How We Screened 2500 stocks, to a watchlist of 100
We use the following factors to screen the stocks:
Market Beta: The correlation of the stock’s returns to the market index such as the S&P 500.
Momentum: The variation between the highest vs lowest price within the period (such as a year, 3 years, 5 years).
Size: Using the market capitalisation of the stock to explain the returns.
Valuation: Using ratios such as the price to earnings, price to sales and price to free cash flow, to explain returns.
Profitability: Using unit level profitability of the company to explain returns, and plan ahead.
Investment: Whether the company is investing in growing its business, and how it funds that investment - from its cash flow, or from debt.
Eco-efficiency: Whether the company is greenwashing, greenshifting, or the Jevons paradox. Companies that are able to generate more product (and hence revenue) with lesser and lesser resources score higher.
Integrity and Health Factor: Checking for financial statement manipulation, whether the company faces bankruptcy within the next few years, and whether the financials of the company is healthy.
The first six (6) factors are standard Fama- French factors, that many portfolio managers use, and their portfolios deliver pretty good returns.
Factors seven (7) and eight (8) in our Octo Factor Model, filter out most of the noise. These are operational risks, that contribute heavily to stock returns. THe Integrity and Health Factor filters out 93% of the stocks, and in most cases, companies that have poor scores on eco-efficiency, have poor integrity and are hiding issues with their financial health. In combination, they chuck out 96% of the stocks. That gives us a list of 100 stocks from a 2500 initial lot.
Our next big weapon, is how we weight the first six (6) factors. Most portfolio managers allocate a disproportionate weightage to the market beta, often upto 70%. We don’t. This means that our portfolio is fundamentally resilient, and does not drop in value when events in geopolitics, such as tariffs, or the middle eastern crisis, don’t affect our portfolio. While one part of the portfolio drops in value, another one goes up. As an example, when Trump announced the tariffs, the S&P 500 dropped 18-20%, ours dropped 4%, and was back up very quickly.
This is backed with our mechanical risk controls, which are checked every day, hedged suitably, and we review our strategy, every alternate week. Unlike most portfolio managers who rebalance, once a quarter, we check and change once in two weeks.
By upgrading your subscription, you get access to:
Our research notes (see an example)
Stock teardowns (see an example here)
What is happening in the macro scene? How is the earnings season shaping up? (see an example of our strategy update)
If you are considering an allocation, we are closing our dealing period for March in the next few days, and the current minimum is £20k for individuals, and £100k for ltd companies. The next dealing period is June 2026, and the minimum subscription will be £100k for all categories of investors.
We look forward to hearing from you, soon.
Best regards,
Sowmy VJ, Managing Partner & Sridhar Somasundar, Chief Operating Officer
Helix Research Ltd