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Investing in stocks is no less than watching a seed grow into a tree. You spot the right business and watch it weather storms, grow and make you rich.
But picking the right businesses from a sea of duds demands hours of exhaustive analysis, delving into countless metrics.
That's where Value Research Stock Ratings swoops in, aiming to simplify stock investing and streamline the entire process. It can help you quickly identify promising stocks with the potential to beat the market and make comparisons effortlessly without sifting through numerous financial parameters.
Also, by relying on our novel rating system, you can identify stocks with a higher probability of weathering market storms, allowing you to ride out the ups and downs more smoothly.
Numbers back our claims. We rigorously tested our rating system on historical data spanning a decade. First, we constructed two equally weighted portfolios comprising our top-rated (four and five-star composite ratings) and low-rated stocks (one and two stars), respectively, for each of the last ten years starting FY13. Next, we checked how each of these portfolios performed in the subsequent five years against the BSE 500 index*.
Our top-rated stocks vs. the benchmark
Our portfolio underperformed solely during the pandemic period (FY18-23)
| Period (FY) | 5Y returns CAGR (BSE500) (%) | 5Y returns CAGR (Top rated) (%) | 5Y returns CAGR (Low rated) (%) | Alpha generated by top rated (% point) | Alpha generated by low rated (% point) |
|---|---|---|---|---|---|
| FY13-18 | 14.7 | 33.6 | 25.2 | 18.9 | 10.5 |
| FY14-19 | 13 | 22.3 | 13.2 | 9.3 | 0.2 |
| FY15-20 | -0.2 | 3.3 | -7.9 | 3.4 | -7.7 |
| FY16-21 | 14 | 14.1 | 9.8 | 0.1 | -4.2 |
| FY17-22 | 13.2 | 15.2 | 11.3 | 2 | -1.9 |
| FY18-23 | 10.1 | 7.8 | 8.7 | -2.3 | -1.4 |
| Outperfomance probability (%) | 83.3 | 33.3 | |||
| *We used BSE 500 index as the benchmark index as our top rated stocks encompass large, mid and small caps. | |||||
The portfolio of our top-rated stocks outperformed the benchmark index 83 per cent of the time!
What sets our rating system apart is its adaptability. We understand that each sector has its own nuances, and a one-size-fits-all approach doesn't cut it. That's why our unique rating methodology takes into account the specific criteria needed to evaluate stocks across diverse sectors. For example, we rated banking and financial services stocks based on parameters unique to the sector.
We repeated the above exercise for banking and financial services.
| Period (FY) | 5Y returns CAGR (BANKEX) (%) | 5Y returns CAGR (Top rated) (%) | 5Y returns CAGR (Low rated) (%) | Alpha generated by top rated (% point) | Alpha generated by low rated (% point) |
|---|---|---|---|---|---|
| FY13-18 | 15.8 | 35 | N/A | 19.2 | -- |
| FY14-19 | 18.6 | 113.2 | -49.4 | 94.6 | -67.9 |
| FY15-20 | 1.1 | -35.8 | -80 | -36.9 | -81.1 |
| FY16-21 | 15.3 | 30.9 | -43.7 | 15.5 | -59 |
| FY17-22 | 11.3 | 53.1 | -56.3 | 41.8 | -67.7 |
| FY18-23 | 11.1 | 33.9 | 12.1 | 22.8 | 1 |
| Outperfomace probability (%) | 83.3 | 20.0 | |||
| We have not rated non-banking financial services companies on a historical basis; we have not yet rated any insurance company. There were no banks with a one and two star rating in FY13. | |||||
Like before, the portfolio of our top-rated banking stocks outperformed the BSE Financial services index 83 per cent of the time!.
Who should use Value Research Stock Ratings
Value Research Stock Rating is based on our long-term investing principles. Our rating system may not help you gain from the unpredictable wild movements of some of our low-rated stocks. That is the nature of the markets.
But if your goal is to build long-term wealth, Value Research Stock Ratings should be an indispensable part of your investing journey. It can give you the edge you need to get rich off the markets.
Also read: Are your stocks financially healthy?
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