|
Style Model
|
Small Value
|
||
|
Sector Model
|
XLF
|
0.78%
|
|
|
Large Portfolio
|
Date
|
Return
|
Days
|
|
SR
|
6/2/2014
|
1.99%
|
125
|
|
CFI
|
6/9/2014
|
4.59%
|
118
|
|
RRD
|
7/21/2014
|
2.82%
|
76
|
|
ESI
|
8/4/2014
|
-69.18%
|
62
|
|
BSET
|
8/11/2014
|
6.25%
|
55
|
|
STRA
|
8/18/2014
|
1.63%
|
48
|
|
PBI
|
8/25/2014
|
-8.72%
|
41
|
|
CLF
|
9/2/2014
|
-44.79%
|
33
|
|
AFL
|
9/15/2014
|
-3.26%
|
20
|
|
KFY
|
9/29/2014
|
-3.53%
|
6
|
|
(Since 5/31/2011)
|
|||
|
S&P
|
Annualized
|
12.03%
|
|
|
Sector Model
|
Annualized
|
24.93%
|
|
|
Large Portfolio
|
Annualized
|
19.32%
|
Rotation: selling ALF; buying IQNT.
The recent small cap collapse was catastrophic on my model. ESI is facing a lawsuit related to the badly
calculated earnings, and those are still up in the air. What is REPORTED leaves ESI with a P/E of 1.75
(according to eTrade), but the actual earnings remain unknown. Investors don’t like uncertainty, so they
have been fleeing ESI in droves.
This puts ESI in an unusual spot. It is no longer worth dumping. The risk is already built into the
stock. Unless some kind of unusual
reversal were to occur, ESI will likely stay on the model like a black eye for
a long long time.
No help for it.
The Sector Model remains undisturbed:
And the sector and style matrix now favors small caps again:
|
Small Value
|
Mid Value
|
Large Blend
|
Large Value
|
Small Growth
|
Mid Blend
|
Large Growth
|
Mid Growth
|
Small Blend
|
|
|
Finance
|
1
|
2
|
3
|
4
|
7
|
8
|
11
|
24
|
41
|
|
Industrial
|
5
|
6
|
9
|
10
|
16
|
17
|
19
|
43
|
58
|
|
Utilities
|
12
|
13
|
14
|
15
|
27
|
29
|
36
|
57
|
64
|
|
Energy
|
18
|
20
|
21
|
22
|
39
|
40
|
42
|
61
|
71
|
|
Staples
|
23
|
25
|
28
|
31
|
44
|
45
|
48
|
67
|
75
|
|
Cyclicals
|
26
|
30
|
33
|
34
|
46
|
47
|
51
|
69
|
76
|
|
Materials
|
32
|
35
|
37
|
38
|
49
|
50
|
53
|
70
|
77
|
|
Healthcare
|
52
|
54
|
55
|
56
|
65
|
66
|
68
|
78
|
80
|
|
Technology
|
59
|
60
|
62
|
63
|
72
|
73
|
74
|
79
|
81
|
If I were a market timer, I’d be long – but I’m not a market
timer, and I’m already long…
In any case, the recent collapse shows the dangers of mean
reversion. In momentum trading you have
stop losses and can suffer death by a thousand cuts in the hopes for a big
score. In mean reversion trading you
have no stop losses and can hope for a thousand small gains with the danger of
a big collapse.
That sometimes leaves you with trades (and holds) like ESI.
Tim
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