8/4/2015 Corrected Metrics

Sector Model	XLE	-1.13%
Full Model	Date	Return
PWR	3/9/2015	-3.53%
CBI	4/2/2015	9.55%
MTZ	4/9/2015	-7.56%
DRQ	5/15/2015	-25.70%
RES	5/19/2015	-16.09%
SPN	5/28/2015	-27.50%
NOV	6/23/2015	-17.31%
INT	7/7/2015	-14.63%
AHC	7/28/2015	16.99%
FFIC	8/3/2015	-0.92%
(Since 5/31/2011)
S&P	Annualized	11.16%
Sector Model	Annualized	21.35%
Full Model	Annualized	14.38%
S&P	Total	55.61%
Sector Model	Total	124.47%
Full Model	Total	75.29%
Sector Model	Advantage	10.19%
Full Model	Advantage	3.21%
	Previous	2015
S&P	53.06%	1.67%
Sector Model	142.84%	-7.57%
Full Model	101.13%	-12.85%

Some careful observers have pointed out that the graphs for the Sector Model do not line up with the tracking numbers on the reports.  I reviewed the trades and the metrics against the snapshots, and the metrics were indeed slipping from the records I’ve kept for each week.

The metrics were automated, while the snapshots have been taken manually. The snapshots reflect intraday trades such as the one that was made Monday morning, which by itself constituted a 3% improvement over the automated reading in the background.

That is, on Friday after close the call was to be in XLE instead of XLU, but the account was still in XLU on Monday morning. XLU gapped up and XLE gapped down, and the trade took advantage of the difference.

Over the course of time those differences add up, and I had to correct the metrics to reflect reality.

Two takeaways:

1)      I’m still having a crappy year, and

2)      The Full Model looks even worse in comparison.

There are some reasons for the Full Model’s bad performance, which will not carry forward:

1)      I had garbled data from Value Line when I changed computers in 2011

2)      I broke my original rule against concentrating excessively in an industry.

Both of those are corrected. I reset the Value Line screens back to default in May, and I went back to my original rule against industry concentration after my six OILFIELD stocks resoundingly punished me.

When you have a system, and you deviate, record EVERYTHING. You can make corrections if you know what you did, why you did it, and how it worked out. Both good decisions and bad decisions become embedded into the model as it fine tunes itself.

I still have 4 OILFIELD stocks and 3 ENGCON stocks, but once those rotate out I will resume the original diversification strategy that worked a long time ago when the Full Model did better than the Sector Model.

The Sector Model, ultimately, is the benchmark.  If I did nothing else but select the largest cap stock in an industry in the buy zone and trade intraday when those shift, I would duplicate the Sector Model’s performance.

But the goal shouldn’t be to duplicate a benchmark – but to beat it.

Going forward, we’ll see how the Full Model rights itself.

Tim