09/08/2012 holding steady into next week

Small Portfolio	XLF & IAU	17.84%
Position	Date	Return	Days
DECK	6/15/2012	-3.90%	85
CVX	7/5/2012	7.02%	65
RIMM	7/16/2012	-0.83%	54
UEIC	7/30/2012	16.15%	40
QSII	8/6/2012	13.77%	33
SWM	8/23/2012	4.00%	16
FCX	8/27/2012	9.13%	12
DWA	9/4/2012	3.42%	4
CAJ	9/5/2012	1.11%	3
DVN	9/7/2012	1.61%	1
S&P	Annualized	5.40%
Small Portfolio	Annualized	13.98%
Large Portfolio	Annualized	16.65%

 

The model is now completely converted to the upgraded fundamental filters.  BT was the last of the Joel Greenblatt formula stocks to go, and now the remaining ones are selected from a Benjamin Graham style filter similar to the one used on the “Value Investor” portfolio on www.Validea.com.

I’ve also adjusted the rotation rules.  The first two this week were scheduled, and the final one was mandatory: BT had the worst fundamentals AND the worst technicals, so it had to go.

DVN was only slightly better from a fundamental perspective, but vastly better from a technical one.  We can thank the Environmental Protection Agency for favoring natural gas over coal.  Not good for coal (or the country), but potentially good for DVN.  The biggest hope for DVN, however, is a central bank (temporary) rescue of the Euro.  That should fall apart disastrously sometime in the future, but natural gas should get a double kick from both industrial use and inflation if the Euro-fix works for a while.

If not, well, nothing will be a very good investment, will it?

As I mentioned the other day, the rotations will slow down again.  There won’t be a scheduled one this week, and it is unlikely a mandatory trigger will hit.

Time to watch what unfolds.

There’s a lot of talk about election years being bullish, and that’s true.  But even in election years September has a bad track record.  We may be gritting our teeth over the next few weeks, and if President Obama taps into the national gas reserves to try to juice his own election returns, that might negatively impact DVN as prices across the energy sector decline.

But that’s not under my control, and it’s impossible to predict. If I were him, I’d do it.  But I can’t select stocks trying to second guess people in power.

From a strictly technical perspective, the market seems to be favoring cautious optimism over defensive sectors.  On discretionary trades I’d still buy the dips, but not be married to those positions.  The market may be forming a blow off top.  Very profitable to ride, as long as you’re nimble.

The Mousetrap isn’t nimble.  It’s just designed to go up more and down less than everything else.  I do have some non-listed discretionary hedges on the side… and I’m being punished accordingly.

Tim