growth phase. They offer greater upside potential as they expand operations, increase market share, and scale their businesses. Many of these companies have already proven their business models and are now transitioning into the next stage of growth. Including mid-caps in a portfolio not only boosts return potential but also enhances diversification, reducing overall risk.

How the Model Works

The model begins with a universe of the top 200 NSE-listed companies, selected based on full market capitalization. From this set, companies are evaluated using proprietary quantitative algorithms that focus on two main factors: Quality and Growth.

How We Assess Quality and Growth

Windmill Capital’s proprietary Quality Score evaluates companies using four key metrics: Return on Equity (ROE) for management effectiveness, Debt-to-Equity ratio for financial strength, Accrual Ratio to assess earnings quality, and earnings variability over five years to gauge consistency. For financial institutions like banks, NBFCs, and insurers, specific ratios such as Capital Adequacy and Insurance Leverage are used instead of gearing. Companies are then ranked into four quartiles, with Quartile 1 (Q1) representing the highest quality.

Similarly, the Growth Score is based on historical earnings per share (EPS) and revenue growth, identifying firms with strong and steady expansion. Companies are again sorted into quartiles, with Q1 indicating the highest growth potential.

Ensuring Safety with Risk Filters

To maintain a portfolio of only strong and reliable companies, we apply the following risk filters:

✅ Liquidity Filter

This checks how easily a stock can be bought or sold. Liquid stocks reduce transaction costs and allow investors to enter or exit positions without triggering sharp price movements.

✅ Promoter Holding Filter

We review both the total promoter holding and the level of pledged shares. A high percentage of pledged shares indicates financial risk and is filtered out to protect investors.

✅ Default Probability & Red Flag Filter

We eliminate companies with a high risk of default or those flagged under NSE’s ASM/GSM lists. Only financially sound, going-concern companies make it to the final portfolio.

Conclusion

The Growth & Quality Edge Model is a carefully curated strategy designed for long-term wealth creation. By combining fundamental strength, growth potential, and risk control, it helps investors gain exposure to high-quality large and mid-cap stocks without compromising on safety.

Whether you’re seeking consistent performers or the next breakout leaders, this model gives you a smart, balanced way to invest.

Disclaimer: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of a SEBI recognized supervisory body (if any) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice and nor to be construed as an offer to buy /sell or the solicitation of an offer to buy/sell any security or financial products.Users must make their own investment decisions based on their specific investment objective and financial position and using such independent advisors as they believe necessary.Windmill Capital Team: Windmill Capital Private Limited is a SEBI registered research analyst (Regn. No. INH200007645) based in Bengaluru at No 51 Le Parc Richmonde, Richmond Road, Shanthala Nagar, Bangalore, Karnataka – 560025 creating Thematic & Quantamental curated stock/ETF portfolios. Data analysis is the heart and soul behind our portfolio construction & with 50+ offerings, we have something for everyone. CIN of the company is U74999KA2020PTC132398. For more information and disclosures, visit our disclosures page here.