These cases are perfectly simple and easy to distinguish. In a free hour, when our power of choice is untrammeled and when nothing prevents our being able to do what we like best, every pleasure is to be welcomed and every pain avoided. But in certain circumstances and owing to the claims of duty or the obligations of business it will frequently occur that pleasures have to be repudiated and annoyances accepted. The wise man therefore always holds in these matters to this principle of selection. But I must explain to you how all this mistaken idea of denouncing pleasure and praising pain was born and I will give you a complete account of the system.

What is Pirotroski Score?

The Pirotroski Score ranks between zero and nine based on the financial strength of the company. It has been a popular tool to evaluate value stocks.

A company having Pirotroski score of 8 and above is considered very good. Below 5 it is not considered good at all.

What is this strategy?

I selected only those companies having Pirotroski scores higher than 8 in the last 5 years in the portfolio selected from the Nifty 500 universe.

Some Facts About This Strategy

• Period: 17 July 2016-16 July 2021
• I choose a complete 5-year period to include the bull cycle and bear cycle including the famous 2020 market crash.
• Stock Universe: Nifty 500
• Benchmark: Nifty 500
• Frequency: Monthly
• Return: 36.77% CAGR
• Cumulative Return:380%

See the performance in the graph given below:

It is evident that the strategy has consistently beaten the Nifty 500 right from start to end. Unlike many other strategies that perform in a certain period magnificently and that increases the average.

Portfolio Analysis

Here are some facts that came out in the portfolio analysis

• Total Stocks Selected in the period: 88
• Winners:53
• Losers:35
• Maximum Drawdown: 31%
• Maximum Period Return: 21.72%
• The maximum loss in a period: -23%
• Mean period return:2.95%
• Average Stock Count per Period:9.80
• Average Holding Period of a Stock:7.97
• Biggest winner:258.44% (Deepak Nitrite)
• Biggest loser: 37% (Gujarat Narmada Valley Fertilizer Corporation

Period Analysis

• Total number of weeks:60
• Profitable weeks: 42
• Loss-making weeks:18
• More than 10% loss in a month: 4 times
• Less than 5% loss in a month: 5 times

Entry & Exit Rules

Enter the stock whenever a new stock is added and exit it as screener notifies.

The best part of the strategy has been its consistency and the return has been quite impressive. I tested it with monthly frequency mode.  However, the results vary dramatically in the Quarterly mode.

Here is the snapshot of the result:

Though it has also outperformed the Nifty 500 for the most time, the main difference came only after April 2020.  You can see it has given positive results in most periods. The only outlier is the 2020 pandemic fall which is the long red bar. If you ignore this bar, even in negative periods, the drawdown is not much.

The number of quarters it gave negative returns/the number of quarters it gave positive returns: 0.66

The CAGR of 23% return has been impressive but much less than the monthly frequency mode. Another interesting thing about Quarterly Frequency mode is that it has maximum drawdown in April-July period 2019 and not in 2020 famous crash.

I have tested it for monthly and quarterly modes with Nifty 500. However, you can test the performance in weekly mode and with other indexes and check the result.

Click here to download the detailed Entry and Exit dates of stocks of the strategy. 

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