Turtle’s Quant Process

The PPP Process stands for Price, Profits, People and is central to Turtle Wealth’s investment strategy. It ensures a comprehensive evaluation of stocks by focusing on three key factors:

Price: Stocks are evaluated based on All-Time High (ATH) prices after long periods of consolidation.
Profits: We prioritize companies that are consistently delivering ATH profits, signalling strong financial health.
People: We assess the management team through scuttlebutt research and meetings to ensure that the leadership is aligned with shareholder interests.
This three-pronged approach creates a well-rounded view of the company, combining both quantitative and qualitative factors

Of all the fundamental aspects we consider, Profit After Tax holds the greatest importance. Achieving ATH in stock prices alone isn’t sufficient; there must be a solid financial foundation behind it. Turtle Wealth focuses on stocks with All-Time High profits because they indicate robust financial health. When a company reaches ATH in profits, it typically supports the stock’s price increase, reflecting strong operational performance and financial stability.

To outperform the benchmark, we believe that one needs to invest in stocks that are already outperforming the BSE 500. By selecting stocks that demonstrate consistent outperformance against the benchmark index, Turtle Wealth aims to deliver market-beating returns, ensuring that the portfolio remains in line with top-performing stocks.

Turtle’s approach emphasizes that value should exceed price. This occurs when a stock’s price has been range-bound, but the company’s profits continue to rise steadily, reaching new ATHs. This discrepancy between the rising profits and the relatively slower price increase creates an opportunity, indicating that the stock is undervalued relative to its true financial potential.

Turnaround companies offer unique opportunities for growth. These are businesses that may have faced challenges in the past but are now entering a new phase of recovery due to structural changes, new projects, or business improvements. Investing in turnaround stories allows Turtle Wealth to capture the company’s maximum growth potential as it returns to profitability or expands significantly.

Yes, a stock that has performed well over a long period may still be included in a new client’s portfolio, even at an elevated price, provided it meets Turtle Wealth’s strict quantitative criteria. However, the allocation for new clients may differ. We ensure that no stock exceeds the maximum risk of 1.2% of the invested value, and allocations are adjusted dynamically to manage risk effectively. This way, we create portfolios with tailored allocations to suit the client’s specific risk profile and market condition.

No, we do not follow the model portfolio approach. At Turtle, our quant system is designed to create customized portfolios for each client. For instance, a new client may hold different allocations in the same stocks, or if a stock is not suitable for a new buy (based on its rating or current situation), we may choose to exclude it. When stocks have risen significantly, we adjust allocation percentages to ensure proper risk management. Essentially, every client’s portfolio is uniquely customized to align with their specific investment needs at the time.

We have a structured process for allocation that helps us manage risk per stock, typically limiting it to 1.2% of the total invested value. Once the entry and exit points are defined (with the exit acting as the stop-loss), the system automatically calculates the allocation. For example, if a stock has an entry at ₹100, an exit at ₹80, and a maximum allowed loss of 1.2%, the system allocates 6% of the portfolio to that stock. This ensures risk is well-managed, based on predefined limits for both entry and exit.

In our process, the allocation of a stock can only be determined once we have finalized its exit point, which serves as our stop-loss. This approach allows us to manage risk effectively across the portfolio. We’ve realized that while everyone focuses on finding the best entry point, very few know when to exit, which is a critical part of our strategy. By setting the exit price in advance, we ensure the allocation aligns with the potential risk, providing clear boundaries for both entry and exit.

We base our exit prices on the stop-loss rather than a target price. At Turtle, we don’t believe in limiting the potential of a company with a target price, as its future growth could be limitless. The stop-loss helps us manage risk and ensures that we protect the downside, allowing the stock to grow without predefined upper limits unless other factors indicate it’s time to exit.

Turtle’s quant process involves 3 key phases:

1. Selection & Research:  We use a quant-based model to rank and identify the best investment opportunities from a defined universe. Our quality check ensures only companies with strong corporate governance are selected.
2. Allocation & Risk Management: After selecting the stock, we allocate capital and manage risk with our robust Quantitative Allocation Process and Risk Management System that work seamlessly together to optimize the portfolio.
3. Holding Review: Once stocks are added to the portfolio, they undergo regular review to ensure they continue to align with our investment strategy

The rationale for limiting the universe to 500 stocks is to focus on quality companies with proven track records, ensuring better transparency and liquidity. By narrowing the stock selection, we can concentrate on businesses that are less likely to experience extreme volatility or unexpected issues. This helps manage impact costs and allows for efficient portfolio management by focusing on well-established companies with adequate market volume.

The holding period of a stock is highly dynamic and entirely dependent on its performance. Our simple formula is: Hold the Winners, Exit the Losers.

We perform regular portfolio reviews on weekly basis to ensure that allocations are properly adjusted, especially after onboarding a new client, receiving a top-up, or managing existing client portfolios. Our QUANT process follows a dynamic allocation strategy, ensuring proper risk management and alignment with client goals.

Our process is entirely in-house, meticulously managed by a highly skilled team with years of experience in fund management. Over time, we have carefully developed and refined this process, making it more robust, transparent, and efficient. Each step has been improved through continuous learning and adaptation, incorporating key insights gained from both successes and challenges.

Meet the Experts Managing Your Investments – link to the team page of website: https://turtlewealth.in/our-team/