Tuesday, March 31, 2015

3/31/2015 Trade Notice

The Full Model sold ALB and bought BHE with a better than 1% favorable gap.

Wednesday, March 25, 2015

Sunday, March 22, 2015

3/22/2015 The Boring Trade


Sector Model
XLU
-2.39%
Full Model
Date
Return
Days
UVV
12/2/2014
17.14%
110
JOY
12/8/2014
-21.00%
104
RS
12/11/2014
-2.11%
101
GNW
1/20/2015
1.10%
61
AGCO
1/23/2015
7.48%
58
ALB
2/10/2015
0.75%
40
ISBC
2/17/2015
0.85%
33
MPEL
2/25/2015
-8.29%
25
SSYS
3/3/2015
-6.38%
19
PWR
3/9/2015
-1.02%
13
(Since 5/31/2011)
S&P
Annualized
12.52%
Sector Model
Annualized
23.01%
Full Model
Annualized
19.45%
S&P
Total
56.71%
Sector Model
Total
120.06%
Full Model
Total
96.75%
Sector Model
Advantage
10.49%
Full Model
Advantage
6.93%
Previous
2015
S&P
53.06%
2.39%
Sector Model
122.60%
-1.14%
Full Model
101.13%
-2.18%

 

It’s been a while, so I’m including the full returns.

The Sector Model recovered at the baseline, but further weakness in the broad market could cause it to fall below it for an extended time.  The baseline is not a base, but an average, around which the model should fluctuate over time:



 

That said, XLU is not a positive choice for the broad market and doesn’t do so well for itself either. 

For the Full Model, the choice of industries is a bit more positive:

TOBACCO
Bear
UTILCENT
Bear
CHEMDIV
Bull
ELECTRNX
Bull
ENGCON
Bull
HEAVYTRK
Bull
PUBLISH
Bull
RAILROAD
Bull
RECREATE
Bull
COAL
Top
GASDIVRS
Top

 

The majority is still bull, per a Sam Stovall type of analysis.

Mr. Market is smoking a cigarette while he is trying to stay warm in an early spring that’s still snowing in the North East.  He’s trying to stay up with the latest news while driving a truck and listening to the radio.

We’ve entered one of those times where everyone is so uncertain of the future market direction that they are funneling money into the most boring set of industries they can.

Will the Fed raise rates or won’t they? Are they raising rates because the economy is good, or is the economy bad because they are raising rates?  Is energy cheap?  Will it get even cheaper?

Notice that “market up” or “market down” always hangs in the balance.

The big money is going for the boring trade.

Boring is less exciting, but more profitable in the long run.

Tim

 

 

 

 

 

 

Monday, March 9, 2015

3/9/2015 Trade Notice

The Full Model sold ESI and bought PWR with a 3.61% favorable gap (rounded down to 3% in the records).

Sunday, March 8, 2015

3/8/2015 When "normal" is a pain in the butt


Sector Model
XLU
-6.81%
Full Model
Date
Return
Days
ESI
8/4/2014
-47.80%
216
UVV
12/2/2014
22.44%
96
JOY
12/8/2014
-23.66%
90
RS
12/11/2014
-5.69%
87
GNW
1/20/2015
5.07%
47
AGCO
1/23/2015
10.21%
44
ALB
2/10/2015
5.16%
26
ISBC
2/17/2015
-2.91%
19
MPEL
2/25/2015
-8.01%
11
SSYS
3/3/2015
-0.89%
5
(Since 5/31/2011)
S&P
Annualized
12.13%
Sector Model
Annualized
22.10%
Full Model
Annualized
20.00%
S&P
Total
53.97%
Sector Model
Total
112.28%
Full Model
Total
98.86%
Sector Model
Advantage
9.97%
Full Model
Advantage
7.87%
Previous
2015
S&P
53.06%
0.60%
Sector Model
122.60%
-4.64%
Full Model
101.13%
-1.13%

 

What do you do when you’re wrong?

Do you pretend you are right or do you look at what is wrong so that you can fix it?

My wife is a doctor and has this problem when she is sick.  She refuses to admit that she is sick and doesn’t slow down enough to get well.

In terms of stock investing that means recording your wins and your losses, and analyzing the difference between them.

That kind of analysis also keeps you on track when something seems wrong and may not be.

ESI was wrong, and I embedded that lesson into the fundamental parameters of the full model.

What about XLU?

To answer that, here is a chart for the Sector Model since Steve Cohen launched a fund that followed it:



I warned for most of last year that the 30% returns were an aberration; and that at some point the model would revert back to its benchmark.

It has now done so.

In other words, the model is behaving as expected.  Sometimes it will be above the benchmark and sometimes below, but as long as it tracks that benchmark it will be behaving normally.

No matter how annoying “normal” can sometimes be.

Tim

Tuesday, March 3, 2015

3/3/2015 Trade Notice

Before the close, Full Model sold EDU and bought SSYS with a better than 2% favorable gap.