SP500 VGQ 10 stocks model

https://www.portfolio123.com/app/r2g/summary?id=1495143

SP500 VGQ 10 stocks model subscription price reduced.




1. Performance since launch.png


2. Performance for last 3 months.png


3. Performance for last 1 month.png

Russel2000 underperformed SP500 for last 4 and half years (coincidentally since p123 designer model launch April 2013).

Blind spot; smallcap always 2X to 3X better performance than large cap,
it is not the case if we see the performance screen shot for last 4 and half years.

Thanks
Kumar

S&P500-10 Value, Growth and Quality Stocks
https://www.portfolio123.com/app/r2g/summary?id=1495143

S&P500-10Value Stocks - Rev3
https://www.portfolio123.com/app/r2g/summary?id=1500539


Very nice Kumar.

There are 77 large cap stock designer models (> 50% large caps).
48 of them (including yours) have beaten SPY over the last 3 months!! A ringing endorsement for the Portfolio123 platform and its data.

Designers with more than one large cap model among the 48 beating SPY the last 3 months:

mmasand - 2
quadz42 - 2
chipper6 - 2
SteveJ - 2
Justin_Goss - 2
wwasilev - 3
StockMarketStudent - 3
raws - 2
ehensim1 - 3
MarcGerstein/newmilan - 8
Miro - 6

Throughout history, when this occurs it is referred to by pundits as a case of the “Generals charging without the troops” (or some such nonsense). More accurately, it is usually a sign that market breadth is thinning and this typically occurs at the end of bull runs.

However, as Kumar noted, this situation has existed for the last 4.5 years, so it is not “typical.” What is happening is that the historically low-interest rates have artificially favored large, asset-rich companies that can take on a tremendous amount of debt and buy back their stock, thereby reducing available shares and increasing the price. Nevertheless, it may be a setup for other signals to occur that are suggesting the end is near.

For example, while there have been no signs yet that a market downturn preceding a recession is occurring, all the signals are set up in a classic pattern:

1) The Unemployment Rate today at 4.1% is below the historical average where it has bottomed since 1948 (at 4.21%):

As Georg Vrba has shown us many times, when the Unemployment rate bottoms and reverses upward, it is a high–probability signal of a coming market downturn (and usually an imminent recession).

2) The Yield Curve is another high-probability indicator of a market reversal when it flattens (and sometimes goes inverted). For example, this image shows the yield curve in mid-2011. At that time, the three-month bond interest rate was scraping bottom at 0.01% while the 30-year bond stood at 4.4% – a 4.39% difference:

Today, the three-month bond interest rate is at 1.29%, while the 30-month yield stands at 2.78% – a spread of only 1.49%:

When we see the unemployment rate reverse and go higher for two consecutive months, look out! If we also see the yield-curve get flat or go inverted, that is a coincident indicator to reduce exposure to long positions and take defensive measures. Of course, these are classic, high-probability signals from the past. They are also very blunt tools since they deal with information (unemployment rate) or decisions (Federal Reserve on short-term interest reates) made on a monthly (or longer) basis.

Historically, they indicated that:

Historically, these signals indicated that:

1) Rising Unemployment: Employers are cutting back on hiring and are even beginning to lay off workers because of reduced demand going forward, and…

2) Flat Yield Curve: The Federal Reserve usually raises short-term rates to subdue an overheated asset market. In the current situation, it also means the Fed is looking for some room to lower rates to be able to ease monetary conditions when a recession does occur. Therefore, they are currently raising short-term interest rates to have some leeway in the future.

With the three-month rate at just 1.29%, that’s not much “accommodative easing” with which they have to work. It may only be about 3-4 interest rate cuts of 0.25% to 0.50%. Normally, at this point in the market/economic cycle, short-term overnight rates are around 5% or higher. When short-term rates match or exceed long-term rates, then the yield curve is flat. When short-term rates are a bit higher than long-term rates, it’s a classic harbinger of a significant downturn.

Most other economic and market indicators are still looking bullish, so don’t expect these warning signals to go off immediately. However, we are much closer to the end of this epic bull market than many went to believe.

Best of luck out there!

Chris

Russel 2000 performance for last 1 year and 50 days.

If you are a market maker and specialist with huge money to gamble can make money in russel 2000, micro and small cap stocks on slippage
buy on Monday morning and sell on Monday evening, to get the spread and reap the benefit of demand (ask price much wider than bid) on Monday morning retail trader.

Luckily, I have attended AAII monthly meetings; to get practical and successful investment methods, some presenter Hardvard MBA, Standford MBA with many decades of experience, may live few more years because of their age. We wish them to live long because they are sharing their life time investment experience unfiltered.

I find something very common between them, even though they studied MBA from top business schools, they not only rely on fundamentals.

  1. my surprise everyone ignoring stocks under $10 and stocks under 200k to 300k volume.

  2. they stayed away from microcap even they can make fast money using their many decades of experience with the market,
    they preach most of their colleague broke investment career either investing in microcap/smallcap or shorting the market.

  3. they used TA to buy and hold stocks for 3 months to 1 year even though they screened the stocks using fundamentals with MBA background.

I yet to find successful small cap designer model with 10 stocks holdings with over 1 million adt and 200K minimum avg volume in P123 for
above SP500 performance for 2 or 3 consecutive years.

In p123, there are many small cap experts with more than 10 years of successful investment experience on this smallcap universe.
Please, give us direction whether do you have any experience of having

small cap model with 10 stocks holdings with over 1 million adt and 200K minimum avg volume in P123 for
above SP500 performance for 2 or 3 consecutive years in OUT OF SAMPLE.

Thanks
Kumar :sunglasses:

S&P500-10 Value, Growth and Quality Stocks
https://www.portfolio123.com/app/r2g/summary?id=1495143

S&P500-10Value Stocks - Rev3
https://www.portfolio123.com/app/r2g/summary?id=1500539



If you remember, Kumar, I recommended about three years ago in the forum that you focus your efforts on mid- and large-cap stocks. As I recall, you responded to me (I’m paraphrasing from memory) that academic studies have shown small-cap stocks have a record of performing better than large companies. I subtly implored you to move higher in market capitalization with your P123 work because larger shares have less volatility and are more predictable.

At that time you were a newbie, and I could see that you are making frequent newbie mistakes of grasping for performance without considering how the inherent volatility of small stocks would affect you emotionally. Although I’m sure you didn’t do it because I recommended it, I was pleased to see it when you began posting about the stable, smooth returns of your S&P 500 portfolio.

I have seen hundreds of beginning investors do what you were doing - but stubbornly insist on sticking with what they think will be the highest returning stocks, which are usually small-cap stocks. Invariably, a market downturn occurs, and it punishes small stocks exponentially more severely than larger companies. After a long bullish-period of gains (which causes recency bias), they believe that they have to stick with their positions and not try to time the market (which they have been told is impossible). When the market keeps going down this time, they are shocked! - shocked! to discover they can actually lose a lot of money. Nevertheless, they decide to stay with those losing positions until they get back to even (anchoring) because they don’t to have a record (in their minds only, usually) of being a ‘loser.’ Ultimately, they do capitulate and sell all of their shares so that they can at least get some of their money back. Unfailingly, this “SELL IT ALL!” response occurs just before the market bottoms and begins to climb again.

Those neophyte investors that were small-cap fan-boys often throw up their hands and give up on investing. They usually end up buying an annuity or something equally as inane and are never heard from again. I’m glad to see that you didn’t abandon investing at the first sign of trouble, Kumar, but instead adjusted your selection criteria to focus on larger enterprises that are more reliable and consistent producers of return. Good for you!

Don’t get me wrong, small- and micro-cap stocks are investable, but I believe this group of stocks should only be targeted by investors with many years of experience - after they have witnessed more than one severe sell-off, or even a couple of market crashes (such as 2008-2009). We have not seen a sharp selloff since you began investing (I only know that you started with P123 in 2013).

I’m glad to see that you have embraced large companies – and based on the posts you have made in this forum about your S&P 500 and other portfolios, you are doing quite well. If you asked me to give you advice again today, I would say to continue to avoid investing in small- or micro-cap companies and stick with that with what’s already in your wheelhouse (large-caps). As you have identified in this post and others, small businesses are less than advantageous for a relatively new investor. They are especially at a disadvantage at this point as investors have embraced the (large-cap) ‘generals’ and are disregarding the (small-cap) ‘soldiers’ for the last 4.5 years.

Those who insist on putting new money into small and micro-cap companies at this time, with a market top in sight, could soon violate Buffett’s Rule #1.

Best of luck,

Chris

PS - You might consider developing a small-cap portfolio that you only trade on paper. When the market sell-off/recession occurs next year, treat it just as you would a real-money portfolio (easier said than done) and watch how it is affected compared to your S&P 500 and other portfolios. Notice especially how the price action in those small companies affects your emotions - and learn from it! (Keep in mind that you will never experience the degree of emotions you would if it was your real hard-earned dollars at stake). Better yet, design a mid-cap portfolio (hint: mid-cap ports usually require a bit different rankings and rules than large-caps, but much of your work can cross over).

Breaking news!! :slight_smile:

COUNT ON IT!

haha

No, I actually edited my post to read “next year” instead of early-mid next year. I don’t want to frighten anyone with my paranormal accuracy. :wink:

Chris

if subscriber subscribes to one of the model; i plan to give rest of the sp500 model free to them.
as all the stocks belongs S&P 500, avg return of these model 35% to 41% in simulation.

out of sample, they are better than bench mark so far.

whether this features available with p123 designer model now?

S&P500-10 Value, Growth and Quality Stocks
https://www.portfolio123.com/app/r2g/summary?id=1495143

S&P500-10Value Stocks - Rev3
https://www.portfolio123.com/app/r2g/summary?id=1500539

S&P500-10 Stocks Value & RS
https://www.portfolio123.com/app/r2g/summary?id=1508735

I have observed long term successful investor has short list of 20 to 30 candidates to choose best 10 to 15 candidates to buy.
It is a good metaphor, as if we have 3 winning teams to choose best players to form a champion team,
we will end up with top half of the table after playing so many plays with champion team (best of the best).

Thanks
Kumar

Kumar,

Picking and choosing from among companies that are selected by your ports, well, that’s a difficult thing to backtest. How do you know which you would have chosen 5 years ago?

I believe, backtest statistics are good in simulation.
In practice, it looks like more difficult.

I have learned CANSLIM stocks selection from a 90 years old AAII president, he is senior to William O’Neil in hardvard. he is a CANSLIM master.

  1. EPS and fundamental ranking > 75
  2. Relative price strength > 75
  3. Institional buying and accumulation distribution rank A+, A-, B+
    these are included.

ie.,
then pivot point, 52 week high recommended, 52 week low discarded.

  1. market timing component on price the SPY below 10week moving average, market in downtrend call.

I don’t think practically it is possible to automate this CANSLIM method, IBD working with top mind in the business to filter candidates
using above 4 rules and few more top industry filter rules.

Thanks
Kumar

Can you let us know what you mean by this? How is accumulation/distribution ranked?

Thanks,

Chris

Have you written any timing rules based around yield curve flattening?

PortfolioPerfection,

Not sure, this market timing question to me or Chris.

i am using both price and EPS downtrend in my designer model market timing.

  1. in the chart unemployment, 1930 to 1952 it goes up and down
    market was flat or in downtrend, employment rate is controlled by federal.

  2. interest rate is 0-1% controlled by federal for last 10 years, market was in up.

  3. $TNX yield, controlled by federal was down for last 15 years.

Stock Price and company Earnings belongs to company prospects can’t be controlled.

I have learned these stuffs from Fred Richard, AAII Dallas chapter, president. who claims he observed federal data for last 55 years in OUT OF SAMPLE :slight_smile: . he not able to make any money on federal/economic data.

One more myths, investing in benchmark/index will return 6% return over 20+ years period; it is not always true.
from 1929 to 1952,
0% return for 23 years investment in indexes.

Thanks
Kumar

Update – one month later:

50/77 large cap designer models beat SPY over the last 3 months. That’s 65%
29/59 beating SPY over the last 12 months. 49%

It gets even better when designer models are limited to 20 holdings or less.

29/52 beat SPY over the last 12 months. 56%
46/67 beat SPY over the last 3 months. 69%

Great job Portfolio123 data and tools!! Great job designers!!

Hey, I think there is some flaw in the logic that small caps are beaten by big caps.
In general (right now) yes, but we are not generally investing in index funds.

This is a very, very simple 3 Months System (Value, Momentum combined) (its a port not a sim!!!). 100 Stocks and
its beating the sp500 and a lot of big cap models.

My best small cap models average 50% a year, my best big cap model averages 18% a year.

The key is, there are good times for small caps and there are good times for big caps, my small
cap Modell still outperforms the big cap modells even when times are tough for small caps.

Thats whats called a “Dominant Trading System” that is robust and produces good results in
almost (not 2008 / 2009 I have to admit) all environments.

And that has to almost 100% with value, because (relative, what we have since we rank) value works in the toughest environments and value is most often found in small caps, becaus the gib guys simply can not invest in them, therefor the most “inefficiencies”
are in small cap market.

Combine Value (75%) with a bit of momentum (25%) and you got a nice equitiy curve, since both do
not correlate much with each other.

Do not get me wrong, I will switch to big caps, but only if my port gets so big that I do not have liquidity to trade
small caps, but until then I enjoy the ride…

Regards Andreas


This is my best big cap Modell on the sp500.

Not bad, but I can make more in small caps.


this is the same big cap sp500 Modell cap only 10 positions…


here is an CANSLIM Model, so this also can be automated, using the IBD of the shelf (it should be puplic on p123) combining it
with size factors (small caps again, but over 250k turnover a day 20 day average).

Buy the way this is a designer model :slight_smile: https://www.portfolio123.com/app/r2g/summary?id=1493937


Agreed. Large caps are the hardest area to make money. Small caps are easier.

That’s why it’s so impressive that so many large cap designer models are beating SPY!!