Porfolio Armor

Performance Update (as of 10/5/2022)

(For the first Top Names Update post, from late August, see here).

Each day the market’s open, our system gauges stock and options market sentiment to rank securities by its estimate of their potential returns over the next six months. On June 24th, we added a new factor to our security selection process.

The new factor is based on historical data we’ve been tracking which shows that, all else equal, securities that underperformed over the last week and month relative to their historic averages, outperform ones that did well over the most recent week and month. So far, the new factor has gotten us better entries into volatile names, improving performance.

Internally, we track the performance of our selection process without the factors too (our “plain” top ten), so we can see how much our factors improve (or worsen) performance and adjust the factors accordingly. Here are a couple of examples.

Our Top Names From June 24th

These were our top ten names on June 24th, the first top names cohort to include the new factor.

Here’s how they’ve done, as of Wednesday’s close:

They’re up 14.41%, on average, versus -3.33% for the market-tracking SPDR S&P 500 Trust (SPY). Oil & gas names such as EQT Corp. (EQT), the ProShares Ultra Oil & Gas ETF (DIG), and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares ETF (GUSH) have led the gains.

June 24th “Plain” Performance

Here’s how our top ten names selected without factors on June 24th have performed so far.

They’re down 2.36% so far.

Our Top Names From June 30th

As you can see, BOIL appeared in our top ten (with factors) on June 30th.

On average, the June 30th top ten are up 10.69%, versus down 0.04% for SPY.

Now let’s look at how the performance of our June 30th top names selected without factors have done since.

June 30th “Plain” Performance

Here’s the performance of the top ten selected without factors on June 30th.

These are up 8.48% so far, on average.

Still An All-Weather Approach

Although the new factor kept us out of TECS on June 24th and June 30th, it hasn’t kept us out of bearish ETFs entirely. On July 21st, for example, it put us in a similar ETF to TECS, the Direxion Daily Dow Jones Internet Bear 3X Shares (WEBS).

WEBS was the worst performer so far in this cohort last month; now it’s in the middle of the pack after the recent downturn in tech names, followed by the snap-back rally at the beginning of this month.

Note that two of the top three performers were bearish (TTT and TMV, short Treasury bonds) ETFs.

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