|
Style Model
|
Large Value
|
||
|
Sector Model
|
XLU
|
-1.33%
|
|
|
Large Portfolio
|
Date
|
Return
|
Days
|
|
ABX
|
4/11/2013
|
-28.24%
|
394
|
|
NEM
|
9/30/2013
|
-12.88%
|
222
|
|
RS
|
2/10/2014
|
3.18%
|
89
|
|
BX
|
4/14/2014
|
-4.36%
|
26
|
|
TIVO
|
4/23/2014
|
-2.49%
|
17
|
|
SHOO
|
4/28/2014
|
-6.18%
|
12
|
|
UNF
|
5/2/2014
|
-0.86%
|
8
|
|
TIBX
|
5/5/2014
|
-1.24%
|
5
|
|
EFII
|
5/7/2014
|
0.94%
|
3
|
|
CERN
|
5/8/2014
|
1.41%
|
2
|
|
(Since 5/31/2011)
|
|||
|
S&P
|
Annualized
|
12.01%
|
|
|
Sector Model
|
Annualized
|
26.50%
|
|
|
Large Portfolio
|
Annualized
|
25.13%
|
Rotation: selling RS; buying PWR.
As I mentioned the other day, from here we should settle
down to a once a week rotation. There
will be exceptions, of course, but the most recent trades were a reset of the
model in light of the extreme bearishness in both Sector and Style
configurations:
|
Large Value
|
Small Value
|
Mid Value
|
Mid Blend
|
Small Growth
|
Large Blend
|
Large Growth
|
Small Blend
|
Mid Growth
|
|
|
Utilities
|
1
|
3
|
6
|
11
|
13
|
34
|
39
|
44
|
73
|
|
Finance
|
2
|
5
|
8
|
14
|
17
|
41
|
46
|
49
|
74
|
|
Staples
|
4
|
7
|
12
|
20
|
22
|
47
|
52
|
54
|
75
|
|
Materials
|
9
|
18
|
23
|
31
|
35
|
55
|
57
|
61
|
76
|
|
Technology
|
10
|
19
|
24
|
32
|
36
|
56
|
58
|
62
|
77
|
|
Cyclicals
|
15
|
25
|
28
|
38
|
43
|
59
|
63
|
66
|
78
|
|
Industrial
|
16
|
27
|
30
|
42
|
45
|
60
|
64
|
68
|
79
|
|
Healthcare
|
21
|
29
|
37
|
48
|
50
|
65
|
69
|
71
|
80
|
|
Energy
|
26
|
33
|
40
|
51
|
53
|
67
|
70
|
72
|
81
|
In terms of “position” that translates to:
|
Small Growth
|
Small Blend
|
Mid Growth
|
Small Value
|
Large Growth
|
Mid Blend
|
Mid Value
|
Large Blend
|
Large Value
|
|
|
Cyclicals
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
|
|
|
|
|
|
|
|
|
Industrial
|
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
|
|
|
|
|
|
Staples
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
|
|
|
|
|
Utilities
|
|
|
|
|
|
|
|
|
Position
|
|
Finance
|
|
|
|
|
|
|
|
|
|
In market corrections, large caps, value stocks, and
defensive industries fall less than small aggressive growth stocks.
The sector and style matrix is favoring Large, Value, and
Utilities – not quite as bearish as possible, but pretty darned close.
So why not short?
Well, shorting assumes that the market will go down relative to the dollar.
But the dollar has been floating in thin air like a Looney
Tunes character who has just run off the edge of a cliff. In spite of extreme monetary policy, “inflation”
has gone nowhere.
So if the market “falls” in real value, but the dollar “falls”
even more, then the market will appear to go up in “price.”
Besides, it’s impossible to predict exactly when such an event
may occur.
Over the past year we’ve had a VIX spike once every three to
four months. We are now three months
since the last one. Maybe we’ll get
another one in the next few weeks.
Maybe not.
Far easier than timing, then, is simply rotating into those
industries and styles that have been beaten down more than others, and to wait
for mean reversion. The goal isn’t to
time the market, nor even to avoid any losses.
Instead, the goal is to go up more, or down less, than the market. We can see this in the year to date returns
for the Sector Model:
Timing is a fool’s errand.
Soros can do it, but Soros is a mutant.
We humans have to invest the Buffet way – look for stocks
that are beaten beyond reason, and hold them until reason returns.
That kind of philosophy works for more than just the stock
market, by the way.
Tim
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