Sunday, September 21, 2008

Stock of the Week Cumulative Gain Now 102% Since Inception

To update the post below, Stock of the Week Performance from 03/30/08 to 09/08/08, I thought it might be of interest to note that the cumulative gains in the Stock of the Week selection are now up to 102.1% since the March 30, 2008 inception.

Credit goes to a strong week from Aceto (ACET) for pushing the SOTW over the triple digit threshold.

Tuesday, September 9, 2008

Stock of the Week Performance from 03/30/08 to 09/08/08

Lately I have received several questions about the Stock of the Week. Each Sunday I conclude the subscriber newsletter with a new Stock of the Week (SOTW) selection. These are companies that range from large caps to small caps (minimum market capitalization of $250 million and average daily volume of 250,000 shares) that I believe have excellent short-term potential and solid long-term potential.

As I state in the newsletter, each week I automatically ‘sell’ the selection from the previous week and replace it with a new selection, regardless of my opinion about the desirability of holding the Stock of the Week beyond the weekly time frame. The result is that I am highlighting a new opportunity each week rather than trying to optimize the holding period for specific stocks.

This approach has led to some interesting results, which I have summarized in the chart below. First, of the 24 SOTW selections, 17 have been profitable at the end of the first day after they were recommended, with an eye-catching mean return of 3.4% in that first day. Excluding the current selection, which was up 7.7% yesterday, 15 of the 23 SOTW selections have been profitable at the end of the week, with a mean return of 2.3%. Not surprisingly, the variation in the weekly returns is fairly high, ranging from +15.5% to -14.8%, with a median weekly return of 3.7%. As of yesterday’s close, the sequential return of all SOTW selections from the March 30, 2008 inception was 84.4%.

It is important to note that the SOTW selections have not necessarily been strong performers following the initial one week holding period. The graphic shows one stock that is down 64% since the SOTW designation and two other stocks that have fallen in excess of 40%. Obviously any approach that beats the indices by such a wide margin must entail a great deal of risk – and the SOTW is no exception. The SOTW performance history does suggest, however, that it is possible to rack up big winners in a bear market, even while picking stocks that are generally falling in concert with the market.

Finally, I feel obliged to add that I certainly do not expect the SOTW selections to continue to match the performance from the first five or so months, but I am cheered by the numbers that have been put up so far and the by the interest this feature has generated.

Subscriber Newsletter Features and Portfolio Performance through August 2008

As promised, I will continue to use this space to summarize the recent content in the newsletter and update the performance of the model portfolios that I make available to newsletter subscribers. Since their March 30, 2008 launch, the (equities only, long only) portfolios have performed as follows:

*Note that the Focus Growth portfolio was retired on August 29th, largely because I was not satisfied with the recent bear market performance relative to the benchmark S&P 500 index. The new Focus Growth 2 portfolio uses an entirely different stock selection process that has consistently outperformed the S&P 500 in both bull and bear markets since I developed it approximately 3 ½ years ago.

In addition to the model portfolios, the subscriber newsletter continues to incorporate a number of regular weekly sections, including a market commentary, asset class outlook, market sentiment update, current investment thesis, and week in review. Features generally focus on subjects such as sector rotation, volatility, put to call ratios, market breadth, volume, and other sentiment-related issues. Some of the August features included:

  • A New Tool to Help Predict Bank Failures
  • Where Is the Safe Haven?
  • VIX and T-Bill Discount Rates
  • India VIX Reflects Elevated Anxiety
  • A Volatility-Based Long/Short Optionable ETF Trading System
  • What’s Working Right Now: the NASDAQ Arms Index
  • Current Thinking on Commodities vs. Equities Battle
  • Energy Sector and Commodity ETFs
  • Two Very Different Metals: Copper and Gold
  • Vulnerabilities Profile of Texas/Louisiana Oil and Gas Infrastructure
  • Thoughts on Energy Stocks for a Gulf of Mexico Hurricane
  • Tracking Hurricane Gustav
  • Bond VIX Indicates Relatively Low Turmoil
  • Bullish Readings from ISEE Equities Only Call to Put Ratio
  • The NASDAQ-100 and Resurgent Large Cap Technology
  • Strength at the Top of the NDX

Finally, I have also added a second subscriber service that I have made available only to newsletter subscribers: a volatility-based trading system that I use to identify both long and short trades on optionable ETFs. Additional information is available at the EVALS (ETF Volatility Analysis Long/Short) blog.

If anyone has any additional questions or comments about the subscriber newsletter, or is interested in a sample newsletter, please feel free to email me at