06/17/2012 updated fundamental screens

Condition	Bear Market	Rally
S&P Target	1240
Small Portfolio	IAU & XLF	7.72%
Margin (short)	XLK	5.44%
Position	Date	Return	Days
GCI	7/14/2011	-0.08%	339
CSGS	10/3/2011	28.32%	258
NLY	10/25/2011	10.38%	236
KBR	10/27/2011	-13.12%	234
VG	10/27/2011	-44.98%	234
BT	1/4/2012	1.57%	165
PDLI	3/7/2012	7.73%	102
SAI	5/30/2012	10.47%	18
XEC	6/5/2012	-1.95%	12
DECK	6/15/2012	1.29%	2
S&P	Annualized	-0.17%
Small Portfolio	Annualized	7.37%
Mousetrap	Annualized	4.67%
Margin	Annualized	9.86%

I need to work out a better way to report the Margin position.  The current position on XLK is at a 0.29% loss.  The cumulative of all shorts has a net gain of 5.44% (which might get ripped out of the sockets this week).

In any case, a few observations and some changes.

First, everyone was sure that the apocalypse had come a couple of weeks ago.

The market therefore… went up.

Greece is going to vote itself free money that the Euro crowd won’t want to give them.

The market will therefore… right.  Who knows?

Now for the changes:

The trade to DECK involved two changes to the Mousetrap model.

On the technical aspect of the model, a quarter holding period now has a slight edge over a year holding period.

On the fundamental aspect of the model, I’ve incorporated elements of the “Value Investor” filters defined on the website www.validea.com.

Below are the composite scores of the different validea models. I created the composite by giving the average performance of their 20 stock portfolios (i.e. average of annual, quarterly, and monthly rebalancing models), minus the performance of the S&P. The scores, then, are the average annual outperformance over the S&P index from the date listed for the launch of the model:

Value Investor	Benjamin Graham	7/15/2003	9.37%
P/E/Growth Investor	Peter Lynch	7/15/2003	6.43%
Price/Sales Investor	Kenneth Fisher	7/15/2003	6.20%
Growth/Value Investor	James P. O'Shaughnessy	7/15/2003	6.13%
Growth Investor	Martin Zweig	7/15/2003	5.43%
Momentum Investor	Validea	7/15/2003	4.97%
Book/Market Investor	Joseph Piotroski	3/26/2004	3.50%
Small-Cap Growth Investor	Motley Fool	7/15/2003	1.50%
Contrarian Investor	David Dreman	7/15/2003	0.53%
Patient Investor	Warren Buffett	1/2/2004	0.43%
Earnings Yield Investor	Joel Greenblatt	1/27/2006	-0.73%
Low PE Investor	John Neff	1/2/2004	-0.80%

At the time I began the Beta test, I was using the Greenblatt filter as a placeholder. Last year was the worst year on record for that model. I’ve since added elements of the Graham model, for obvious reasons.

Whereas Greenblatt merely looks at 12 month trailing earnings yield and return on total capital, my adjustments add some favorites of Graham:

Reported Annual Sales (High)

Current Ratio (High)

Long Term Debt (Low)

Total Current Assets (High)

Total Current Liabilities (Low)

EPS Growth 10 Year (High)

Price to Book Value (Low)

The first selection, DECK, is quite possibly a value trap.  I personally don’t see how it will do well in light of an almost certain global recession.

But I’ve already confessed (above) that I have no clue what’s going on right now, so all I can do is to follow the model.  Money-flow is strong in the shoe industry, and DECK has good fundamentals.

In any case, while I was pleased that my model avoided the -29% performance LOSS the Greenblatt model experienced against the S&P last year, I decided it would be interesting to see how it does with better fundamental filters this year.

Might be entertaining.

Tim