Nine momentum stocks with low volatility for 2019

Published: December 29, 2018 at 9:26 am

Here are nine stocks with momentum and low volatility for 2019 from the Nifty 100. This list will be published/updated on a monthly basis. Readers interested in momentum investing combined with low volatility can use this as a starting point. This is the previous month’s list:  List of stocks with momentum and low volatility (Nov 2018)

Momentum investing essentially means identifying stocks that have moved up considerably in the past 6-12 months and investing them in the hope that the trend will continue into the future. It is hope on the basis of past research as discussed here for the Indian and US markets: Momentum Stock Investing in India: Does it work?. Low volatility investing refers to identifying stocks with low price fluctuations and investing in them. Again this is based on past evidence: Low volatility stock investing: Does it work? Higher returns at lower risk?

As discussed in the first link above, there is a close connection between momentum investing and low volatility. In fact, most momentum stock picking strategies also include a way to filter out stocks based on volatility. That is, they prefer stocks that have moved up in the past (= momentum) with low volatility. Another idea that is closely related is to hunt for stocks that have stayed close to their all-time price highs.

I have previously published a list of stocks that have traded close to their “all-time” high and  30 Low Volatility Stocks from Nifty 100: Aug 2018 and  July 2018. Readers may be aware I have been testing low volatility investing with lazy investing portfolios involving low volatility So clearly, I am a fan of low volatility investing and would like to explore with a monthly listing such as this one.

Warning: Whether you choose stocks with momentum or low volatility or both, it is important to recognise when to sell the stocks. This kind of trend following requires serious levels of discipline and commitment.  You should be able to buy a stock without question and sell it without question if it no longer has enough momentum and/or low volatility.  If you get distracted by the valuation of the stocks, their ROE etc and hesitate or buy more than necessary it will not work. Please do not blindly use this list to buy and clutter your portfolio. This list will evolve in methodology with time. So be prepared for this. Do your own research about momentum and low volatility investing!!

Momentum Investing in India

You can watch this video version of the above-linked post to get an introduction to momentum investing

List of stocks with momentum and low volatility (Dec 2018)

To play it safe, I would like to stick with the Nifty 100. The full list can be downloaded from below.

Nine momentum stocks with low volatility for 2019

Procedure followed

1: Download last one-year stock price from moneycontrol. You can do this for any stock with this tool: Automated Earnings Power Stock Analysis With data

2: Calculate daily returns (usual and logarithmic)

3: Calculate standard deviation in daily returns (usual and logarithmic). This is the volatility.

4: Calculate CAGR of the last year. This is the momentum. Note that BSE uses CAGR/volatility as the momentum score

5: Calculate how many daily returns were positive. This is a measure of the quality of the momentum.

6: Since 71 of the 101 stocks studied had a one year return less than zero, we will short-list only those stocks with a positive return.

7: From this 30 stocks, we will demand that at least half the daily returns should have been positive. That is, out of the 247 daily returns, at least half should have been positive. This shortens the list to 19 stocks.

Sorted by decreasing volatility

Bajaj Finance Ltd.
UPL Ltd.
Tech Mahindra Ltd.
Bajaj Finserv Ltd.
Titan Company Ltd.
HCL Technologies Ltd.
Godrej Consumer Products Ltd.
Reliance Industries Ltd.
Dabur India Ltd.
Tata Consultancy Services Ltd.
Pidilite Industries Ltd.
Marico Ltd.
Infosys Ltd.
Housing Development Finance
Kotak Mahindra Bank Ltd.
Britannia Industries Ltd.
Hindustan Unilever Ltd.
Colgate Palmolive (India) Ltd.
HDFC Bank Ltd.

Sorted by decreasing return

Security NameCAGR
Bajaj Finance Ltd.41%
UPL Ltd.1%
Tech Mahindra Ltd.44%
Bajaj Finserv Ltd.10%
Titan Company Ltd.9%
HCL Technologies Ltd.21%
Godrej Consumer Products Ltd.15%
Reliance Industries Ltd.26%
Dabur India Ltd.22%
Tata Consultancy Services Ltd.56%
Pidilite Industries Ltd.31%
Marico Ltd.15%
Infosys Ltd.32%
Housing Development Finance15%
Kotak Mahindra Bank Ltd.17%
Britannia Industries Ltd.30%
Hindustan Unilever Ltd.30%
Colgate Palmolive (India) Ltd.15%
HDFC Bank Ltd.12%

If we further look at the standard deviation and demand a value lower than the median from the above 19, we will be left with 9 stocks.

Nine stocks with momentum and low volatility for 2019

Pidilite Industries Ltd.
Marico Ltd.
Infosys Ltd.
Housing Development Finance
Kotak Mahindra Bank Ltd.
Britannia Industries Ltd.
Hindustan Unilever Ltd.
Colgate Palmolive (India) Ltd.
HDFC Bank Ltd.

Download the full list of Nifty 100 stocks with 1Y CAGR, volatility and fraction of daily positive returns

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