• 657 days Will The ECB Continue To Hike Rates?
  • 657 days Forbes: Aramco Remains Largest Company In The Middle East
  • 659 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,059 days Could Crypto Overtake Traditional Investment?
  • 1,064 days Americans Still Quitting Jobs At Record Pace
  • 1,066 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,069 days Is The Dollar Too Strong?
  • 1,069 days Big Tech Disappoints Investors on Earnings Calls
  • 1,070 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,072 days China Is Quietly Trying To Distance Itself From Russia
  • 1,072 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,076 days Crypto Investors Won Big In 2021
  • 1,076 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,077 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,079 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,080 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,083 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,084 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,084 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,086 days Are NFTs About To Take Over Gaming?
Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

Fundamental Plan Flat Over Last Four Weeks

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 February 29, 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.

Accenture Ltd. (ACN) - 5.3%
Amphenol Cp (APH) - 4.8%
Cpfl Energia Sa Ads (CPL) - 5.5%
Diamond Offshore Drl (DO) - 5.7%
Giant Interactiv Ads (GA) - 4.3%
Greenhill & Co (GHL) - 5.1%
Garmin Ltd. (GRMN) - 3.7%
Infosys Technologies (INFY) - 5%
Kinetic Concepts Inc (KCI) - 4.7%
Lan Airlines Sa Ads (LFL) - 5.3%
Mobile Telsys Ojsc (MBT) - 4.7%
Mcdermott Int Panama (MDR) - 5%
Microsoft Corp (MSFT) - 4.3%
Partner Communications (PTNR) - 5.9%
Transocean Inc (RIG) - 5.9%
SEI Investments Comp (SEIC) - 4.5%
Companhia Sider Ads (SID) - 5.3%
Schlumberger Ltd (SLB) - 4.9%
United Therapeutics (UTHR) - 4.3%
Western Digital Cp (WDC) - 5.3%

Cash - 0.3%

Returns

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

Equity: $92,619.85
Gain, Past 4 Weeks: -0.19%
Gain, Year to Date: -12.28%
Gain, Since Inception: -7.38%

Drawdown is the reduction in equity from peak to trough, when a system or strategy is losing money.

In backtesting, the Fundamental portfolio experienced a maximum drawdown of 14.6% over the ten-year test period. In backtest, the system equity was evaluated once every four weeks, so it is possible that the system experienced a slightly higher mid-month drawdown.

Currently the Fundamental portfolio has a drawdown of 13.5%, evaluated at four-week intervals. If I were to evaluate the drawdown at one-week intervals, it would have reached 17.5% on the week ending January 18, 2008.

Clearly the poor performance of the Fundamental portfolio in the last few weeks is very similar to the poorest performance of the system in backtest, which would have occurred in February 2003. Given the recent and extreme negative price action in the overall stock market, I still believe it is too early to conclude that the system action is a significant deviation from expected, based on backtesting.

The following stocks in the Fundamental portfolio went ex-dividend in the past four weeks: DO, MSFT, PTNR, and SLB.

Total dividends = $232.48 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, then ranks them by ROE to hold the top 20. As a result of this regular four-week evaluation, the portfolio is making some widespread changes.

Remove the following eleven stocks from the list:

Accenture Ltd. (ACN) - 5.3%
Diamond Offshore Drl (DO) - 5.7%
Giant Interactiv Ads (GA) - 4.3%
Greenhill & Co (GHL) - 5.1%
Garmin Ltd. (GRMN) - 3.7%
Lan Airlines Sa Ads (LFL) - 5.3%
Mobile Telsys Ojsc (MBT) - 4.7%
Transocean Inc (RIG) - 5.9%
SEI Investments Comp (SEIC) - 4.5%
United Therapeutics (UTHR) - 4.3%
Western Digital Cp (WDC) - 5.3%

Including the cash percentage of 0.3%, this allows approximately 54.5% of the portfolio to be allocated equally to the two new purchases, with a target of 4.95% of equity.

Add the following eleven stocks to the list:

Best Buy Co Inc (BBY)
Cf Ind Hldgs Inc (CF)
Coach Inc (COH)
Fmc Technologies Inc (FTI)
Gymboree Corporation (GYMB)
Noble Corp (NE)
Nvidia Corporation (NVDA)
Perini Cp (PCR)
Strayer Education, Inc. (STRA)
Terra Inds Inc (TRA)
Vimpel Commun (VIP)

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 eleven substitutions listed above.

Tracking

Shares of the eleven stocks listed above will be sold, market at open on Monday. Based on portfolio total value and closing prices on February 29, 2008, enough shares of the eleven replacements to comprise a 4.95% each allocation to the portfolio will be bought, market at open on Monday. Since the portfolio has little room for full allocations, I will round down any fractional shares in the share calculation for buys.

 

Back to homepage

Leave a comment

Leave a comment