The roller coaster ride of oil

December 1, 2016

Millions of American every year pay a hefty sum of money to be thrilled by some of the world’s fastest rollercoasters. The feeling of being suspended above the world as you climb higher and higher only to have crashing down is an amazing feeling.  If you have not conquered the rational part of your brain that says that it is not logical to put yourself in those metal contraptions I highly recommend a trip to your local amusement park. Another option has been to stay long oil over the past year, below is a chart showing roller coaster ride of Brent Crude Futures over the past year.

brent-cude-chart-1-year-11-30-2016

In January we hit the bottom turn of the roller coaster and analysts did not have a consensus on oils next direction.

“The price of Brent crude fell to $27.67 a barrel at one point, its lowest since 2003, while US crude fell as low as $28.36.

Many analysts have slashed their 2016 oil price forecasts, with Morgan Stanley analysts saying that “oil in the $20s is possible”, if China devalues its currency further.

Economists at the Royal Bank of Scotland say that oil could fall to $16, while Standard Chartered predicts that prices could hit just $10 a barrel.”1

Looking back now it was just a market overreaction. The client calls and excessive worry that the world was slowing down are now just a bad memory. Since the bottom in January: oil prices have recovered, China is still growing at a respectable rate and Latin America did not fall apart as many people feared. After the OPEC meeting yesterday we saw oil prices once again climb above $50.00 to close out the day over 8% ahead.  Today as of writing this the Brent Crude markets are up over 3% and gasoline futures are up over 5%. While we do not how the cuts to oil production that have been approved will happen or if the countries involved will follow through, we have a short term relief in the energy market’s low prices.

In our Aggressive SRS mode we rotated two additional energy names into the model in the past month allowing us to capitalize on the energy spike, while at the start of the year we held no energy names going into the January selloff.  That account is a concentrated portfolio (20-25 holdings). Two of our energy names were up mid 20% and a third was up 10%. Needless to say, we haven’t seen a day like today since Hurricane Katrina caused all the refiners to have problems.  The long term goal like every other money manager is to outperform our index, while that does not always happen in short time periods, days like yesterday are the reason you invest for longer periods and follow your investment thesis.

If you would like more information on our Systematic RS Aggressive Portfolio, please e-mail andyh@dorseymm.com or call 626-535-0630. Andy will also be hosting a webinar on Friday December 2, 2016 at 2 PM ET introducing our family of Systematic Relative Strength Portfolios.

 Upcoming Events

Please join Andy Hyer, Client Portfolio Manager at DWA, for an introduction to our family of Systematic Relative Strength Portfolios on Friday, December 2nd at 2 p.m. ET.  These portfolios provide disciplined access to relative strength strategies including U.S. Equities, International Equities, Fixed Income, and Global Macro and are available on UMA and SMA strategies at a large and growing number of firms.  Click here to register for the webinar. The event password is dwadwa.

 

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

1 West, Matthew. “Just How Low Can Oil Prices Go and Who Is Hardest Hit?” BBC News. January 18, 2016. Accessed December 01, 2016. http://www.bbc.com/news/business-35245133.

 

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Relative Strength Spread

November 29, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 11/28/16:

spread

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Knowing When to Stand Still

November 28, 2016

There has been an enormous amount of commentary following the November 8th presidential election about exactly what a Trump administration will mean for the financial markets, both domestic and international.  Trump’s victory is being called one of the biggest political upsets in modern U.S. history.  I think it is fair to say that the markets were probably expecting a Clinton victory, which may account, to some degree, for the wild swings in the performance of many relative strength strategies in the days following the election.  For example, see below for the performance of our Systematic RS International model compared to its benchmark, the Nasdaq Global ex US TR Index.  In the immediate aftermath of the election, many of our Latin American holdings took it on the chin, perhaps in fears of the perceived protectionists policies that might be associated with a Trump administration.  However, you’ll notice that within a couple of days the performance of the model snapped back.

intl-perf

*Performance of the Systematic RS International model is non-inclusive of dividends or transaction costs.  The performance of the Nasdaq Global ex US Index is inclusive of dividends, but does not include transaction costs.  Period 11/8/16 – 11/22/16.

We received a number of panicked phone calls during the few days following the election when we were experiencing some sharp underperformance.  “Is the model responding too slowly?”  “Wouldn’t it make sense to get out of all Latin American stocks now?”  Those were some of the types of questions we were receiving.  Our response was that we didn’t know if the underperformance would continue or if we would see those positions snap back, but that we would stick with our relative strength discipline.  Positions that deteriorated sufficiently would be removed from the model and replaced with stronger names.  In other words, we were not overriding the model.

This does remind me of a NYT article I read a number of years ago on a related topic:

The soccer field has turned out to be a popular laboratory among economists, with penalty kicks a particular favorite.

Awarded after certain kinds of fouls, or sometimes to decide a championship match, a penalty kick pits one player against the goalkeeper. (Mano a pie instead of mano a mano, though, since the goalie is allowed to use his hands.)

Standing just 36 feet away, the kicker sends the ball hurtling at the goal at 60 to 80 m.p.h., giving the goalie just 0.2 to 0.3 second to respond. Given the speed, the goalkeeper has to decide what to do even before observing the direction of the kick. Stopping a penalty kick is considered one of the most difficult challenges in sports. Not surprisingly, 80 percent of all penalty kicks score.

For their study, Mr. Azar, along with Michael Bar-Eli, a sports psychologist; Ilana Ritov, a psychologist; and two graduate students, scanned the top leagues in the world, collecting data on 311 penalty kicks. Then they computed the probability of stopping different kicks (to the left, the right or center) with different actions (jumping left, right, or staying put) to see which one “maximizes his chance of stopping the ball.”

According to their calculations, staying in the center gives the goalkeeper the best shot at halting a penalty kick — 33.3 percent, instead of 14.2 percent on the left and 12.6 percent on the right.

Yet when the group analyzed how the goalkeepers had actually reacted to these penalty kicks, they discovered the goalies remained in the center just 6.3 percent of the time.

The reason, Mr. Azar contends, is rooted in how the players feel after failing to block the ball.

01kick_600

Source: New York Times

When it comes to soccer and investing, when choosing what to do, sometimes the best thing is nothing.  Overriding models may or may not work out in the short-run.  In the long-run, adherence to disciplined and adaptive models makes all the difference.

Over the last 10+ years the we have been managing the Systematic RS International portfolio, it has certainly had periods of underperformance, but over the last 10 years it has outperformed its benchmark by 6.4 percent annually, net of all fees.

intl-long-term-perf

As of 10/31/16

To receive the brochure on our Systematic RS Portfolios (which are available on a large number of SMA and UMA platforms), please e-mail andyh@dorseymm.com or call 626-535-0630.

This example is presented for illustrative purposes only and does not represent a past recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

The performance shown above is based on monthly performance of the Systematic Relative Strength International Model.  Net performance shown is total return net of management fees, commissions, and expenses for all Dorsey, Wright & Associates managed accounts, managed for each complete quarter for each objective, regardless of levels of fixed income and cash in each account.  The advisory fees are described in Part 2A of the adviser’s Form ADV.  The starting values on 3/31/2006 are assigned an arbitrary value of 100 and statement portfolios are revalued on a trade date basis on the last day of each quarter.  All returns since inception of actual Accounts are compared against the NASDAQ Global ex US Index.  The NASDAQ Global ex US Index Total Return Index is a stock market index that is designed to measure the equity market performance of global markets outside of the United States and is maintained by Nasdaq.  A list of all holdings over the past 12 months is available upon request.  The performance information is based on data supplied by the Manager or from statistical services, reports, or other sources which the Manager believes are reliable.  There are risks inherent in international investments, which may make such investments unsuitable for certain clients. These include, for example, economic, political, currency exchange, rate fluctuations, and limited availability of information on international securities.  Past performance does not guarantee future results. In all securities trading, there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown. Investors should have long-term financial objectives when working with Dorsey, Wright & Associates.

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Weekly RS Recap

November 28, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (11/21/16 – 11/25/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Recap of November so far

November 25, 2016

As we recover from the great national holiday of turkey, family and football we see the world of securities start to slow down. According to Market Watch the days before and after Thanksgiving make up two of the five slowest trade days for the year. This slow down allows us time to reflect on what we have seen so far in the month of November.  So far this month we have seen:

  • The Cubs win the World Series for the first time in 108 years
  • Donald Trump gets elected President of the United States
  • Major earthquakes hit Fukushima, Japan in similar fashion to the 2013 triple disaster
  • Vin Scully us award the Presidential Medal of Freedom

We have also seen global markets increase volatility from fear of a changing trade environment, US equity markets have a surprise rally in the wake of possible corporate tax reform and US interest rates start to climb. Looking forward we will continue to have major events as the global markets will need to digest what policies the new president will put into place and what Brexit is going to really look like for the EU.

We will continue to hit these bumps in the road, but we need to plan for the full journey and not focus on the potholes along the way. People fled from Latin American banks over the past couple of weeks resulting in a rough patch for our International accounts. Over the past week we followed our game plan of watching the signals and trusting our process. The results have been a strong week of outperformance vs. our benchmark; we continue to be very happy about how this strategy has performed compared to its benchmark over time. The process while it does not have the sizzle of a hot stock picker does have a great story of out performance over full market cycles and exposure to places in the world that an individual investor often does not have the knowledge to invest.

When talking to clients, friends and family this holiday season I always like to have a good story. The story this year is about finding value in places others have abandoned out of fear or taking a step back, staying true to a thoughtful investment thesis.

If you are interested to learn more about our investment thesis in our International strategy,  Andy Hyer can be reached at andyh@dorseymm.com or 626 535-0630

Charles Coleman
Associate Portfolio Manager
Dorsey Wright & Associates

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Everyone Loves A Story

November 22, 2016

There is always a reason not to invest in stocks.  Over the years there have been countless reasons that have kept investors out of the market.  The graph below was posted on Twitter back in August by @danielcrosby.  I pulled that chart up again last week after the election and reminded myself how many reasons over the years there have been to sit on the sidelines.  The sad truth is everything on the chart had well-reasoned arguments for why investors should have avoided the stock market.  But the market was actually up 100 times more than inflation over the time period in the chart.

smart

It is so difficult to avoid getting caught up in the madness because the issues surrounding these problems are real.  The story is always more persuasive than the truth.  Try playing a little game the next time you are at a cocktail and the stock market comes up.  There is usually someone around that has a story for a certain stock or how the economy will impact global returns.  Everyone standing around listening is captivated because they love the story.  Eventually someone will ask you how you go about investing.  My usual response is something like, “Well, I just buy a bunch of stocks that are going up and hold them until they stop going up.”  It is amazing how quickly everyone needs to go to the bar for a refill after hearing my “story.”

But that is one of the best ways to make money in the market over the long term!  Find an edge and exploit that edge as best you can.  Keep the process simple so that it is repeatable.  The more moving parts you have the more things you have that can break.  The more you focus on stories rather than a repeatable, proven process the more likely you will be to fall into the trap that plagues most investors.

Telling a story is great for sales.  You aren’t going to bring in many new accounts with the cocktail party speech I suggested above.  So go ahead a put a little sizzle on the steak in order to sell your process.  But when the rubber meets the road and it is time get down to the business of managing accounts don’t fool yourself.  There is elegance in simplicity.  Follow your process and don’t get caught up trying to make everyone think you are a really smart person.  There are always reasons to keep you out of the markets, but history shows that basing your investment decisions on the news story du jour isn’t the way to generate good returns over time.

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How Momentum Based ETFs Work in Portfolio Construction

November 21, 2016

ETF Trends publisher/editor Tom Lydon spoke with Andy Hyer, Client Porfolio Manager, Dorsey, Wright & Associates, a Nasdaq Company, at the Schwab Impact Conference in San Diego that ran Oct. 24-27, 2016.

Hyer discussed how its innovative momentum based ETFs work in portfolio construction.

Neither the information nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products.  This document and presentation do not purport to be complete descriptions of the securities or commodities, markets or developments to which reference is made.  Past performance is not indicative of future results.  Potential for Profits is accompanied by possibility of loss. 

 

Some performance information presented is the result of back-tested performance.  Back-tested performance is hypothetical (it does not reflect trading in actual accounts) and is provided for informational purposes to illustrate the effects of the discussed strategy during a specific period.  

 

Back-tested performance results have certain limitations.  Such results do not represent the impact of material economic and market factors might have on an investment advisor’s decision making process if the advisor were actually managing client money.  Back-testing performance also differs from actual performance because it is achieved through retroactive application of a model investment methodology designed with the benefit of hindsight.  Dorsey, Wright & Associates believes the data used in the testing to be from credible, reliable sources, however; Dorsey, Wright & Associates, LLC (collectively with its affiliates and parent company, “DWA”) makes no representation or warranties of any kind as to the accuracy of such data. 

 

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Relative Strength is a measure of price momentum based on historical price activity.  Relative Strength is not predictive and there is no assurance that forecasts based on relative strength can be relied upon.

 

Unless otherwise stated, the returns of the strategies do not include dividends for stocks or ETFs but do account for distributions in mutual funds.  Returns of the strategies do not include any transaction costs. Investors should have long-term financial objectives. 

 

The information contained herein has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs.  Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions.  Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable (“information providers”).  However, such information has not been verified by DWA or the information provider and DWA and the information providers make no representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein.  DWA and the information provider accept no liability to the recipient whatsoever whether in contract, in tort, for negligence, or otherwise for any direct, indirect, consequential, or special loss of any kind arising out of the use of this document or its contents or of the recipient relying on any such recommendation or information (except insofar as any statutory liability cannot be excluded).  Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice. 

 

Each investor should carefully consider the investment objectives, risks and expenses of any Exchange-Traded Fund (“ETF”) prior to investing. The risk of loss in trading commodities and futures can be substantial. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. You should therefore carefully consider whether such trading in ETFs is suitable for you in light of your financial condition.  Before investing in an ETF investors should obtain and carefully read the relevant prospectus and documents the issuer has filed with the SEC. ETF’s may result in the layering of fees as ETF’s impose their own advisory and other fees. To obtain more complete information about the product the documents are publicly available for free via EDGAR on the SEC website (http://www.sec.gov).

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Relative Strength Spread

November 21, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 11/18/16:

spread

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Weekly RS Recap

November 21, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (11/14/16 – 11/18/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Sentiment Readings At Historic Lows

November 21, 2016

Piper Jaffray’s November 2016 issue of The Informed Investor included some great insight on investor sentiment.  In short, we’ve reached bearish sentiment levels that, from a contrarian standpoint, suggests a positive outlook for equities:

The AAII Investor Sentiment survey measures the percentage of individual investors who are bullish, bearish and neutral on the stock market for the next six months.  Of particular interest is the bullish percent number that is a solid contrarian indicator and often shows investors’ complacency/fear at important turning points in the market.

From a historical perspective, the lower decile (bottom 10% readings) of the Bullish % numbers resides at 26%.  For the week ending November 2, 2016, the sentiment survey recorded a bullish % reading of 23.6%, which falls in the bottom decile of all observed values since July 1987 (as shown in the table right below).  From a contrarian perspective, the data suggests a positive bias and that the path of least resistance is likely higher.

aaii

From a performance perspective, we went back in history (1987-present) and calculated average and median market returns after such low readings were observed.  We note that the SPX index has been higher over the following 13- and 26-week periods, 74% and 81% of the time respectively.

Additionally, the SPX has recorded positive average returns of 7.7%, six months after weak readings of the Bullish % numbers were observed.

aaii2

Perhaps you are scratching your head as to how this can happen when markets are so close to all-time highs.  A couple guesses as to why this can happen.  First, the election causes politicians to focus on the things that are going wrong (and how they are going to fix them!).  The constant focus on the negative has the effect of, not surprisingly, causing people to overlook what may be going right.  Second, the market has been flatish on a year-over-basis.  When investors don’t get their expected 7-9 percent a year their mood drops (even if we’re not far from all-time highs).

Contrarian indicators such as this work best at the extremes and recent readings in the bottom decile suggest that the coming weeks and months may very well surprise to the upside.

Past performance is no guarantee of future returns.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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A Game Plan For Incorporating “The Totality of Information”

November 8, 2016

Jason Zweig recently made a key observation during an interview with Russ Roberts (via The Irrelevant Investor):

I think if there’s one overriding theme to the book, one of the things I’ve tried to get across in The Devil’s Financial Dictionary is the importance of just being humble before the financial markets. I mean people are humble before nature- think about when you stand on the rim of the Grand Canyon, or you walk to the edge of the ocean, or you look up at the stars, people feel this sense of awe and wonder and smallness because we are small when we compare ourselves with the natural world. Well individuals, and for that matter, policy makers, are small when we compare ourselves with the financial markets, but most of us forget that.  And we think, oh we’ll we have better data or we know something the other guy doesn’t, and in fact we should have that same sense of just being a spec of sand on a long beach and just remember that whatever we know is very small compared to the totality of the information that’s out there.

This begs the question, what is your edge as a financial advisor?  If your edge is “knowing something the other guy doesn’t” how realistic is that edge?  So much of what goes on in the investment management business is centered around people believing that they have insight into why a given security is mispriced.  Taking Zweig’s advice to stay humble as it relates to the totality of the information that is out there goes to the essence of  technical analysis.  For technicians, and specifically those adhering to a trend following/relative strength-based approach to investing, our edge has nothing to do with identifying mispriced securities.  The prices are what they are—the simple intersection of supply and demand.  Our edge is having a disciplined method of identifying and participating in the strongest trends in the market.  Thanks to the power of technology, our trend following models see and incorporate all information in the market that is relevant to our buy and sell signals.

If you need some ammo to help make the case for such a trend following approach.  I would suggest reading (or re-reading) some of John Lewis’ white papers on the topic.  Some of my key takeaways from these white papers:

  • Price is sufficient as an input for trend following models.  There is no need to complicate things with other inputs.
  • Trend following works on stocks, ETFs, and asset classes
  • Relative Strength doesn’t work all the time, but it does work a high percentage of the time
  • Discipline is the key.  Rather than focus on constantly tweaking a relative strength model, it is best to do thorough research up front than then focus on execution after that.  Constantly tweaking a trend following model is no different than not having any discipline.
  • There are best practices when it comes to relative strength models.  Those white papers detail best practices.  Some of those best practices including knowing what box size to use on a PnF relative strength chart and where to set your relative strength rank buy and sell threshold for a given objective.

As a subscriber to DWA research, you have the necessary tools at your fingertips to employ such relative strength strategies.  There is no need to recreate the wheel here.  We’ve done the heavy lifting for you.  Team Builder, Matrix Plus, the Models Page, the Technical Attributes, and Fund Score, DALI.  It’s all there.

It is possible to be humble and confident at the same time.   Humility is demonstrated by not looking beyond price.  The confidence comes from embracing a trend following model designed to interpret those prices in a systematic way.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Weekly RS Recap

November 7, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (10/31/16 – 11/4/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Point and Figure RS With Micro Caps

November 2, 2016

We have written quite a bit over the years about using point and figure relative strength for stock selection.  One of the whitepapers that discusses the basics of using RS can be found here.  In a lot of the research (including the whitepaper in the link) we use a universe of large capitalization stocks.  There really isn’t a good reason for the use of that universe.  Generally speaking, it is easier to deal with large caps because the information tends to be cleaner, and people are usually more interested in hearing about companies they know and recognize.

Point and figure relative strength works just as well or better on universes of small capitalization stocks.  The small cap universe is incredibly dynamic, and each year there are plenty of big winners and plenty of companies that wind up going out of business.  The dispersion of returns is very high, which is very good for a momentum strategy.  The micro capitalization universe has stocks in it that are even smaller than the small cap universe.  Micro caps are truly the wild, wild west.  The other characteristic with micro caps that make it a good universe for relative strength analysis is there is very little analyst coverage on these companies because they are so small.  That makes it easier to find undiscovered gems than it is in a larger capitalization universes.

To define a micro cap universe, we took the all of the stocks trading on US exchanges at the end of each calendar year and included everything ranked every company by market capitalization.  Stocks ranked from number 2000 through 3500 were included in the universe.  That universe essentially includes the bottom half (in terms of market cap) of the Russell 2000 and then another 500 stocks that don’t even qualify for inclusion in the Russell 2000 Index.  At each month we ranked every stock in the universe by relative strength versus a micro cap benchmark.  If you are unfamiliar with how a point and figure relative strength ranking works you can find an explanation in the paper linked to above.  Stocks were placed into one of four baskets at each month end based on point and figure relative strength chart configuration (signals and columns).  Each month the baskets were refreshed and all of the stocks in each basket were equally weighted.  Equally weighting each stock on a monthly basis would prove to be difficult in actual portfolio management, but we are just trying to get an idea about the power of relative strength in this universe.

microeqmicroret

(Click To Enlarge)

The Universe return listed above is the monthly equal weighted return of all the stocks in the universe.  We have included this because most broad market benchmarks are capitalization weighted and do not get the benefit of getting reweighted each month at no cost.  The returns of the universe are the best apples-to-apples comparison of how the universe was constructed.  The Benchmark return is a blended return of two different indexes: Russell 2000 Total Return and Russell Microcap Total Return.  The data on the Russell Microcap index doesn’t go back to the beginning of our test.  Before the microcap index was available we used the Russell 2000, and then linked that index performance to the microcap index when the data became available.

The stocks on a point and figure buy signal and in a column of X’s are the strongest stocks.  That basket of stocks performs remarkably well with very good volatility characteristics.  One thing that appears to be the case in the microcap universe is that relative strength helps find quality companies.  There are so many microcap companies that are, for lack of a better term, a hot mess.  Quality is extremely important when dealing with such small firms.  Most large cap companies are large because they have multiple products, experienced management teams, and defined processes and controls.  Sure, large cap companies make mistakes and their stock prices can go down quite a bit, but it is nothing like what goes on in the microcap space.  Momentum is very important when looking at very small stocks, and it also helps filter out a lot of the companies with poor quality characteristics.

Momentum works in a number of different markets and across markets.  In a universe of very small companies it is no different.  Using point and figure relative strength as a filter to focus on the strongest stocks in the universe is a great way to increase your odds of success.

Performance data is the result of hypothetical back-testing.  Investors cannot invest directly in an index.  Indexes have no fees.  Back-tested performance results have certain limitations.  Back-testing performance differs from actual performance because it is achieved through retroactive application of an investment methodology designed with the benefit of hindsight.  Back-tested performance do not represent the impact of material economic and market factors might have on an investment advisor’s decision making process if the advisor were actually managing client money. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.  Neither the information nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products.  This document does not purport to be complete description of the securities, markets or developments to which reference is made.  Performance is inclusive of dividends, but does not include any transaction costs.

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Weekly RS Recap

October 31, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (10/24/16 – 10/28/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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David Letterman on Prospect Theory

October 25, 2016

I stumbled across this gem from the NYT recent interview with David Letterman:

More earnestly, he added: “Maybe life is the hard way, I don’t know. When the show was great, it was never as enjoyable as the misery of the show being bad. Is that human nature?”

Yep, it is definitely human nature.  And it has implications for our investment behavior as well.  From then entry on Prospect Theory in Investopedia:

According to prospect theory, losses have more emotional impact than an equivalent amount of gains. For example, in a traditional way of thinking, the amount of utility gained from receiving $50 should be equal to a situation in which you gained $100 and then lost $50. In both situations, the end result is a net gain of $50.

However, despite the fact that you still end up with a $50 gain in either case, most people view a single gain of $50 more favorably than gaining $100 and then losing $50…

…Prospect theory also explains the occurrence of the disposition effect, which is the tendency for investors to hold on to losing stocks for too long and sell winning stocks too soon. The most logical course of action would be to hold on to winning stocks in order to further gains and to sell losing stocks in order to prevent escalating losses.

When it comes to selling winning stocks prematurely, consider Kahneman and Tversky’s study in which people were willing to settle for a lower guaranteed gain of $500 compared to choosing a riskier option that either yields a gain of $1,000 or $0. This explains why investors realize the gains of winning stocks too soon: in each situation, both the subjects in the study and investors seek to cash in on the amount of gains that have already been guaranteed. This represents typical risk-averse behavior.

David Letterman perfectly articulated a condition that affects most of us: we feel the impact of loss and pain to a greater degree than we feel the impact of an equivalent amount of gain or joy.  Left unchecked this disposition effect creates all kinds of problems in our investing behavior.  We hold on to the losers because if we don’t actually sell a loser then we won’t have have to admit that the trade didn’t work and we think we are avoiding some measure of pain.  And the winners, well we sell them as fast as possible to avoid seeing those gains evaporate (even if it means missing out on the continuation of that trend).

The only problem with giving in to the disposition effect is that it leads to very poor investment results.  See Jim O’Shaughnessey’s What Works on Wall Street.

So what can be done?  As with most things in life that work, the solution is not complicated.  It only requires great discipline.  It is for this very purpose that adherence to models (which enforce discipline and helps combat the disposition effect) is front and center in the Dorsey Wright experience.  It may never become “easy” to take the trades that a well-designed model provides, but I can attest to the fact that it is easier and I believe more profitable than trying to navigate the markets without models.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Weekly RS Recap

October 24, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (10/17/16 – 10/21/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Relative Strength Spread

October 18, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 10/17/16:

rs-spread

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Elkhorn Commodity Rotation Strategy ETF (DWAC)

October 17, 2016

While the majority of investors allocate their dollars primarily between equities and fixed income, there are a number of alternative assets that may add value to the portfolio over time.  Furthermore, the advent of ETFs has made it easy for investors to gain exposure to areas of the financial markets that were previously reserved for the savviest of investors.  One such example is the Commodity asset class.  Today, investors can select from upwards of 140 ETFs and ETPs to introduce commodity exposure into the portfolio, instead of trading futures contracts. One of the newer ETF products to hit the market within this space is the Elkhorn Commodity Rotation Strategy ETF DWAC, which uses the Dorsey Wright methodology to target those commodities with the strongest relative strength characteristics.

One of the main factors which helps enable a relative strength based strategy to generate strong returns is ample performance dispersion among the investable universe.  The most popular commodities discussed by mainstream media are precious metals (gold, silver, platinum) and energy (crude oil), but that only scratches the surface of this asset class as a whole. For example, the “softs” complex (which includes Sugar, Cotton, Cocoa, Orange juice, and Coffee) certainly isn’t making CNBC headlines on a daily basis, but Sugar futures are the top performing commodity on the year and have registered an impressive gain of over 50% in 2016.  On the flip side, agricultural Commodities such as Live Cattle (-20.22%), Wheat (-20.79%) and Lean Hogs (-25.27%) continue to lag and remain in very firm downtrends.  At some point these trends will change, but the dispersion which exists within the asset class remains wide year over year.

Generally speaking there are about 5 different commodity sectors: precious metals, industrial metals, livestock, agriculture, and energy.  One of the most commonly used benchmarks for the asset class is the S&P Goldman Sachs Commodities Index (GSCI).  It was launched in May 2007 and holds approximately 24 different commodities. The index allocations are world production weighted based on the average quantity of production of each commodity.  Currently, the index is allocated as follows:  Energy (70.44%), Industrial Metals (8%), Precious Metals (3.68%), Agriculture (12.78%), and finally Livestock (5.11%).   As a result, energy is the tail that wags the dog in this instance, accounting for more than two-thirds of the index’s performance. This is not unusual to see across many broad based commodity ETFs, making the DWAC quite different from the rest of the pack in terms of the exposure it offers.

The underlying index follows a Dorsey Wright relative strength based strategy to make its allocation decisions. The product also implements the dynamic roll methodology in order to avoid cost of carry issues at futures expiration. The universe for the underlying index includes 21 different commodities, and the index will target the top five on a monthly basis with a 20% weighting in each. The ability to tactically rotate through a broad universe of commodities and concentrate within the top performing sectors while eliminating exposure to the weak sectors is what makes this product both dynamic and unique. As of 9/30/2016, the current allocations in DWAC are as follows: Sugar, Silver, Coffee, Zinc, and Cotton. Additional information regarding historical allocations and other product info can be found on the DWAC factsheet.

DWAC vs. GSCI Equity Curves

1995-2015

Below we have as we plotted the equity curves in order to help compare historical performance of DWAC vs. GSCI.

1

DWAC inception date: Sept 21, 2016, GSCI inception date: May 7, 2007 – data prior to inception is based on a back-test of the underlying indexes.  Please see the disclosures for important information regarding back-testing.  DWAC Returns are calculated on a total return basis.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

DWAC vs. GSCI Performance

1995-2015

The table below gives a detailed perspective on the historical performance for each index.  Notice that DWAC offers a higher annualized return, and does so with lower annualized volatility.  Additionally, losses have been relatively contained when compared to the benchmark, while periods of outperformance have been instrumental in cumulative performance.

  • Cumulative Returns:  DWAC (+576.80%) vs. GSCI (-18.35%)
  • Annualized Returns:  DWAC (+10.02%) vs. GSCI (-1.01%)
  • Volatility (Annualized):  DWAC (22.23%) vs. GSCI (28.19%)
  • Largest Annual Loss:   DWAC (-20.24% – 1998) vs. GSCI (-46.49% – 2008)
  • Largest Annual Gain:  DWAC (+50.91% – 2006) vs. GSCI (+49.74% – 2000)
  • # Years Outperforming:  DWAC  (12 years) vs. GSCI  (8 years)
  • Total Performance in Outperforming Years:  DWAC (+253.90%) vs. GSCI (+73.11%)2

DWAC inception date: Sept 21, 2016, GSCI inception date: May 7, 2007 – data prior to inception is based on a back-test of the underlying indexes.  Please see the disclosures for important information regarding back-testing.  DWAC returns are calculated on a total return basis.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

Performance data for the model is the result of hypothetical back-testing.  Performance data for prior to inception date is the result of backtested underlying index data.  Investors cannot invest directly in an index. Indexes have no fees.  Back-tested performance results have certain limitations. Back-testing performance differs from actual performance because it is achieved through retroactive application of an investment methodology designed with the benefit of hindsight. Model performance data as well as back-tested performance do not represent the impact of material economic and market factors might have on an investment advisor’s decision making process if the advisor were actually managing client money. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

Neither the information nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products.  This document does not purport to be complete description of the securities or commodities, markets or developments to which reference is made.  

 

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Weekly RS Recap

October 17, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (10/7/16 – 10/14/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Manager Insights: Third Quarter Review

October 10, 2016

The stock market spent the majority of the summer months moving sideways in a tight trading range.  The S&P 500 finished the quarter up almost 4%, and is sitting on a gain of 7.8% so far this year.  International equity markets were a bright spot, and outperformed domestic markets.  Developed markets finished up 6.5% and Emerging markets finished with a gain of 9.2%.  Bonds also finished in positive territory with a 0.5% gain.  Commodities were a weak spot in the third quarter.  After strong gains in the first six months of the year, the S&P GSCI Commodity Index gave back 4.2% over the summer and now sits at a gain of 5.3% for the year.

We continue to see rotation below the surface in a number of different asset classes.  This is nothing new, but we think the rotations we are seeing now have the potential to be very beneficial to our strategies.  In the U.S. equity markets there has been a momentum shift out of areas such as high dividend and low volatility stocks.  The relentless reach for yield drove many investors into stocks instead of bonds, and drove valuations to historically high levels.  The same valuation issues cropped up in low volatility stocks, which have been quite the hot ticket for the last year or so.  These are not the areas that usually lead a robust bull market.  Low Volatility, especially, tends to lead during down markets.  As a result, there was a lot of hand wringing about how solid the market actually was with that kind of leadership.  We felt the leadership we were seeing was more a result of investor’s preference for yield (and the lack of good fixed income options) rather than an indictment on the overall market.

The new leadership that appears to be emerging is what is traditionally considered positive for a strong bull market.  Small capitalization stocks have had spotty performance for a while, but they really picked up steam in the third quarter.  The Russell 2000 Total Return index finished with a gain of 9% moving it well ahead of the S&P 500 for the year.  Technology stocks also dramatically outperformed what could be considered the old leadership (Utilities, Consumer Staples, and Low Volatility) over the summer.  The relative improvement in these higher volatility areas shows investors are gaining more confidence in the market.  Confidence is an incredibly important piece of the puzzle for momentum strategies so we are looking at this new development very favorably.

The appetite for higher volatility investments is also increasing internationally.  As previously mentioned, Emerging markets had a fantastic third quarter.  Latin America has been the biggest driver of that performance so far this year.  For the past couple of years, international markets have not fared as well as our domestic markets.  That appears to be changing, and we are seeing increasing allocations to Emerging markets in those account styles that allocate internationally and globally.  The overall composition of those portfolios has changed dramatically over the course of the year.

As we head in to the final three months of the year it is impossible not to think about the upcoming election.  Frankly, it is nothing short of a circus sideshow at this point.  We fully understand the uncertainty people feel because neither candidate seems like a good choice.  That, however, is politics, and we are investing.  We encourage you not to get caught up in the headlines.  We do expect some volatility around election time, but we don’t think either candidate’s victory means doom or exuberance for the stock market.  It is incredibly difficult to forecast how politics will affect the market, and most so called experts get it wrong.  Keep your politics out of your investing plan and you will be much better off for it in the long run.  Never forget that there is always some reason not to invest, but the reality is that investing in stocks is a tremendous way to build wealth over time.

The final three months of the year should be interesting to say the least.  There are pieces falling in to place that lead us to believe our relative strength strategies can do quite well if these trends are sustainable.  If you have any questions about any of our strategies please give us a call at any time.

This information is from sources believed to be reliable, but no guarantee is made to its accuracy.  This should not be considered a solicitation to buy or sell any security.  Unless otherwise stated, performance numbers are not inclusive of dividends or fees.  Investors cannot invest directly in an Index.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Q4 2016 PowerShares DWA Momentum ETFs

October 10, 2016

The PowerShares DWA Momentum Indexes are reconstituted on a quarterly basis.  These indexes are designed to evaluate their respective investment universes and build an index of stocks with superior relative strength characteristics.   This quarter’s allocations are shown below.

PDP: PowerShares DWA Momentum ETF

pdp

DWAS: PowerShares DWA Small Cap Momentum ETF

dwas

DWAQ: PowerShares DWA NASDAQ Momentum ETF

dwaq

PIZ: PowerShares DWA Developed Markets Momentum ETF

piz

PIE: PowerShares DWA Emerging Markets Momentum ETF

pie

Source: Dorsey Wright, MSCI, Standard & Poor’s, and NASDAQ, Allocations subject to change

We also apply this momentum-indexing methodology on a sector level:

sector-momentum

See www.powershares.com for more information.  

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Weekly RS Recap

October 10, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (10/3/16 – 10/7/16) is as follows:

ranks-10-10-16

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Adapt or Die

October 4, 2016

The Economist recently pointed out just how much change there has been in the characteristics of the companies that make the list of the top ten market cap companies today versus 2006:

James Manyika, of the McKinsey Global Institute, points out that today’s superstar companies are big in different ways from their predecessors. In the old days companies with large revenues and global footprints almost always had lots of assets and employees. Some superstar companies, such as Walmart and Exxon, still do. But digital companies with huge market valuations and market shares typically have few assets. In 1990 the top three carmakers in Detroit between them had nominal revenues of $250 billion, a market capitalisation of $36 billion and 1.2m employees. In 2014 the top three companies in Silicon Valley had revenues of $247 billion and a market capitalisation of over $1 trillion but just 137,000 employees.

economist

Three of the companies that made the list in 2006 continue to make the list today (Exxon Mobil, General Electric, and Microsoft).  Here’s what I find most interesting about those companies that made the list at the end of 2006—their performance since that time has largely been dismal (with the exception of MSFT).

perf_economist

Microsoft was the only one of the ten to have performance that exceeded that of the S&P 500.  Six of the ten have actually had negative total returns since the end of 2006.  Anyone who thinks it is safe to go with the biggest, most well-known companies for their portfolio would have been unpleasantly surprised by the results.

There is wisdom in the old adage The only constant in life is change.  It’s true!  The markets exemplify this reality every day.  It is for this very reason that the relative strength tools you have at your fingertips with the Dorsey Wright Platform are so essential.  They provide a disciplined way to stay with the relatively strong stocks and seek to avoid the relatively weak stocks.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  This example is presented for illustrative purposes only and does not represent a past recommendation.

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September SMA Performance Update

October 1, 2016

Detailed performance of our Systematic Relative Strength Portfolios is shown below.  International, Core, Aggressive, and Balanced added to their margins of outperformance for the year.  We continue to like what we see from a technical perspective with the broad U.S. equity market in a positive trend and above the range of the last couple of years.  We have also seen a strong pick-up in international equity performance—particularly in emerging markets.

sma-perf

To receive the brochure for these portfolios, please e-mail andyh@dorseymm.com or call 626-535-0630.  Click here to see the list of platforms where these separately managed accounts are currently available.

Total account performance shown is total return net of management fees for all Dorsey, Wright & Associates managed accounts, managed for each complete quarter for each objective, regardless of levels of fixed income and cash in each account.  Information is from sources believed to be reliable, but no guarantee is made to its accuracy.  This should not be considered a solicitation to buy or sell any security.  Past performance should not be considered indicative of future results.  The S&P 500 is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the U.S. stock market, as defined by Standard & Poor’s.  The Barclays Aggregate Bond Index is a broad base index, maintained by Barclays Capital, and is used to represent investment grade bonds being traded in the United States.  The 60/40 benchmark is 60% S&P 500 Total Return Index and 40% Barclays Aggregate Bond Index.  The NASDAQ Global ex US Total Return Index is a stock market index that is designed to measure the equity market performance of markets outside of the United States and is maintained by Nasdaq.  The Dow Jones Moderate Portfolio Index is a global asset allocation benchmark.  60% of the benchmark is represented equally with nine Dow Jones equity indexes.  40% of the benchmark is represented with five Barclays Capital fixed income indexes. Each investor should carefully consider the investment objectives, risks and expenses of any Exchange-Traded Fund (“ETF”) prior to investing. Before investing in an ETF investors should obtain and carefully read the relevant prospectus and documents the issuer has filed with the SEC.  ETFs may result in the layering of fees as ETFs impose their own advisory and other fees.  To obtain more complete information about the product the documents are publicly available for free via EDGAR on the SEC website (http://www.sec.gov) There are risks inherent in international investments, which may make such investments unsuitable for certain clients. These include, for example, economic, political, currency exchange, rate fluctuations, and limited availability of information on international securities.

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Systematic Relative Strength Portfolios (SMA/UMA Platforms)

September 28, 2016

Picture1

Our Systematic Relative Strength portfolios are available as separately managed accounts at a large and growing number of firms.

  • Wells Fargo Advisors (Global Macro available on the Masters/DMA Platforms)
  • Morgan Stanley (IMS Platform)
  • TD Ameritrade Institutional
  • UBS Financial Services (Aggressive and Core are available on the MAC Platform)
  • RBC Wealth Management (MAP Platform)
  • Raymond James (Outside Manager Platform)
  • Stifel (Opportunity Platform)
  • Kovack Securities (Growth and Global Macro approved on the UMA Platform)
  • Charles Schwab Institutional (Marketplace Platform)
  • Envestnet UMA
  • Fidelity Institutional
  • Adhesion Wealth

Different Portfolios for Different Objectives: Descriptions of our seven managed accounts strategies are shown below.  All managed accounts use relative strength as the primary investment selection factor.

Aggressive:  This Mid and Large Cap U.S. equity strategy seeks to achieve long-term capital appreciation.  It invests in securities that demonstrate powerful relative strength characteristics and requires that the securities maintain strong relative strength in order to remain in the portfolio.

Core:  This Mid and Large Cap U.S. equity strategy seeks to achieve long-term capital appreciation.  This portfolio invests in securities that demonstrate powerful relative strength characteristics and requires that the securities maintain strong relative strength in order to remain in the portfolio.  This strategy tends to have lower turnover and higher tax efficiency than our Aggressive strategy.

Growth:  This Mid and Large Cap U.S. equity strategy seeks to achieve long-term capital appreciation with some degree of risk mitigation.  This portfolio invests in securities that demonstrate powerful relative strength characteristics and requires that the securities maintain strong relative strength in order to remain in the portfolio.  This portfolio also has an equity exposure overlay that, when activated, allows the account to hold up to 50% cash if necessary.

International: This All-Cap International equity strategy seeks to achieve long-term capital appreciation through a portfolio of international companies in both developed and emerging markets.  This portfolio invests in those securities with powerful relative strength characteristics and requires that the securities maintain strong relative strength in order to remain in the portfolio.  Exposure to international markets is achieved through American Depository Receipts (ADRs).

Global Macro: This global tactical asset allocation strategy seeks to achieve meaningful risk diversification and investment returns.  The strategy invests across multiple asset classes: Domestic Equities (long & inverse), International Equities (long & inverse), Fixed Income, Real Estate, Currencies, and Commodities.  Exposure to each of these areas is achieved through exchange-traded funds (ETFs).

Balanced: This strategy includes equities from our Core strategy (see above) and high-quality U.S. fixed income in approximately a 60% equity / 40% fixed income mix.  This strategy seeks to provide long-term capital appreciation and income with moderate volatility.

Tactical Fixed Income: This strategy seeks to provide current income and strong risk-adjusted fixed income returns.   The strategy invests across multiple sectors of the fixed income market:  U.S. government bonds, investment grade corporate bonds, high yield bonds, Treasury inflation protected securities (TIPS), convertible bonds, and international bonds.  Exposure to each of these areas is achieved through exchange-traded funds (ETFs).

Picture2

To receive fact sheets for any of the strategies above, please e-mail Andy Hyer at andyh@dorseymm.com or call 626-535-0630.  Past performance is no guarantee of future returns.  An investor should carefully review our brochure and consult with their financial advisor before making any investments.

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