Fundamental is a moderately low-beta, moderately low-turnover trading plan for stocks traded on major U.S. exchanges. It focuses on providing above-market returns over the longer term while keeping a variability of returns that is similar to the market's risk profile.

Information is as of the close on April 25, 2008.

Model Allocation

Based on beginning with a $100,000 portfolio at inception, these are the current weights and holdings. The initial target was a buy of 5% weights per position. See my previous post on this system. Sort is alpha order by ticker and weights are rounded to the tenth of a percent.

America Movil, S.A.B (AMX) - 4.0%
Amphenol Cp (APH) - 5.6%
Cf Ind Hldgs Inc (CF) - 5.4%
Coach Inc (COH) - 5.4%
Fmc Technologies Inc (FTI) - 5.5%
Greenhill & Co (GHL) - 4.1%
Infosys Technologies (INFY) - 5.2%
Kinetic Concepts Inc (KCI) - 3.3%
Mcdermott Int Panama (MDR) - 5.4%
Microsoft Corp (MSFT) - 4.5%
Noble Corp (NE) - 5.5%
Nvidia Corporation (NVDA) - 4.3%
Partner Communications (PTNR) - 5.8%
Schlumberger Ltd (SLB) - 5.4%
Strayer Education, Inc. (STRA) - 5.2%
Syntel, Inc. (SYNT) - 5.3%
Terra Nitr Co Com Ut (TNH) - 5.7%
Terra Inds Inc (TRA) - 4.2%
Western Digital Cp (WDC) - 4.7%
Waddell&Reed Fin Inc (WDR) - 4.9%

Cash - 0.4%

Returns

Based on beginning with a $100,000 portfolio at inception.

Equity: $99,195.11
Gain, Past 4 Weeks: 12.19%
Gain, Year to Date: -6.05%
Gain, Since Inception on 11/12/2007: -0.80%

The drawdown (reduction in equity from peak to trough, when a system or strategy is losing money) discussed in previous entries is back to the mid-single-digit level. The four-week, YTD, and since 11/12/2007 gains for dividend-adjusted SPY holding would have been 6.15%, -4.10%, and -3.31%, respectively.

While the system drawdown has improved since the market lows in March, I am concerned with the turnover in positions, which is higher than I expected, but may be due to the nature of this recent market correction. I will be investigating this further.

The following stock in the Fundamental portfolio went ex-dividend in the past four weeks: WDR.

Total dividends = $26.79 on the tracking portfolio. This amount has already been added to the returns shown above. Dividends paid will remain in cash until needed for a new purchase. Note, commissions are expensed at $10.00 per trade when accounting for returns.

Changes To Model Allocation

Fundamental screens for stocks that meet basic criteria, such as earnings and revenue growth, earnings quality, and debt-to-capital rations, then ranks them by ROE to hold the top 20. As a result of this regular four-week evaluation, the portfolio is making the following changes.

Remove the following stocks from the list:

Amphenol Cp (APH) - 5.6%
Cf Ind Hldgs Inc (CF) - 5.4%
Coach Inc (COH) - 5.4%
Greenhill & Co (GHL) - 4.1%
Infosys Technologies (INFY) - 5.2%
Kinetic Concepts Inc (KCI) - 3.3%
Microsoft Corp (MSFT) - 4.5%
Noble Corp (NE) - 5.5%
Schlumberger Ltd (SLB) - 5.4%
Strayer Education, Inc. (STRA) - 5.2%
Syntel, Inc. (SYNT) - 5.3%
Western Digital Cp (WDC) - 4.7%
Waddell&Reed Fin Inc (WDR) - 4.9%

Including the cash percentage of 0.4%, this allows approximately 65.0% of the portfolio to be allocated equally to the new purchases, with a target of 5.0% of equity each.

Add the following stocks to the list:

Cpfl Energia Sa (CPL)
Gymboree Corporation (GYMB)
Boeing Co. (BA)
Colgate-Palmolive Co. (CL)
Rockwell Collins, Inc. (COL)
ITT Educational Services, (ESI)
Herbalife Ltd. (HLF)
Holly Corp. (HOC)
Imperial Oil Ltd (IMO)
Magellan Midstream Holdin (MGG)
Netease.Com, Inc. (NTES)
Paychex, Inc. (PAYX)
Philippine Long Distance (PHI)

If this system were to be initiated today, the target allocation would be a buy for 5% weight holdings of the twenty stocks listed in Model Allocation, with the substitutions listed above.

Tracking

Shares of the stocks listed above will be sold, market at open on Monday. Based on portfolio total value and closing prices on March 28, 2008, enough shares of the replacements to comprise a 5.0% each allocation to the portfolio will be bought, market at open on Monday. Since the portfolio has plenty of room for full allocations, I will round any fractional shares to the nearest integer in the share calculation for buys.