| Index | Recent Threads | Who's Online | User List | Search |
|
|
 |
Portfolio123 » List all forums » Forum: General Comments » Thread: Recent Performance of "Short Candidates" |
|
Total posts in this thread: 4 |
[Request a Feature]
[Post new Thread] [Add To My Favorites] [Watch this Thread] |
| Author |
|
|
olikea
Advanced Member
|
On of the best public ranking systems for identifying stocks for short sale is "Short Candidates", that relies heavily on valuation. I thought it would be interesting to see how the ranking has performed in the recent bear period since June. The results are quite frankly, astonishing. I used 20 week rebalancing period, and a minimum liquidity screen that requires a market cap > $50m and daily turnover > $200k, and price > $3 While nearly all buckets show negative results, the top bucket shows mildly positive returns. This is a shorting system! In otherwords, it has performed completely back-to-front to how you would expect it to, you would have lost money on both the short side and the long side in the recent market turmoil. Hedge? I think not. A lot of this must be due to the unwinding of hedge fund positions, covering their shorts. But I think it is a stern warning to those who believe a market-neutral portfolio is low risk, or risk free. ---------------------------------------- 
short candidates.png
(10527 bytes)
(Download Count: 107)
|
||
|
|
synhawk
Advanced Member
|
Interesting observations Oliver. I have come to the conclusion that shorting based on fundamentals is a not the best of ideas. I think shorting is more of a technical game. It may be more prudent to hedge with short etf or a bear fund, or a good short technical system. I'm searching for a technical method but have yet to find something that fits my style and is robust enough. |
||
|
|
dwpeters
Advanced Member
|
Hi, A shorting strategy that is directly inverse to a long strategy is not necessarily the best hedge. When the long strategy breaks down the shorting strategy may break down (up?). Such a strategy may have value in it's own right and still provide some negative correlation to a long strategy .. but perhaps not when it is most needed. Given that there seems to be something of a flight from value recently, with value stocks underperforming, I don't think it is too surprising that overvalued stocks would be outperforming. This does not invalidate the use of value factors, even now, for either long or short strategies. There are long value oriented sims and growth sims with value factors that are still performing well in this environment. I wouldn't be surprised if there were fundamental short strategies still working as well. "But I think it is a stern warning to those who believe a market-neutral portfolio is low risk, or risk free." I agree completely. Check out the chart of this mutual fund which uses a hedge fund style long/short strategy. Very good return, very low volatility implying very low risk, then bam. http://stockcharts.com/h-sc/ui?s=TFSMX&p=D&yr=2&mn=3&dy=0&id=p26815657965 Performance is still not bad for a mutual fund, but performance in August was very surprising compared to past performance. Don |
||
|
|
ginger
Advanced Member
|
Olikea, Thanks again for the excellent submission and a real thought-provoker. Synhawk, I have found that Proshares ETFS are leading the way in the development of "contra" (or "inverse") ETFs. They can be found at http://www.proshares.com/. I regularly use their more robust (i.e., quality of volume) inverse ETFs to make money in both directions in my newsletter, IntelligentValue.com. I use a variety of proven market indicators that are giving me about a 95% accuracy to make calls on market bottoms and tops. As an example, take a look at this chart for one of my portfolios. Where you see the flat tops since late July, its where I sold my ports (I usually use a mix of several 3-stock P123 systems an approach I credit to Denny) and went to cash. If you compare the market downturns to the upward port movements, that's when I invested the cash into ProShares inverse ETFs. Frequently, I would watch a market crash on one day, and then sell stocks and buy inverse ETFs on the next, then make up all my first-day losses plus more on the next day, as the market crashed again. This is a classic technical move in the markets. Here's a link to demonstrate the kind of excellent returns that can be accomplished using market timing and proven shorting techniques: http://www.intelligentvalue.com/fibonacci-value_graph_071106.htm |
||
|
| [Show Thread Printable Version] [Post new Thread] |
