In this week’s screener, we look at the "high return, high durability" investment strategy. The screener chooses a maximum of five stocks from the Nifty 500 index each quarter with strong financial durability, reasonable valuation and good momentum. 

The screener currently has stocks like HCL Technologies, Oil India, Hindustan Aeronautics, Zydus Lifesciences and Firstsource Solutions.

We performed two backtests on the screener to check its past performance. The backtests ran with a quarterly portfolio review frequency (change stocks every quarter) against the benchmark of Nifty 500 from March 2013 to March 2023. 

The difference between the two backtests was that for one test we considered only Nifty 500 stocks, and all stocks with a market cap of over Rs. 60 crore for the other.

The backtest with Nifty 500 stocks gave cumulative returns of 1,751.2% over 10 years, with a return CAGR of 33.84%. The average stock return was 14.4%, with a total of 82 winners and 62 losers. Ceat gave the highest returns of 428.8%. The maximum drawdown of the strategy was 30.5% in the September 2022 quarter. 

The backtest with all stocks beat the Nifty 500 strategy with higher cumulative returns and CAGR. However, this strategy comes with added risks, as its maximum drawdown is higher at 55.6%. It also has a higher number of losers (76) against 86 winners. Choosing all stocks may also include stocks with low delivery volumes. So the Nifty500 universe is more realistic. 

You can find some popular screeners here