Equity Midas

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Founding Principles

Responsibility
Responsibility First
We Take Our Advice
We invest our own funds in our recommendations. Almost all our equity market investments are driven by EVM. Its our responsibility first, then our business. Skin in the game as they say!
Quant
Quantitative Approach
Proprietary Algorithm
Our recommendations are based on quantitative analysis of company performance and the market response. Tested over 15 years of data, Expectations Value Model (EVM) is the most consistent performer.
WYSWYG
WYSWYG
Uniform Opportunity
What You See is What You Get!! Our subscription window closes a day prior to releasing our recommendations. This ensures each subscriber has the same window of opportunity to invest in EVM recommendations.
Strong Foundation
Strong Foundations
Value Investing Principles
Our research is driven by Value Investing Principles. Value Investing is one of the most consistent investment strategies across multiple markets, time periods and cycles. We approach this proven framework thru the quants view.
Rules Based
Rules Based Investing
Structured, Disciplined Approach
We recommend being the markets for long term but rebalancing the portfolio periodically as new information is presented. This allows us to benefit from the new opportunities without compromising on the core principles.
Back Tested
Real-Life Back Testing
Excellent CAGR in Back Tests
"Real Life Back Testing" = Only data available as on the test date used to simulate real life situation. In our tests, an equal-weighted portfolio of EVM recommendations has out-performed its benchmark consistently.
Business Quality
Quality Businesses
No Compromise on Quality
Even when EVM does not recommend in holding our stocks for ever, there is no compromise on the quality of the business. A strong balance sheet & consistent operating performance are key stock selection criteria of EVM.
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Research Analyst Role

We are SEBI registered Research Analyst and not Investment Advisors. This means our expertise lies in researching and analysing stocks and giving our views/recommendations on those stocks. In our case, we publish them as recommendations.

 

An Investment Adviser on the other hand, works with you to plan your overall finances after understanding your financial goals. The advice offered by an Investment Adviser is personalised as against our recommendations which do not change based on individual financial situation/goals. Simply put, our recommendations are not personalised advice; it is the output of our research.

Unlike a PMS or a Mutual Fund, we are not involved in the actual trading of stocks. The actual buying and selling of the portfolio stocks is done by the subscriber himself/herself using their own trading and demat accounts.

Our service to subscribers is limited to giving access to the recommendations.

Value Investing

Investing is simple, buy low, sell high & make profit.  The core focus of investing, hence, has always been to identify stocks valued lower than their intrinsic value.

Any financial asset can be valued based on the expected returns (earnings, cash flow, dividends, etc.) in the future. These future returns when discounted at the expected rate of return (also called as discount rate)  yield us present value (or the intrinsic value) of the asset. Consider every company as a returns yielding machine. If you can forecast the expected returns, you can determine the present value. If the present value is higher than the market value, it is valued low and is a candidate for buying.

Value Investing is always a contrarian approach. Many great investors including Warren Buffett, Charlie Munger, Benjamín Graham, Peter Lynch, have their own interpretations of value investing but all of them have this trait in common. Value Investing is a game of patience, once you make your move, you have to trust the market to correct its mistake and re-value the stock to its appropriate level.

Even when the company maintains or betters it performance subsequently, it might take a few weeks to few years for the market to revalue the company. However, once you find such a company, which you bought at a relatively low price and which continues to deliver on its operational performance, you probably never need to sell such a wonderful asset! While value investing is perfectly correct in theory, its implementation in practice is much more complicated.

Predicting the future is no mean game. Even the people managing and running the business won’t be able to make correct predictions. The solution is Margin Of Safety.  Margin of Safety gives you the leeway to be wrong on the predictions but yet be right on making gains.

Rating Rationale

  • Our BUY Recommendations are the output of our proprietary quantitative model, Expectations Value Model (EVM). EVM combines financial performance, market expectations, and quantitative assessments to determine stock recommendations. To know more about the model, please visit: https://equitymidas.com/philosophy/
  • We divide the stocks in two sets viz. Large & Mid Caps and Small Caps. Top 6 companies as determined by EVM,from each sets, are given as our recommendations.
  • EVM can only be run after the annual results are declared i.e. on last day of May every year. Our BUY recommendations are hence released typically on 31st May (except when 31st May is a weekend/holiday)
  • When the next set of BUY recommendations are available, we simultaneously give SELL recommendations for the previous year’s BUY recommendations. In other words, we re-balance the recommendations once a year. Essentially, SELL recommendations only mean that the next set of BUY recommendations have been identified.
  • These are key tenets of EVM:
    1. Operational performance of the companies should be rewarded by the market, historically.
    2.  Market expectations are within the reach of the company for the next year.
    3. Company is fundamentally sound with good interest coverage.
    4. Rank the company based on valuations and probability of meeting the expectations.
  • Since EVM is run every year, the typical holding period for our recommendations is 1 year but few stocks may re-appear in our next year’s BUY recommendations.
  • We do not have any price targets.
Rating/Recommendation
Interpretation
BUYStocks identified by EVM with potential to deliver good returns (as a group) over the next twelve months. Total expected return includes dividend yields.

DO NOTE:
EVM being a quantitaitve model, has been backtested for the set of recommendations it genrates and not for performance of individual stock. Potentially, the variation in returns of individual stocks can be very high. We do not have target prices of target returns for our recommendations.
SELLHolding period of 1 year has been completed and new set of opportunities have been identified by EVM.

EVM Guidelines for Operating Performance Classification

EVM states that the market performance of any stock is closely correlated to the underlying company’s expected operating performance. Every quarter we analyse the operating performance of the recommended stocks against the expectations calculated by EVM.

 

We rank the recommendations based on the operating performance and group them in 4 quadrants based on expectations achieved in that quarter. Here is how we group them:

 

 

QUADRANT CLASSIFICATION PER EXPECTATIONS ACHIEVED (%) EVERY QUARTER
Quarter 1Quarter 2Quarter 3Quarter 4
Quadrant 1<=20<=40<=60<=80
Quadrant 2>20 & <22.5>40 & <45>60 & <67.5>80 & <90
Quadrant 3>22.5 & < 25>45 & < 50>67.5 & < 75>90 & < 100
Quadrant 4>25>50>75>100

According to EVM, the group meeting the expectations for that quarter should deliver better than market returns.