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Newsletter March 2022

Dear Member,

This is our 1st ever quarterly newsletter and sets the base for our communications with you. Our newsletters would primarily enable communications around Surge’s performance, approach and decisions.


We have had a good start to Surge’s journey in enabling consistent long term returns for our members; with a return of +10.2% for the month of March 2022.

Since Surge was launched only last month, the documented performance we have is only for one month and that is a very short time period to gauge the performance.

However, I have been running my portfolio purely based on Surge's framework for the last 2-years and that can give you an idea of a more larger period's performance.

(Note: Surge’s Framework performance reflects my personal account’s performance)

Another important thought that I would like to share is that; If we want to generate alpha over any specific benchmark, our portfolio has to be different from that underlying benchmark, which itself would mean that our performance in any specific month could be very different from the benchmark itself. In some months, it would be better and, in some months, it would be worse; but cumulatively over a reasonably long period, ideally it would be better.

In terms of what is our preferred benchmark? Well, we are very focused on picking up businesses and trends through a bottom-up process rather than optimizing our ideas around beating a specific benchmark, our current portfolio has stocks ranging from as low as ~600 crores market cap to as high as ~4.5 Lakh crores and that too across business areas.

So, Members can look to benchmark us on index of their choice as long as they do so over a reasonably long enough time period of 3+ years and consider not just the absolute gains but also the volatility of benchmark when doing a comparison.

Portfolio Construction In A Trend Following Strategy

One of the core principles that I believe as an investor is that the market is a game of probabilities. I have always believed that every time we make an investment, we are putting our luck to test, because no matter how confident we are or how much we know about a particular stock, there is always a possibility that things will not turn out the way we anticipate.

All the analysis around business and price trends that we do, is nothing but to increase the probability that the things will play out in our favor.

I have written about this thought process of probability extensively in my blog- GAME OF STOCKS. I’ll highly recommend you to read that.

But along with the whole business and price trend analysis, one another important attribute that can help us improve these probabilities in our favor is by holding & letting our winners run as long as possible and exiting/cutting down our losers quickly.

I’ll help you understand how this works by providing you a simple quantitative analysis.

Consider a portfolio of stocks wherein-

  • 40% of our investments fails such that we lose 25% in such investments and exit them in just 1 year.

  • 50% of our investments works out fine such that we make 25% CAGR in such investments with a holding period of 2-3 years. (ie. 50-100% returns over 2-3 years)

  • 10% of our investments turn out to be multi-bagger such that we make 50% CAGR in such investments with a holding period of 4-5 years. (ie. 5-7x returns over 4-5 years)

A 60% strike rate seems a reasonable possibility to me; if one is not able to get a 60% strike rate in investing, then there’s definitely some issue with the research process, because a 50% chance of going right is default by nature.

Also, a 10% strike rate of identifying multi-baggers also looks reasonable to me based on my past experience. Over last few years, I have been able to identify couple of such stocks in areas of Pharma CRAMS, Power Exchange and Music Streaming.

Currently in our portfolio, I believe Intellect and Vadilal are two bets that have high probabilities of delivering such multibagger returns if things works-out the way we anticipate.

Now assume a portfolio of 20 stocks-

This is how the portfolio composition will look like over the years based on the assumptions we made above.

Converting this data in % terms would give you an even better understanding-

Some additional inputs that we can derive from this quantitative analysis are around Performance and Portfolio Churn.


If the portfolio composition stabilizes to the above levels of-

  • Poor Investments: 19% (-25% CAGR)

  • Good Investments: 60% (+25% CAGR)

  • Multibaggers: 10% (+50% CAGR)

Then we can get an approximation of portfolio level performance, which would be ~21% CAGR. (-25%*19% + 25%*60% + 10%*50%)

This is a very basic approximation and the same could vary with slight changes in inputs. So, increasing the probability of multibaggers from 10% to 15% and reducing the probability of Poor investments from 40% to 35% increases the expected returns to ~25% CAGR. Another 5% change would make it close to ~30% CAGR.

At Surge, what we are aiming for is not the highest returns in any particular year, but a decent & consistent return over longer periods. Reason being that, the only time someone would have very high exceptional returns in any particular year is when their strategy is perfectly aligned with the theme that is working in the market in that particular period. As & when the market’s theme changes, the strategy is bound to underperform and face tough times. And the only way to circumvent this is to align the strategy again with the new theme of market, which is easier said than done.

Warrant Buffet is not the biggest & wealthiest investor because he was the top performer in any particular year, but because he has had medium returns for the longest period of 70+ years.

I am quite confident that our strategy of Trend Following With A Fundamental Framework is well placed to achieve this goal of decent & consistent returns over longer periods.



The thought behind sharing this analysis is to get you to understand & become comfortable with the following things-

1. That we will be holding our winners and exiting a lot of small losers over our investing journey.

2. We might not be the delivering the highest returns in any particular year, but it is the decent & consistent returns what our framework is focused on.

3. The portfolio churn could be slightly on the higher end, but it comes with its own positives of avoiding large drawdowns in individual stocks and avoiding opportunity cost by not holding dead stocks. And thus, a relatively lower drawdown/volatility on a portfolio level.

In my earlier professional role wherein, I was looking after another research service, my experience was that, one of the primary reasons why a lot of client’s returns where not up to the mark of that of model portfolio of the service, was because a lot of them never really followed the recommendations in entirety.

And based on client interactions, I realized that the biggest barrier was lack of understanding/comfort/confidence with the strategy. A lot of times clients were afraid of selling something at loss or buying something at higher prices.

The entire purpose of these Newsletters and other communications to the Members is to make you understand and become comfortable with our strategy & decisions, so that you can act on the recommendations being provided by us as & when needed. And when you do so, is the only time when you will be able to derive the most value out of what Surge is offering.

Knowledge Base

Till now we have shared five updates on our Knowledge Base

1. Elevation Capital Universal Music Group Report

2. Private Equity M&A in Listed Space

3. How Stock Trends Break- Paints, Power, Telecom and Diagnostics

4. Optionalities- Amazon 2015 AWS Disclosure Repeat

5. SOIC Webinar

I hope that members are making use of the same, as it will enable you to understand our thought process even better and make you a much more informed investor.

That’s all for this newsletter. Hope to communicate with you post Q1FY23 end. Meanwhile, if you have any queries, do write to us at


Ankush Agrawal


Surge's Offering-


Surge Capital is a trade/brand name used by Ankush Agrawal (Individual SEBI Registered Research Analyst INH000008941) to provide equity research services in the Indian Equity Markets.

“Registration granted by SEBI, and certification from NISM in no way guarantee performance of the Research Analyst or provide any assurance of returns to investors”

“Investments in securities market are subject to market risks. Read all the related documents carefully before investing.”

“The securities quoted are for illustration only and are not recommendatory”


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