In our last few posts we have discussed about India’s fastest and most consistent wealth creators in last decade. In today’s post we back test stock predictions made by Motilal Oswal annual wealth studies.

I have picked years  2006 -10 for our analysis so that we can have at least 3 years of stock performance data available for latest predictions. In addition to this for the sake of consistency I have kept Nifty and CNX Nifty midcap as a benchmark indexes to compare performances for all stock predictions.  Each year the studies had a value investing theme simplified into a mathematical model to identify prospective investments. Lets look at those predictions and how have they fared over years.

 2006 – The value investing theme was favorable terms of trade, the study states that a company enjoys favourable ”terms of trade” if its debtors are lower than its creditors. So favorable terms of trade could result in zero or even negative working capital. Whereas adverse terms of trade could mean very high working capital requirements, making the business unprofitable.

The above explanation was converted into a mathematical model and three stocks were identified with favorable terms of trade- HPCL, … Read the rest