10/26/2014 Hits and Misses

Sector Model	XLB	0.00%
Large Portfolio	Date	Return	Days
SR	6/2/2014	13.32%	145
CFI	6/9/2014	1.23%	138
RRD	7/21/2014	4.82%	96
ESI	8/4/2014	-38.43%	82
BSET	8/11/2014	15.05%	75
STRA	8/18/2014	10.41%	68
PBI	8/25/2014	-8.09%	61
CLF	9/2/2014	-36.10%	53
KFY	9/29/2014	3.72%	26
IQNT	10/6/2014	5.96%	19
(Since 5/31/2011)
S&P	Annualized	11.77%
Sector Model	Annualized	25.90%
Large Portfolio	Annualized	21.89%

 

Rotation: selling RRD; buying EDU.

EDU is tripling down on the educational industry, already represented by ESI and STRA – which average together to about a 14% loss.  Misery loves company, as they say.  But the model continues to scream out for that industry, and even ESI is starting to respond.  It’s made great gains in the past ten days.

The Sector Model has also recovered nicely:

 

Both models, then are back above 20% annualized returns since the launch with real money on 05/31/2011.

I did note the other day, however, that there was some whipsawing on the Sector Model.  It switched from XLB to XLI less than five minutes before the close on 10/22.  I BARELY caught the trade.  Steve missed it in his parallel fund, because he trades before 2.

On 10/23 the Sector Model showed XLB just before the close and I switched back.  Then AFTER the close it showed XLF.  I missed .2% on Friday, and Friday the model closed on XLB.

Last week, on the other hand, we both missed a trade that actually worked in our favor by about .65% above what the model itself shows.

So, I’ve slightly outperformed the model (by accident) and Steve has slightly underperformed (also by accident).

No trading can perfectly catch every single whipsaw.  What you want to do is to have a model that works and to get as close to it as possible, which is what we are doing.  Sometimes the hits and misses will work in your favor, and sometimes not.

However, one does want to minimize the “luck” element, and this week I’ll be switching to a real time service to replace the twenty-minute delayed free service I’ve been using.  Steve and I will continue to trade in parallel and if the 3:50 trades with real time do indeed work out better than the 1:50 trades Steve has been making, we’ll nudge the time back to the later trade in his fund.

Either way, it’s been a great year so far for both of us and we are quite pleased.  The tweaks are mostly from a perfectionistic obsession I have with my baby.

Tim