Wednesday, April 30, 2014

04/30/2014 Boring is Better


Style Model
Large Value
Sector Model
XLU
2.11%
Large Portfolio
Date
Return
Days
ABX
4/11/2013
-26.41%
384
NEM
9/30/2013
-9.25%
212
JOY
11/18/2013
6.27%
163
RS
2/10/2014
2.12%
79
CSCO
2/12/2014
2.84%
77
CBI
2/20/2014
-0.68%
69
HFC
3/17/2014
5.47%
44
BX
4/14/2014
0.57%
16
TIVO
4/23/2014
-2.49%
7
SHOO
4/28/2014
0.60%
2
(Since 5/31/2011)
S&P
Annualized
12.13%
Sector Model
Annualized
27.68%
Large Portfolio
Annualized
25.88%

 

Rotation: selling HFC; buying MHK.

The style model has moved to Large Value.  Boring is better.

Tim

 

 

Tuesday, April 29, 2014

04/29/2014 Extreme Bearishness

Large Value Small Value Mid Value Small Growth Mid Blend Small Blend Large Blend Large Growth Mid Growth
Utilities 1 3 4 7 18 36 48 55 73
Finance 2 6 8 11 20 40 50 57 74
Materials 5 10 12 14 23 43 52 58 75
Staples 9 13 15 16 25 45 54 59 76
Technology 17 19 21 22 39 51 62 65 77
Healthcare 24 26 27 28 46 56 64 68 78
Industrial 29 31 32 34 47 60 66 70 79
Cyclicals 30 33 35 37 49 61 67 71 80
Energy 38 41 42 44 53 63 69 72 81

Utilities, Large caps, Value stocks -- all have one thing in common: they aren't supposed to move as much as the market.

You only invest in sluggish stocks when you are afraid the market will turn in the wrong direction.

I have macros running tonight.  I may have a new trade in the morning.


Sunday, April 27, 2014

04/27/2014 Correction

The configuration of the Sector and Style matrix has changed:

Small Growth Small Value Mid Value Large Value Mid Blend Small Blend Large Blend Large Growth Mid Growth
Utilities 1 3 6 8 13 38 44 56 73
Finance 2 7 9 11 19 42 50 57 74
Materials 4 10 15 17 21 47 52 59 75
Staples 5 12 16 18 22 49 53 60 76
Technology 14 20 23 24 26 54 55 64 77
Healthcare 25 28 29 30 35 58 62 68 78
Cyclicals 27 32 33 34 40 61 63 70 79
Industrial 31 37 39 41 46 65 66 71 80
Energy 36 43 45 48 51 67 69 72 81

Accordingly, the trade on the Full model will change to account for the new fundamental configuration.

The corrected trade for Monday morning is: selling DUK; buying SHOO.





Saturday, April 26, 2014

04/26/2014 What are you doing???


Style Model
Mid Value
Sector Model
XLU
0.65%
Large Portfolio
Date
Return
Days
ABX
4/11/2013
-25.49%
380
NEM
9/30/2013
-4.06%
208
JOY
11/18/2013
7.00%
159
RS
2/10/2014
1.05%
75
CSCO
2/12/2014
2.13%
73
CBI
2/20/2014
0.01%
65
DUK
3/10/2014
5.62%
47
HFC
3/17/2014
4.26%
40
BX
4/14/2014
4.02%
12
TIVO
4/23/2014
-1.99%
3
(Since 5/31/2011)
S&P
Annualized
11.87%
Sector Model
Annualized
27.78%
Large Portfolio
Annualized
26.33%

 

Rotation: selling HFC; buying GCO (in the shoe industry).

We lived in Hendersonville Tennessee when I was five until I was ten.  The most fascinating thing about the place was how routine it was to see tornado weather.  My brother and I got so used to it that we’d rush outside to play a game with the wind:

The rule was simple – jump straight up in the air to see who got blown back the furthest.

You could spread out your jacket to catch the wind, but you had to jump STRAIGHT up without cheating.

My older brother usually won, but I loved the game anyway.

Mom also had a routine.  She’d crack open all the windows a little to let the air pressure adjust.  It would take her from room to room upstairs and downstairs.  She’d also shut all the cabinets and put away anything that could turn into flying debris.

It would take her a while before she realized something horrible…

Her two boys weren’t dutifully waiting in the little closet under the stairs.

In fact, they weren’t in the house at all!

She’d run upstairs again just to make sure, before rushing downstairs and out the back door, screaming at the top of her lungs, “What are you doing???”

We’d shrug our shoulders and laugh.  Game over.  Time to go cower until the coast was clear again.

The next day we’d review the damage while we rode the school bus.  I remember seeing one house without a roof, and a good while later I’d see a roof in a field without a house.

And we could always recognize the look in the sky when another tornado watch was coming our way.

Sometimes there was a dead calm in the gloom before the wind began to pick up.  And I even got to see a few funnels form in the distance before Mom ended our little game.

So, a little note on the recent performance of the model…

Keep in mind that both models are defensive in nature.  They do better in bearish conditions than they do in bullish ones.  Although they will outperform in a bull market, they do even better in a bear.

Nowhere is this more apparent than in the struggle the S&P has experienced so far this year:



 

The Sector Model is up 18.31% for the year.

The S&P is up 0.81% for the year.

That kind of outperformance usually happens before a correction.

Again, I don’t use timing indicators for my own models because 1) I’m a lousy timer and 2) my models do best in the worst of times.  So there are no changes I plan to make in my own investments.  I’m just noting it here because some folks do like to get a weather report on occasion and my rough little barometer is showing a low pressure system overhead.

With defensive models, good news for me isn’t so great for all those momentum traders out there.  I’d suggest taking stock in your stocks with a good hard look at the fundamentals you’re investing in.  If they can weather a storm, you should be fine.

If they can’t – what are you doing???

Tim

 

 

 

Thursday, April 24, 2014

04/24/2014 Sector and Style Matrix

The sector and style matrix remains defensive:

Mid Value Small Value Large Value Mid Blend Small Growth Large Growth Small Blend Large Blend Mid Growth
Utilities 1 4 8 16 17 34 37 40 73
Finance 2 6 10 18 19 35 46 48 74
Materials 3 7 11 22 25 38 50 51 75
Staples 5 9 15 27 28 49 52 53 76
Technology 12 20 29 39 41 58 61 63 77
Healthcare 13 21 30 42 44 59 62 65 78
Industrial 14 23 31 45 47 60 64 66 79
Energy 24 32 36 54 55 67 69 70 80
Cyclicals 26 33 43 56 57 68 71 72 81