Monday, April 14, 2014

Obeying Sell Rules Saves Portfolios

I hate to take losses, but looking back on 2014 trades so far, I am glad I have had “some” discipline following sell rules.  Many (almost all) of the stocks I sold that were down 8-12% have continued to slide further into the abyss.  I have rotated into other things, some have worked, some have not.  But better than just holding and hoping the old things come back.  If the market does continue to rally, hopefully the new things are better performers than the old things.

Dollar Cost Averaging Into ETFs

image How would an investor do if starting at the close on every Friday in 2014, they added $1000 to an ETF?

I have the numbers.  (As of close 4/14/2014).

What’s “funny” is how the media warned everyone not to go into the Emerging Markets.  Right?

Update – The IBD Top 50 Stocks Strategy

Here’s a late update on the IBD Top 50 stocks investing strategies vs. $SPY

image The IBD weekly strategy ending 4/11/2014 had another bad week.  The market has been seeing rotation out of the high beta and volatile names into the big cap value names.  But even the larger cap stocks started getting hit this last week.

For the week, there were 3 stocks up and 47 stocks down for the IBD 50.  Only 1 of 4 in the top IBD 5 stocks was positive for the week.

The IBD models are performing exactly the opposite from when the market was advancing.  When the market was advancing, the IBD 50 stocks easily led the SP500.  But even though these are the top ranked stocks, they are also leading on the way down.  Being in the high-quality names has not been a safe haven!

The total return since 2/8/2014 is underperforming the SP500.  None of the IBD models has a positive return for 2014.

The portfolio is sold at the closing price Friday night, and rebalanced into the make-up of the IBD top 50.

Trading costs $169.15.

image The IBD monthly strategy is also having a rough April.  Diversification into more stocks has cushioned the blow compared to more concentrated holdings.

The IBD newspaper frequently updates the IBD 50 holdings, but this portfolio remains with the top 50 as of the close March 31st.  If the the high-beta stocks continue to get sold off, it’s going to be a long month for these models.

IBD often mentions that the stock list and updates to the stock list are not to be used as a buy or sell list.  Wise words!

Trading costs $29.85.

As I have been reading reviews of investing and rebalancing into model portfolios, the trading costs of rebalancing weekly or monthly is often discussed.  Going forward, I will list the “in and out” rebalancing costs for each strategy.  I will assume a $9.95 cost to sell last week’s or last month’s portfolio, and $9.95 to buy the new weekly or monthly portfolio.  (Imagine the costs of doing this with individual stocks, compared to using Motif.  Note that Motif limits the size of portfolios to 30 stocks).

The Top 25 holdings are listed at at Motif Investing.  (A check as of 3/31/2014 shows that the ability to view all holdings is limited to Motif members and IBD subscribers).

None of the above strategies are a recommendation to buy or sell stocks.  These are model portfolios constructed for entertainment only.

This is the IBD portfolio performance since 2/8/2014.  Each portfolio begins with $10,000 and then invests an equal amount in the top 5, 10, 25 and 50 IBD stocks at the closing prices on Friday for the weekly model, and at the closing prices on the last trading day of the month for the monthly model.  Since IBD changes the make up of their top stocks daily, this will only rebalance on Fridays or end of month.  It is assumed that trading costs are $9.95 to “buy” a model portfolio, and $9.95 to “sell” a model portfolio.  Thus, each weekly or monthly rebalance out of the previous portfolio and into the new portfolio costs $19.90.  Daily changes in the IBD 50 or stock rankings are not considered.  Changes in IBD’s overall market views are not considered.  Stop loss orders or other market timing strategies are not considered. 

Based on a blog entry from Paladin Money.  See Investors Business Daily for more information on the IBD 50.  See Motif Investing for their IBD Top 25 portfolio, and the ability to construct your own portfolio of stocks.

Virus!

I was fighting a PC virus over the weekend is unable to blog. Will be back later with the IBD update after what was a horrible week for stocks. 


Bouncing today - for how long?

Wednesday, April 09, 2014

The Fed Tightening Pace

So much ink has been spilled over the Fed tapering, dovishness and hawkishness - $SPY

"Several participants noted that the increase in the median projection overstated the shift in the projections," the minutes of the March 18-19 Federal Open Market Committee meeting showed. Some expressed concern the rate forecasts "could be misconstrued as indicating a move by the committee to a less accommodative reaction function."

Several Fed Officials Said Forecasts Overstated Rate-Rise Pace

By Jeff Kearns and Craig Torres

Bloomberg - Bloomberg - Wed Apr 9 18:00:00 UTC 2014

Several Federal Reserve policy makers said a rise in their median projection for the main interest r...

If you have Windows 8, open this in Finance.


Sent from Surface Pro

Monday, April 07, 2014

Stock Market Thoughts

$QQQ and $SPY – High flyers continuing to be sold.  Money flowing into the dividend paying large caps for “safety.”

The SP500 is right at the 50dma, so if we were going to bounce like we have the past year or so, this is where the bulls should make their stand. 

I was looking at the QQQ at $85.55.  The 200dma is $81.78, which isn’t far away.  The 50dma is now above the current price at $88.43, and could act as resistance to any bounce if the trend is now down.  The problem using the NDX is that it is more volatile and tends to overshoot in both directions.  At least in my black box model.

The black box doesn’t have a buy signal, and is still on a sell signal from QQQ $91-ish.

Anyway, I’m guessing bounce here but I’m thinking the election year correction is here.  Of course, I have been wrong about market corrections for the past year.  I actually hope that I’m wrong again.  Bull markets are better than bear markets (and also better than scary corrections).

***

I decided not to renew my Audioboo Pro account.  I can still do the podcasts for 10 minutes per audioboo.  Which I think is plenty, right?  They increased their price and I just don’t audioboo consistently enough these days.  I can always re-up later.

Sunday, April 06, 2014

Update – The IBD Top 50 Stocks Strategy

Here’s a late update on the IBD Top 50 stocks investing strategies vs. $SPY

imageThe IBD weekly strategy ending 4/4/2014 had another bad week.  While the SP500 remains near all time highs, the more volatile stocks that make up the Nasdaq and the IBD 50 are getting hit with institutional selling.

The market has been seeing rotation out of the high beta and volatile names into the big cap value names.  Many large institutional investors have to be invested 100% of the time, and when the high beta names stop working, money flows into the names that are more highly liquid and that pay dividends.  These big cap stocks are often seen as “safe,” although they eventually get sold off should the market go into a bigger correction. 

For the week, there were 22 stocks up and 28 stocks down for the IBD 50.  Only 1 of 4 in the top IBD 5 stocks was positive for the week.

The total return since 2/8/2014 is underperforming the SP500.  None of the IBD models has a positive return for 2014.

The portfolio is sold at the closing price Friday night, and rebalanced into the make-up of the IBD top 50.

image The IBD monthly strategy has had a rough April so far.  What’s interesting is that the portfolio was rebalanced after the close on March 31st, so the difference between the weekly and monthly strategies excludes the very positive last day of the first quarter.  What a difference!  (Of course, that day was included in the previous monthly returns, so all is not lost…).

The news media often says that the market hasn’t had a 10% pullback in quite awhile, but if one is following the monthly or weekly IBD holdings, there is more volatility here than in the more widely followed indexes.

 

As I have been reading reviews of investing and rebalancing into model portfolios, the trading costs of rebalancing weekly or monthly is often discussed.  Going forward, I will list the “in and out” rebalancing costs for each strategy to demonstrate the impact these costs would have on returns.  I will assume a $9.95 cost to sell last week’s or last month’s portfolio, and $9.95 to buy the new weekly or monthly portfolio.  (Imagine the costs of doing this with individual stocks, compared to using Motif).

The Top 25 holdings are listed at at Motif Investing.  (A check as of 3/31/2014 shows that the ability to view all holdings is limited to Motif members and IBD subscribers).

None of the above strategies are a recommendation to buy or sell stocks.  These are model portfolios constructed for entertainment only.

This is the IBD portfolio performance since 2/8/2014.  Each portfolio begins with $10,000 and then invests an equal amount in the top 5, 10, 25 and 50 IBD stocks at the closing prices on Friday for the weekly model, and at the closing prices on the last trading day of the month for the monthly model.  Since IBD changes the make up of their top stocks daily, this will only rebalance on Fridays or end of month.  It is assumed that trading costs are $9.95 to “buy” a model portfolio, and $9.95 to “sell” a model portfolio.  Thus, each weekly or monthly rebalance out of the previous portfolio and into the new portfolio costs $19.90.  Daily changes in the IBD 50 or stock rankings are not considered.  Changes in IBD’s overall market views are not considered.  Stop loss orders or other market timing strategies are not considered. 

Based on a blog entry from Paladin Money.  See Investors Business Daily for more information on the IBD 50.  See Motif Investing for their IBD Top 25 portfolio, and the ability to construct your own portfolio of stocks.