Greetings all,
There are days where I am happy that I run a strategy with at least 30 holdings at any time. Today was such a day, as was yesterday.
One of my holdings, SGMA (Sigmatron International, Inc) dropped about -40% in two days. Usually this has to with some sort of earnings warning or something similar. I cannot find any such thing though.
Was wondering if anyone could find something and would be willing to share the source.
Thanks 
Victor
I have SGMA also and just assumed it was an earnings miss.
This is what came out yesterday. Found it in Company Specific News in my IB account.
[link to 10k](file:///C:/Jts/kjlifoapfokpnfkglghhldifefjhedjjbeamninb/articles/RTFL$182d4d89.pdf)
I'm too busy to read it now but skimmed it and it looks like they are going to file late and the estimated earnings they gave were bad.
I also have a position, happy to be diversified on days like these.
Found this on twitter:
And:
https://x.com/aggresivevalue/status/1818704726336180500/photo/1
I'll second (or third) that - diversification helps here. I also have this name in 2 strategies :(.
Is there anyway to get their data on P123? The "actual" values are N/A, and using other factors this stock still ranks very highly, which probably isn't the case based on their late filing and poor numbers.
Dear all,
To begin, I want to share that I was risk-off yesterday due to a lack of momemtum in the market and no stocks came up in my daily P123 classic screen (including tech/crytpo stocks). During the past 2-3 year, I am out of the market more than 60% of the trading days.
However, I have noticed that most P123 members with micro/small models seems to hold similiar stocks and I am wondering it maybe a good idea to set a stop loss of 8-10% in case that there is a delay of data update in Factset (which confuse the ranking system) instead of letting it free fall 40% and use diversfication to lower the cost.
In addtion, most of the P123 micro/small cap models recommending the same stocks will probably recommend to sell at the same time in the next re-balance (whether daily/weekly) and the stocks involved with smalll/medium market liqudiity may end up selling at even a lower price with such a large market sell order.
Regards
James
After CRD.A .... now SGMA... what a year!
This time, I was lucky to filter this stock out of my universe by using rule:
DaysSince(LatestNewsDate) > 140
This rule seems to worked well to short these stocks in the last 15 years.
Considering the high returns of microcap strategies over the last 2-3 years and the high trading costs of microcaps, this timing seems to be costing you a lot.
In addition, selling when the stop-loss rule (or other timing rule) is triggered can be a costly transaction, which can lead to even more losses than the simulation shows.
Adding DaysSince(LatestNewsDate) > 140 would only leave about 40 stocks left in the universe. That cannot be a solution.
Or am I misinterpreting your comment?
EDIT: I assume you mean the opposite way around.
It's nice to see a lot of people trading these very tiny stocks whose liquidity is just barely above $50,000 average daily trading volume (SGMA was small enough even before the drop). I always assumed everyone investing millions of dollars in each strategy and only traded stocks with liquidity greater than a few hundred thousand dollars like CRD.A
Pitmaster,
Did adding that rule improve your simulated results over longer time frames or was it just something you did for ease of mind?
This downturn is sure to significantly lower the ranking of this stock in many ranking systems
In a long-only universe the rule should be:
DaysSince(LatestNewsDate) < 140
Then SGMA would be removed from universe ahead of the price drop (assuming you do not force stocks into universe in simulation).
Maybe just set it as a sell rule
ZGWZ,
I can see that you are very interested in the microcap space which I personally don't invest in due to the low limit capacity.I mostly trade big tech/crypto stocks and daily rebalance.
First observation about the P123 designer models. There is currently little interest in them since most of them underperform the respective benchmarks with high max drawdowns maybe due to the weekly rebalance.
Second observation is about microcaps, I don't think you can completely rely on the sim for microcaps since the amount that is executed can move the market price in real time (doesnt happen for mid/large caps unless we are talking about hundred of million dollars in individual transaction volume) which does not reflect in sims and the backtested performance cannot be fullly relied upon. In addtion, without a stop loss (which is like an option with limited downside and unlimited upside), the max drawdown in some micrcaps can be very large (before the next rebalancing) due to data delay/update from Factset or problems with the ranking system or other sudden new announcements.
Regards
James
The second point I made was exactly that, the price impacts would be greater in stop-loss cases and the slippages would be much greater than the default values in the simulation in microcap universes.
Edit: It's just like you have to pay overpriced premiums for put option insurance, stop losses come at a high cost.
One more thing, if you have a positive alpha in your strategy, when you judge that the expected market return is lower than the futures implied risk-free rate, the best option should be to hedge with a short futures position instead of exiting the market. This is because it doesn't hurt you to gain alpha by holding individual stocks while still hedging downside risk with low transaction costs. If your strategy has no alpha or a negative alpha, then you should buy indices.
Also, the official website ebook says Yuval has nearly ten million of dollars and are still available trading in a universe made up mostly of microcap stocks (it is confirmed by his crazy microcap strategy's allocation). And I read on Linkedin that he is even going to start a hedge fund, so it seems that the amount of money is not that much of an issue in the microcap universe. Or are you managing hundreds of millions of dollars?
Edit: I'm actually only interested in the expected return to risk ratio instead of wastefully spending my money in casinos, so I'm not interested in cryptos, VIX gambling, meme stonks, private credit/equity, big tech, hedge fund, impact investing and real estate/infrastructure.
Edit2: Also, you can profit a lot in the past three years in Large Cap universe. So the idea to exit your positions to "risk off" is even a worse idea than I thought AI - Not just for small cap stocks
I want to give you a heads up that that there maybe another Duckruck here.
Not sure I want to argue here with you about Yuval performance but I don't think he is above water YTD and not sure that he is still planning to to start a hedge fund based on the recent performance.
Also unsure if he has made USD 10 mio from trading only microcaps.
As an advise, most trading done by investment banks/hedge funds in VIX, cryptos, private equity and technology stocks.. etc are not gambling and you should probably stop commenting on these investments without the proper knowledge and understanding. (I have over 15+ years exp working in investment banking.)
Furthermore, there will be no more response to your messages so pls stop messaging me.
Regards
James
Deleted by author
Jim,
It is done.
Regards
James
