SP500 VGQ 10 stocks model

[Miro]

When the market crash occurs early/middle of next year . . .

Breaking news!!

[intvalueXXX]

COUNT ON IT!

haha

No, I actually edited my post to read “next year” instead of early-mid next year. I don’t want to frighten anyone with my paranormal accuracy.

Chris

[kumar]

if subscriber subscribes to one of the model; i plan to give rest of the sp500 model free to them.
as all the stocks belongs S&P 500, avg return of these model 35% to 41% in simulation.

out of sample, they are better than bench mark so far.

whether this features available with p123 designer model now?

S&P500-10 Value, Growth and Quality Stocks
https://www.portfolio123.com/app/r2g/summary?id=1495143

S&P500-10Value Stocks - Rev3
https://www.portfolio123.com/app/r2g/summary?id=1500539

S&P500-10 Stocks Value & RS
https://www.portfolio123.com/app/r2g/summary?id=1508735

I have observed long term successful investor has short list of 20 to 30 candidates to choose best 10 to 15 candidates to buy.
It is a good metaphor, as if we have 3 winning teams to choose best players to form a champion team,
we will end up with top half of the table after playing so many plays with champion team (best of the best).

Thanks
Kumar

[Miro]

I have observed long term successful investor has short list of 20 to 30 candidates to choose best 10 to 15 candidates to buy.
It is a good metaphor, as if we have 3 winning teams to choose best players to form a champion team,
we will end up with top half of the table after playing so many plays with champion team (best of the best).

Kumar,

Picking and choosing from among companies that are selected by your ports, well, that’s a difficult thing to backtest. How do you know which you would have chosen 5 years ago?

[kumar]

I believe, backtest statistics are good in simulation.
In practice, it looks like more difficult.

I have learned CANSLIM stocks selection from a 90 years old AAII president, he is senior to William O’Neil in hardvard. he is a CANSLIM master.

1. EPS and fundamental ranking > 75
2. Relative price strength > 75
3. Institional buying and accumulation distribution rank A+, A-, B+
   these are included.

ie.,
then pivot point, 52 week high recommended, 52 week low discarded.

4. market timing component on price the SPY below 10week moving average, market in downtrend call.

I don’t think practically it is possible to automate this CANSLIM method, IBD working with top mind in the business to filter candidates
using above 4 rules and few more top industry filter rules.

Thanks
Kumar

[intvalueXXX]

Kumar: “Institutional buying and accumulation distribution rank A+, A-, B+…”

Can you let us know what you mean by this? How is accumulation/distribution ranked?

Thanks,

Chris

[PortfolioPerfection]

Kumar: “Russel2000 underperformed SP500 for last 4 and half years…”

Throughout history, when this occurs it is referred to by pundits as a case of the “Generals charging without the troops” (or some such nonsense). More accurately, it is usually a sign that market breadth is thinning and this typically occurs at the end of bull runs.

However, as Kumar noted, this situation has existed for the last 4.5 years, so it is not “typical.” What is happening is that the historically low-interest rates have artificially favored large, asset-rich companies that can take on a tremendous amount of debt and buy back their stock, thereby reducing available shares and increasing the price. Nevertheless, it may be a setup for other signals to occur that are suggesting the end is near.

For example, while there have been no signs yet that a market downturn preceding a recession is occurring, all the signals are set up in a classic pattern:

1) The Unemployment Rate today at 4.1% is below the historical average where it has bottomed since 1948 (at 4.21%):

As Georg Vrba has shown us many times, when the Unemployment rate bottoms and reverses upward, it is a high–probability signal of a coming market downturn (and usually an imminent recession).

2) The Yield Curve is another high-probability indicator of a market reversal when it flattens (and sometimes goes inverted). For example, this image shows the yield curve in mid-2011. At that time, the three-month bond interest rate was scraping bottom at 0.01% while the 30-year bond stood at 4.4% – a 4.39% difference:

Today, the three-month bond interest rate is at 1.29%, while the 30-month yield stands at 2.78% – a spread of only 1.49%:

When we see the unemployment rate reverse and go higher for two consecutive months, look out! If we also see the yield-curve get flat or go inverted, that is a coincident indicator to reduce exposure to long positions and take defensive measures. Of course, these are classic, high-probability signals from the past. They are also very blunt tools since they deal with information (unemployment rate) or decisions (Federal Reserve on short-term interest reates) made on a monthly (or longer) basis.

Historically, they indicated that:

Historically, these signals indicated that:

1) Rising Unemployment: Employers are cutting back on hiring and are even beginning to lay off workers because of reduced demand going forward, and…

2) Flat Yield Curve: The Federal Reserve usually raises short-term rates to subdue an overheated asset market. In the current situation, it also means the Fed is looking for some room to lower rates to be able to ease monetary conditions when a recession does occur. Therefore, they are currently raising short-term interest rates to have some leeway in the future.

With the three-month rate at just 1.29%, that’s not much “accommodative easing” with which they have to work. It may only be about 3-4 interest rate cuts of 0.25% to 0.50%. Normally, at this point in the market/economic cycle, short-term overnight rates are around 5% or higher. When short-term rates match or exceed long-term rates, then the yield curve is flat. When short-term rates are a bit higher than long-term rates, it’s a classic harbinger of a significant downturn.

Most other economic and market indicators are still looking bullish, so don’t expect these warning signals to go off immediately. However, we are much closer to the end of this epic bull market than many went to believe.

Best of luck out there!

Chris

Have you written any timing rules based around yield curve flattening?

[kumar]

PortfolioPerfection,

Not sure, this market timing question to me or Chris.

i am using both price and EPS downtrend in my designer model market timing.

1. in the chart unemployment, 1930 to 1952 it goes up and down
   market was flat or in downtrend, employment rate is controlled by federal.

2. interest rate is 0-1% controlled by federal for last 10 years, market was in up.

3. $TNX yield, controlled by federal was down for last 15 years.

Stock Price and company Earnings belongs to company prospects can’t be controlled.

I have learned these stuffs from Fred Richard, AAII Dallas chapter, president. who claims he observed federal data for last 55 years in OUT OF SAMPLE . he not able to make any money on federal/economic data.

One more myths, investing in benchmark/index will return 6% return over 20+ years period; it is not always true.
from 1929 to 1952,
0% return for 23 years investment in indexes.

Thanks
Kumar

[Miro]

There are 77 large cap stock designer models (> 50% large caps).
48 of them have beaten SPY over the last 3 months!! A ringing endorsement for the Portfolio123 platform and its data.

Update – one month later:

50/77 large cap designer models beat SPY over the last 3 months. That’s 65%
29/59 beating SPY over the last 12 months. 49%

It gets even better when designer models are limited to 20 holdings or less.

29/52 beat SPY over the last 12 months. 56%
46/67 beat SPY over the last 3 months. 69%

Great job Portfolio123 data and tools!! Great job designers!!

[judgetrade]

Hey, I think there is some flaw in the logic that small caps are beaten by big caps.
In general (right now) yes, but we are not generally investing in index funds.

This is a very, very simple 3 Months System (Value, Momentum combined) (its a port not a sim!!!). 100 Stocks and
its beating the sp500 and a lot of big cap models.

My best small cap models average 50% a year, my best big cap model averages 18% a year.

The key is, there are good times for small caps and there are good times for big caps, my small
cap Modell still outperforms the big cap modells even when times are tough for small caps.

Thats whats called a “Dominant Trading System” that is robust and produces good results in
almost (not 2008 / 2009 I have to admit) all environments.

And that has to almost 100% with value, because (relative, what we have since we rank) value works in the toughest environments and value is most often found in small caps, becaus the gib guys simply can not invest in them, therefor the most “inefficiencies”
are in small cap market.

Combine Value (75%) with a bit of momentum (25%) and you got a nice equitiy curve, since both do
not correlate much with each other.

Do not get me wrong, I will switch to big caps, but only if my port gets so big that I do not have liquidity to trade
small caps, but until then I enjoy the ride…

Regards Andreas

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[judgetrade]

This is my best big cap Modell on the sp500.

Not bad, but I can make more in small caps.

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[judgetrade]

this is the same big cap sp500 Modell cap only 10 positions…

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[judgetrade]

here is an CANSLIM Model, so this also can be automated, using the IBD of the shelf (it should be puplic on p123) combining it
with size factors (small caps again, but over 250k turnover a day 20 day average).

Buy the way this is a designer model https://www.portfolio123.com/app/r2g/summary?id=1493937

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[Miro]

Hey, I think there is some flaw in the logic that small caps are beaten by big caps.

Agreed. Large caps are the hardest area to make money. Small caps are easier.

That’s why it’s so impressive that so many large cap designer models are beating SPY!!

[geov]

Andreas,
Interesting that your Nice and Steady large cap models make about 17% annualized. You have market timing in these models.
For my 12 stock model I get the same return without market timing and only 38% turnover. This model has an average holding period of 1,143 days.

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[geov]

Now, if you want to go for max return have a look at the VIX Timer with SVXY.

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[judgetrade]

Hi Georg,

is that a designer model, I would be interested!!!
Best Regards
Andreas

[U5YJ52993752gH7p5fx8]

Georg,
I am a subscriber to your Vix timer DM, this is why.

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[gfleet]

James,

That is pretty impressive. I have a question. What kind of stocks does “Defensive Cat Food” trade? Creative name, just curious.

George

[U5YJ52993752gH7p5fx8]

Defensive Cat food is an 8 position small cap momentum with a bit of value.
King for a day is mean reversion using the same universe.
“Looking up at the bottom” is a 4 position short port.

Without the VIX trader, return drops to 70% and the Draw down goes up to 16%