Combining Momentum & Low Volatility for Enhanced Alpha

May 2, 2016

Most market participants would agree that four of the most popular factor based investment methods used today are often considered to be momentum, value, growth, and low volatility.   At Dorsey Wright, we are often asked the best way to combine Dorsey Wright strategies (momentum/relative strength) with these other commonly used factor strategies.      Proponents of any smart beta strategy will often support all of these strategies, even admitting that there are pros and cons to each factor.  Momentum, for example, is the idea of investing in securities or asset classes using a previous time period that has performed well, most commonly a 12 month trailing return.  This type of strategy tends to do well during periods of sustained trends, but lags others such as value and low volatility during choppy markets.

During the 1st quarter of 2015, the majority of momentum/relative strength based strategies tended to fare better than the other factor based strategies mentioned above.  One of the largest contributing factors to this alpha generation during Q1 of 2015 was the dispersion which existed amongst US equities.   For example, the energy sector saw a sharp decline while sectors such as healthcare, biotech, and consumer discretionary fared much better.    Fast forward to the Q1 of 2016 and we have a different story on our hands.   Momentum strategies have struggled due to a lack of sustained sector leadership, while investment themes such as low volatility and value have performed much better.

Given the recent changes in sector leadership, we thought it would be interesting to go back and take a look how a few of these factor methods have compared to each other in terms of performance, volatility, etc.  The table below is a simple study complied over the last 18 years comparing PDP (Momentum), SPLV (low volatility), and SPY (benchmark).   Although momentum (PDP) outperforms both SPLV (low volatility) and SPY (benchmark), the added alpha generation came with a few drawbacks (mainly the potential for elevated volatility).   While periods such as these can be difficult, there are certainly ways to minimize the downside when they do come about in the market.   For example, using a systematic process can be a huge advantage, as it helps remove the human emotion which often times is magnified during periods of heightened market volatility.   Let’s take a look at the table below and see what type of results each of these portfolios (momentum, low volatility, and the equity index) generated over the allotted time period.

pdp

PDP inception date: March 1, 2007 – data prior to inception is based on a back-test of the underlying index.

SPLV inception date: May 5, 2011 – data prior to inception is based on a back-test of the underlying index.

When we take a closer look at the returns, we can see just how much the momentum and low volatility factors  differ in terms of performance at various cycles in the market (note 1999, 2003, and 2008 just to name a few).   The idea of implementing both momentum and low volatility into a portfolio would then sure seem logical to most money managers.   After all, any type of low volatility factor investing can typically be thought of as a reversion to the mean type of trade, which most would agree is the exact opposite goal of momentum investing (i.e.  looking for “fat tail” trades that deviate from the mean).    More simply stated, combining two different factor allocations in a portfolio which tend to do well during different market cycles would certainly seem to be an added benefit for any portfolio manager looking to reduce volatility and continue to generate alpha.

pdpsplv

The graphic above does a good job of displaying the differences returns year in and year out.  In fact, the correlation of excess returns between momentum and low volatility ends up at roughly-.70.    We plan to further visit this topic in our next blog post in order to give readers an a better idea on the type of results seen when combining these two factors in both a static and flexible allocations.   For now, the important thing to keep in mind is that in today’s investment world market participants should take full advantage of the full suite of products out there in order to help achieve alpha for their clients.    Using momentum and low volatility is just one way this can be done.   More detailed performance and risk analysis to follow in our next post on this topic.

Performance data for SPLV prior to 05/05/2011 and PDP prior to 3/01/2007 is the result of backtested underlying index data.  Investors cannot invest directly in an index.  Indexes have no fees.  The returns of the ETFs above do not include dividends, or all transaction costs.  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 strategy during a specific period.  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 does 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 within this post, nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities  This article does not purport to be complete description of the securities to which reference is made.

DWA provides the underlying index for the PDP, discussed above, and receives licensing fees from PowerShares.

           

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Sector Performance

April 28, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 4/27/16.

gics

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.  Source: iShares

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Performance Within Context of Expectations

April 25, 2016

Just how baffling can the stock market be to investors?  So often the market just does not behave the way investors think it should.   Morgan Housel of The Motley Fool provides some data points that can make investor’s heads explode:

Coca-Cola is fighting 12 consecutive years of soda consumption decline. Its stock is at an all-time high.

Tesla is changing the world, and orders for its new car are off the charts. Its stock is lower than it was 18 months ago.

Cigarette consumption has dropped 44% since 1981. Altria stock is up 71,000% since 1981.

WalMart net income has tripled since 2000. Its stock has lost 1.5% since 2000.

Apple has earned almost a quarter trillion dollars of profit since 2012. Its stock has barely budged.

Amazon’s profits round to zero since 2012. Its stock has tripled.

2009 was one of the worst years for the economy in a century. The market rose 27%.

2015 was a good year for the economy. The market rose 1%.

Brazil’s economy is a disaster. Its stock market is flat over the last two years.

America is enjoying the longest streak of low unemployment claims in four decades. Its stock market is also flat over the last two years.

And so on.

Housel sums up the problem:

Outcomes are determined by performance within the context of expectations, with importance heavily weighted toward the latter. And if predicting future performance is hard, calibrating them against expectations is close to sorcery…

…In a world where analysts focus most of their time analyzing performance – what earnings will do, or what the economy will do – and it’s no wonder we struggle to predict outcomes.

This is where many investors simply throw up their hands and give up on finding a logical, organized way to analyze the market.  It is also where investors who are introduced to the Point and Figure method of technical analysis “see the light” in the sense that the market gets boiled down to understanding that price is the intersection between supply and demand.  The motivation for buying and selling activity may remain elusive, but the imbalance between supply and demand can be seen in the chart.  Momentum of the trend of the security can be identified and derived by looking at the relative strength of the security compared to all other securities in the investment universe.  With that information, investors can invest in the market as it really is and not as they wish it to be.

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Sector Performance

April 15, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 4/14/16.

sector

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.  Source: iShares

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Most investing is simple, but we complicate it.

April 6, 2016

Morgan Housel, in a 2014 WSJ article, shared some wise words to help demystify the stock market.

Companies earn a profit.  When investors are in a good mood, they pay up for that profit.  When they are in a bad mood, they pay less.  Future stock returns will equal profit growth, plus or minus the change in investor attitudes.

That really is all that is going on in the stock market.  But we complicate it, scrutinizing every market detail for evidence of what is coming next.

At their core, market forecasts are an attempt to predict investor’s emotions—say, how happy people will be in 2024.  An there is just no reliable way to do that.

A sensible way to invest is to assume companies will earn a profit, and assume the amount investors will be willing to pay for that profit will fluctuate sporadically.  Those emotional swings will balance out over time, and over the long run the profits companies earned will accrue to investor’s pockets.

Everything else—what stocks might do next quarter, or when the next crash might come—can be needlessly complicating.  Investors should learn to take the simple route.

Housel’s description of how the stock market works is spot on.  However, investors still have to decide what to do with this information.  Perhaps, they will choose buy and hold index investments.  Perhaps, they will choose to employ active investment strategies in an attempt to improve the risk/return profile of a passive investment.  If they choose the latter, even for a portion of their overall allocation, they would be well served to choose active investment strategies that take into account the reality that stock prices are determined by a combination of factors that include corporate profits AND investor emotions.

Key to the rationale for momentum investing is that one never knows, nor does one necessarily care, the exact motivation of buyers and sellers in the marketplace.  For momentum investors, it is enough to see the net effect of all buying and selling pressure for stocks and then to rank a universe of securities by their momentum, buying the securities with the strongest momentum and holding them for as long as they remain strong.

What should investors avoid?  As Housel points out, forecasting is an exercise in futility.  Furthermore, expecting the stock market to be a simple math problem related to corporate profits is another way for investors to set themselves up for disappointment.

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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Corporate Profits and Stock Market Returns—It’s Complicated

April 4, 2016

There is never any shortage of big scary things to worry about when it comes to the stock market.  Savita Subramanian from Bank of America recently weighed in on her current concerns on earnings growth:

Publicly traded companies have seen negative earnings growth two quarters in a row and there are no fundamental underpinnings for the rally, Savita Subramanian, BofAML’s head of U.S. equity and quantitative strategy, said on CNBC’s “Fast Money” this week.

“We are in a profits recession. There (are) no two ways around it,” said Subramanian, whose S&P 500 price target of 2,000 is among the lowest on Wall Street. She is also concerned about how Federal Reserve monetary policy could affect stocks.

“You have the Fed embarking on a long, slow tightening cycle. Tightening into a profits recession doesn’t sound like anything to throw a big party about,” she said.

Ben Carlson saw her comments and decided to take a closer look at the historical relationship between profit growth and stock market returns.

One of the biggest problems in the world of finance is that people make proclamations without backing it up with evidence. So I wanted to see what the historical relationship looks like between profit growth and stock market returns. Using Federal Reserve data on corporate profits, I looked back at the historical growth rate of profits by decade and compared them to that decade’s stock market returns (using the S&P 500):

Carlson1

Now let’s break things down even further by market type:

Carlson2

(Although the S&P 500 was up 6% per year in the 1966-1981 period, many consider this a sideways market because the Dow went nowhere from a price perspective and once you take inflation into account real returns were basically zero.)

There’s really not much of a discernible pattern that can be detected here. High profit growth has led to both high and low stock market returns throughout the post-WWII period. There were also times of low profit growth with high stock market returns.

The greatest profit growth was seen in two of the worst-performing stock market decades — the 1970s and 2000s. But those periods were markedly different as the 70s saw sky-high inflation with rising interest rates while the 2000s had low inflation and falling rates.

After accounting for inflation, the 1980s only saw profit growth of roughly 1.6%, but stocks returned more than 17% per year (12% real). The 1950s and 1960s saw one of the greatest bull markets of all-time, but profit growth was basically average. Profits growth has been non-existent during the latest bull market cycle, but stocks are up gangbusters anyways.

This may seem highly blasphemous to die hard fundamentalists who often fall into the trap of thinking that success in the stock market is mostly a matter of accounting.  It is not.  Rather, it all comes back to what investors are willing to pay for those earnings.  Thus the need for technical analysis!

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Sector Performance

March 24, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 3/23/16.

sector

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.  Source: iShares

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Sector Performance

March 11, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 3/10/16.

sector

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.  Source: iShares

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Sector Performance

February 26, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 2/25/15.

sector

The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.    Source: iShares

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Stat of the Week

February 25, 2016

Via The Motley Fool:

It’s hard to believe that corporations bought $1.5 trillion of their own stock over the last three years while net inflows into mutual funds and ETF stock funds were less than $500 billion. When we talk about “investors” we think of people investing their own money, but the overwhelming driver of stock purchases are companies themselves.

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Stocks vs. Bonds

February 17, 2016

Via The New York Times:

stocks vs. bonds

Past performance is no guarantee of future returns.

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Sector Performance

February 5, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 2/4/16.

sector

The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.    Source: iShares

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Instability At The Top

February 3, 2016

It requires a huge run of success to make it into the list of the top 5 stocks based on market capitalization, but how durable is the performance of those mega caps after they make it to the top?  Justin Fox at Bloomberg took a look at this question.  Consider the following two charts.  The first chart shows today’s top 5 market-cap stocks (Alphabet/Google, Apple, Microsoft, Facebook, and Berkshire Hathaway) and the trajectory they took to get there.

today's top 5

The second chart looks at the top 5 market cap stocks from a decade ago (Exxon Mobil, General Electric, Microsoft, BP, and Citigroup), and how they have fared since.

top 5 from a decade ago

Only Microsoft remains in both lists.  In fact, Microsoft was the only one of those stocks that beat the S&P 500 over the past decade.  Two of the stocks are still well underwater from where they were a decade ago.

return

Source: Yahoo! Finance.  Returns are inclusive of dividends, but do not include any transaction costs.  2/2/06 – 2/2/16

Admittedly, this is not a comprehensive study.  Rather, it simply illustrates the fact that success is not guaranteed.  Just because a company has been successful in the past does not guarantee that it will be successful in the future.  As we commonly point out, there is no shortage of data showing the rationale for buying high momentum stocks.  Sometimes those high momentum stocks are also mega-cap stocks.  However, having a good sell discipline is essential!

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.

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Interpreting Oversold Conditions

January 21, 2016

How oversold is the U.S. equity market at this point?  One way to answer that is by looking at the Sector Bell Curve that plots the sector bullish percent charts for the 40 Dorsey Wright sectors.  A broad universe of U.S. equities is categorized into these 40 sectors.  The bullish percent for each sector measures the percentage of stocks in each of those sectors on a point and figure buy signal (short-term indication of positive trend).  The average of those 40 bullish percent readings (BPAVG) was 21.20% as of 1/20/16.  Visually, this oversold condition can be observed by the chart below which shows this sector bell curve skewed to the left hand side of the chart.

sector bell curve

We have data on BPAVG going back to 6/13/1997.  Over that period of time, only 1.5% of all measurements have been lower than today’s reading.  So, short answer is that the market is pretty oversold at this point!  The chart below of the S&P 500 highlights other times over this period where the BPAVG has been as oversold (or more oversold).

spx

Those months and years where the BPAVG has been this oversold (or more) since 1997 are highlighted in yellow: August-October 1998, January 2008, October-December 2008, February-March 2009, October 2011, and now January 2016.

A couple observations:

  • Some of those times when the Sector Bell Curve (BPAVG) was this oversold preceded tremendous moves higher in the broad market (1998, 2009, 2011)
  • Some of those oversold conditions preceded even greater losses in the broad market (2008)

The search goes on for the perfect indicator of a market bottom!  Actually, I’m not holding my breath.  Markets just aren’t that predictable.  With that in mind, I have a couple thoughts on how to proceed:

  1. Diversify.  A mix that appeals to me is 1/3 fully-invested momentum and value strategies, 1/3 Tactical Allocation, 1/3 Fixed Income.
  2. Add money to your investments when you get oversold conditions.  There is no guarantee that this type of oversold condition won’t get more oversold, but these types of conditions have often created great buying opportunities.
  3. Add other money to your investments on a regular basis no matter what the market is doing.  Is this at odds with suggestion #2?  No.  One of the biggest mistakes investors can make is to not save enough and waiting for “the perfect” opportunity to get in at the bottom can cost an investor a substantial amount of money over time.  Sure, for those inclined, use oversold opportunities to take advantage of what may be a great opportunity, but saving on a regular basis is essential to building wealth over time.

NOTHING CONTAINED WITHIN THE SITE SHOULD BE CONSTRUED AS AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY. THIS POST DOES NOT ATTEMPT TO EXAMINE ALL THE FACTS AND CIRCUMSTANCES WHICH MAY BE RELEVANT TO ANY COMPANY, INDUSTRY OR SECURITY MENTIONED HEREIN. THIS POST IS FOR GENERAL INFORMATION AND EDUCATIONAL PURPOSES. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. POTENTIAL FOR PROFITS IS ACCOMPANIED BY POSSIBILITY OF LOSS. 

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Sector Performance

January 20, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 1/19/16.

sector

The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.    Source: iShares

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Markets

January 19, 2016

Via Morgan Housel:

housel

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What To Do With A Correction

January 14, 2016

Wise words from Jim O’Shaughnessy (from an article written August 28, 2014):

In the past, the United States has endured far more perilous times than those we currently face, and I believe that you will never make money betting against the United States over the long-term. We have come through far greater challenges to emerge stronger, more vibrant and ready to face the future. And today, we find ourselves at inflation-adjusted highs for the S&P 500. Does this mean that stocks will continue to rise? Absolutely not. I’m sure that at some point we will get a 10 to 20 percent correction in the market. But when we do, remind yourself of this simple fact—the U.S. stock market has come back from every setback and gone on to make new highs. Hundreds of years of data back this up. When the next correction comes—and it will come—remind yourself of this simple fact, and BUY.

Past performance is no guarantee of future returns.

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Q4 Manager Insights

January 7, 2016

Despite a decent fourth quarter, global equity markets had a volatile year in 2015.  U.S. and global equities both finished the quarter with solid gains.  After the summer correction in the S&P 500, U.S. stocks snapped back quickly.  This was a surprise to many investors who were looking for the end of one of the longest bull markets on record.  After the snapback, equities treaded water and moved in a very tight trading range to close out the year.  Fixed Income (measured by the Barclay’s Aggregate Index) finished the fourth quarter down slightly, but held on to scrape a 0.55% gain for the year.  Commodities, led by oil, continued their sell off and were the worst performing class of the year.  The trouble in commodities also affected emerging markets, which finished the year down over -14%.

If you were left scratching your head and wondering why it was so difficult to make money in 2015 you are not alone!  According to data from Societe Generale, 2015 was the hardest year to make money in 78 years.  U.S. equities (measured by the S&P 500 Total Return Index) were the best performing major asset class, but only managed to squeak out a gain of 1.38% for the year.  That paltry gain was more than bonds, international equities, and short-term T-bills.  Way back in 1937 (despite what my kids say I was not around to witness that market!) short term treasuries were the best performing major asset class with a gain of only 0.3%.  Even in 2008, bonds were up over 20% so there was somewhere to make money.  This year’s environment was very difficult for hedge funds and for strategies that try to capitalize on major global trends.

Momentum and Relative Strength was a bright spot for the year.  We noticed that more focused (i.e., focused on one specific market) and concentrated (i.e., fewer holdings) strategies performed better.  For example, a concentrated U.S. equity momentum strategy did much better than a strategy with a large number of holdings or a strategy that was invested in multiple asset classes.  It was also advantageous to have a momentum overlay combined with other factors.  Value strategies didn’t fare well in 2015, but value stocks that also had good momentum did very well.  A lot of the momentum outperformance this year came from what momentum strategies avoided rather than what they held.  When we looked at the performance of the S&P 500 industry groups and broke them into quintiles (based on a monthly rebalance), the top four quintiles all had similar performance for the year.  The performance of the bottom quintile, however, was dreadful.  That quintile was made up mainly of Energy and Basic Materials groups.  It is rare to see one group underperform the other four groups by such a large margin (over -13%) for the year.

The Federal Reserve finally took action and raised interest rates by 0.25% during the fourth quarter.  The move was long anticipated, but had been put off due to market volatility and concerns about the health of the global economy.  It is important to keep in mind that even with the hike, rates are still historically low.  We have seen some studies recently that show equities are not as affected as you might think until rates get up around 5%, and we are a long way from that now.  This may be more of a problem for the fixed income markets than equities, but only time will tell.

As the current bull market continues to age we expect a few things to happen we believe will be positive for our strategies.  First, you will begin to hear more cries that the market is “expensive.”  That usually affects valuation based strategies more than relative strength based processes.  Second, the market will continue to narrow.  That is natural and totally expected as the bull market matures.  A narrow market is very positive for our strategies because we can overweight the small pockets of strength that are performing well and avoid the areas that are weak.  As a result, we are encouraging people to take a look at their portfolios and overweight momentum relative to value.  If you have any questions about your allocations or the best way to get exposure to momentum strategies please call us at any time.

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. Potential for profits is accompanied by possibility of loss.

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In Search of Sustained Success

December 22, 2015

How do you rate an NBA team across a decade of play?  One method is “Elo,” a simple measure of strength calculated by game-by-game results (Source: Nate Silver’s FiveThirtyEight).  A description of Elo is below:

Elo ratings have a simple formula; the only inputs are the final score of each game, and where and when it was played. Teams always gain Elo points for winning. But they get more credit for upset victories and for winning by larger margins. Elo ratings are zero-sum, however. When the Houston Rockets gained 49 Elo points by winning the final three games of their Western Conference semifinal during this year’s playoffs, that meant the Los Angeles Clippers lost 49 Elo points.

A rating of 1500 is approximately average, although the league average can be slightly higher or lower depending on how recently the league has expanded. (Expansion teams begin with a 1300 rating.)

As Nate Silver recently tweeted: “Last time the Spurs were a below-average team was in Jan. 1998, right about when the Lewinsky scandal was breaking.”

spurs

Impressive, is it not?  Talk about an organization that figured out a formula for sustained success.  On the opposite end of the spectrum, consider the Elo of the Clippers as shown below:

clippers

Yes, they have become an above average team in recent years, but man did they stink for the better part of the last several decades!

What stands out to me in flipping through the Elo of the different NBA teams is the outliers.  Yes, there are a lot of teams that hover around average, but there are some stark standouts.

How true this is in the financial markets as well.  In fact, this reminded me of a study completed by BlackStar Funds a couple years ago when they looked at the lifetime total returns of individual stocks relative to the corresponding return for the Russell 3000.  Again, what stands out to me is the outliers.  6.1% of all stocks outperformed the Russell 300 by at least 500% during their lifetime.  Likewise, 3.9% of all stocks lagged the Russell 3000 by at least 500%.

BlackStar

Outliers are what makes this business fun and ultimately where the most money can be made.  Just like with certain NBA franchises, there are multi-year winners and multi-year losers in the financial markets.  Relative strength, much like Elo, can help you stay on the right side of those trends.

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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Remember When

December 18, 2015

Ben Carlson prepares you for how to handle all those 2016 forecasts:

Remember when the Fed was never going to raise interest rates?

Remember when QE was going to cause hyperinflation?

Remember when the dollar was going to collapse?

Remember when the Baltic Dry Index was the economic tell of the entire global economy?

Remember when we were going to see a repeat of the 1929 crash because of a chart?

Remember when the end of QE was going to cause an enormous market crash?

Remember when the U.S. credit rating downgrade was going to cause interest rates to skyrocket?

Remember when the fiscal cliff was going to take down the markets?

Remember when we were supposed to be in a recession in 2011?

Remember when Greece was going to cause a global economic collapse in 2010? And 2011, 2012, 2013, 2014 and 2015?

Remember when oil was going to $250/barrel?

Remember when gold was going to $5,000/oz.?

Remember when the Dow was going to fall to 1,000 (or rise to 30,000)?

Remember when Internet stocks during the dot-com bubble era didn’t need earnings because of the new economy?

Remember when stocks couldn’t possibly get cut in half twice in one decade?

Remember when there was no chance the market was going to bounce back after the 2007-2009 crisis?

Remember when interest rates couldn’t possible go any lower in 2010 (and 2011 and 2012…)?

Remember when Cyprus banking issues were the canary in the coal mine of the entire financial world?

Remember when the BRIC countries were the hottest investment trend in the industry because of “growth.”

Remember these types of predictions the next time you hear a market prognosticator tell you they know what’s going to happen in the future. They don’t.

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Sector Performance

December 16, 2015

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 12/15/15.

sector

The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.    Source: iShares

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Weekly RS Recap

November 16, 2015

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 (11/9/15 – 11/13/15) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Sector Performance

November 6, 2015

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 11/5/15.

sector

The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.    Source: iShares

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Sector Performance

October 30, 2015

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 10/29/15.

sector

The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.    Source: iShares

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Weekly RS Recap

October 26, 2015

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile 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 (10/19/15 – 10/23/15) is as follows:

avg perf

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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