Stack value, quality and momentum, and the blend is supposed to beat any one of them. It beat the market, then quietly trailed simpler screens.

One backtest is one story. We built 258 portfolios from the screen, one for every month you could have started, held one, three and five years, and asked the plain question: does stacking three proven edges really beat backing any one of them? Rank every company three ways, by earnings yield, by gross profitability and by twelve month momentum, add the ranks, and buy the best thirty. It made about 16.7% a year against the market's 13.9%, turning ten lakh into roughly forty nine lakh. A real edge, but a modest one, and modest is a surprise when you have just stacked three edges that are each supposed to work on their own.

Concentrating the blend broke it

Here is the finding that should give any factor investor pause. On almost every strategy we have tested, holding fewer, higher conviction names lifts the return. Do that here and it collapses. Push from the best thirty into the best ten and the return did not rise, it fell to about 11% a year, below a plain index fund, at a risk adjusted return barely above zero. The blend's very top picks, the names that scored well on all three factors at once, were its weakest. That is the opposite of how conviction is supposed to work.

A spotless ranking with a soft centre

The strange part is that the ordering itself was excellent. Sorted into ten buckets, the blend's rank correlation came to −0.89, the cleanest sort we have measured, and yet its risk adjusted return landed below the index's. A pristine sort and a soft payoff at the same time is the tell of an averaged signal. Adding three rankings sends every high conviction pick toward the middle: a stock that value loves but momentum hates cancels out to a mild score, so the blend keeps the inoffensive all rounders and quietly drops the extremes, which is exactly where the biggest returns tend to hide.

The compromise basket

Look at what the blend actually held and the picture resolves. These are competent all rounders, an auto parts maker, a gas utility, a construction firm, a mid tier software name, spread across materials, industrials and consumer stocks, and about two thirds micro cap. Not a mispriced bargain nor a runaway compounder among them, because a stock extreme enough to be either would have been penalised on one of the three factors and knocked out of the top. The blend, by design, owns the sensible middle.

Three good ideas, averaged into a muddle

None of this means value, quality or momentum is broken. Each, on its own, has earned its reputation, and the diversified version here still beat the market and was positive in every five year window. The lesson is narrower and more useful: averaging three rankings is not the same as combining three edges. A sum of ranks rewards the stock that is merely fine at everything over the one that is exceptional at something, and exceptional is what pays. Stacking factors can work, but the way you combine them matters more than how many you own, and adding a sum of ranks is the bluntest way to do it.

So we took it to Krest, and ran it through the whole test.