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December 22, 2007

Aggressive
by Bill Rempel

Aggressive is an equal-weighted portfolio derived from two different quantitative stock screens, based on companies that trade on U.S. exchanges. Each screen produces an exceptional trading plan by itself, but when the two are combined, the volatility of returns is reduced without much degradation of total returns. This is because their backtested, detrended equity curves have relatively low correlation.

Information is as of the close on December 21, 2007.

Model Allocation

Based on beginning with a $100,000 portfolio at inception, these are the current weights and holdings. The initial target was a buy of 5% weights per position. See my previous post on this system. Order is by screen name and weights are rounded to the tenth of a percent.

Screen One

Qualifiers for this screen are sorted by Price/Sales ratio as of the last post, from lowest to highest.

Chiquita Brands New (CQB) - 5.1%
Longs Drug Strs Inc (LDG) - 4.2%
Lyondell Chem Co (LYO) - 0.0% - acquired, shares no longer traded
Rehabcare Group Inc (RHB) - 5.4%
Enersys (ENS) - 5.2%
Medcohealth Solutns (MHS) - 4.9%
Hawk Corporation (HWK) - 4.8%
U R S Cp (URS) - 4.5%
Fcstone Group, Inc. (FCSX) - 5.8%
Pepsi Bottling Grp (PBG) - 4.6%

Screen Two

Qualifiers for this screen are sorted by recent speculative interest as of the last post, from highest to lowest.

Helmerich Payne (HP) - 5.4%
Flagstone Reinsurance (FSR) - 5.1%
Teco Energy Inc (TE) - 5.0%
Cimarex Energy Co (XEC) - 5.2%
Max Capital Group Ltd. (MXGL) - 5.0%
PartnerRe Ltd (PRE) - 4.9%
Merchants Bancshares, Inc. (MBVT) - 5.0%
Cleco Cp (CNL) - 4.8%
Edison Intl (EIX) - 5.0%
Fairfax Finl Hld Sub (FFH) - 4.7%

Cash of approximately 5.6% is currently held; this is the cash from slippage of planned purchases four weeks ago, and the additional cash from the acquisition of LYO.

Returns

Based on beginning with a $100,000 portfolio at inception.

Equity: $102,065.92
Gain, Past 4 Weeks: +2.07%
Gain, Since Inception: +2.07%

No stocks in the Aggressive portfolio went ex-dividend in the past four weeks.

Changes To Model Allocation

Aggressive is an equal-weighted portfolio derived from two different quantitative stock screens, based on companies that trade on U.S. exchanges. The new model allocation is a 5% holding of each of the following stocks.

Screen One

Qualifiers for this screen are sorted by Price/Sales ratio, from lowest to highest.

Owens And Minor Inc (OMI)
Computer Task Group, Incorporated (CTGX)
Tecumseh Products Company (TECUA)
Bunge Ltd (BG)
Costco Wholesale Corporation (COST)
Ruddick Cp (RDK)
Humana Inc (HUM)
Rehabcare Group Inc (RHB)
Coca Cola Entrpr Inc (CCE)
Medcohealth Solutns (MHS)

Screen Two

Qualifiers for this screen are sorted by recent speculative interest, from highest to lowest.

Pepsi Bottling Grp (PBG)
Axis Cap Hldgs Ltd (AXS)
Max Capital Group Ltd. (MXGL)
Chubb Cp The (CB)
Allied Wld Assur Co (AWH)
Archer Daniels Mdlnd (ADM)
Edison Intl (EIX)
Alliant Energy Cp (LNT)
American Physicians Service Group, Inc. (AMPH)
No tenth qualifier - hold cash instead.

If this system were to be initiated today, the target allocation would be a buy for 5% weight holdings of each stock listed. Interestingly, Pepsi Bottling Grp (PBG) dropped off of one list and came up on the other.

Tracking

Market at open on the next available trading day, the following ticker symbols will be sold:
CNL, CQB, ENS, FFH, FSR, FXCS, HP, HWK, LDG, MBVT, PRE, TE, URS, XEC.

Also market at open on the next available trading day, the following ticker symbols will be bought:
ADM, AMPH, AWH, AXS, BG, CB, CCE, COST, CTGX, HUM, LNT, OMI, RDK, TECUA.

On the buys, targets will be set at 5% of equity based on Friday’s closing price, and the number of shares will be rounded to the nearest whole number. It is anticipated that the system will hold very close to the 5% cash allocation dictated by the model. There will be no rebalancing or reallocation of stocks that are retained.

Bill Rempel
The Rempel Report

Disclaimer: Nothing at The Rempel Report, or any communication from The Rempel Report or its author, should be construed as personal advice, on investing or anything else, and at all times you are responsible for your own actions and you should perform your own due diligence. I'm not an investment professional, and you should probably consult with one, in addition to doing your own due diligence, before making any investment decisions.

I may have a beneficial position in any potential investment I mention. My positions in, and opinions of, those potential investments may change over time. I have no obligation to reveal those positions, and if I should reveal those positions, I am under no obligation to notify you, though this site or through any other means, if I change those positions.

While I do try to verify much of the data presented, I can make mistakes. I rely on third party vendors for data, and sometimes that data could be incorrect. Therefore, I cannot and will not be held liable for incorrect or erroneous data presented in text, table, chart, or other format. This is one more reason why you should consult with an investment professional, in addition to doing your own due diligence, before making any investment decisions.

Modeling is prone to error, and no statistical model is perfect. The output from statistical or predictive modeling should be viewed with skepticism.

Fundamental analysis is based on examinations of company filings such as income and cash flow statements, balance sheets, quarterly and annual filings, proxies, and other such items. Even though a company appears fundamentally sound today, that doesn't imply they actually are, or will remain, fundamentally sound. Fundamentals can change over time, and there is always the possibility that the company filed information that was either fraudulent or incorrect. I might make an oversight or error when examining company filings. In many cases, I will rely on a third party's presentation of filing data, such as a stock screening program's output, without actually reviewing the filings personally.

Technical analysis is based on the study of historical price, volume, and sentiment data over time. Past performance is no guarantee, and there are no certainties hidden in patterns, charts, indicators, or formulae.

FundaTechnical analysis involves those items which mix elements of Fundamental and Technical analysis, including valuation metrics such as the Price/Book or Price/Earnings ratios. Therefore all the warnings for both Fundamental and Technical analysis apply.

Take responsibility for your own actions. You should consult with an investment professional, in addition to doing your own due diligence, before making any investment decisions.

Copyright © 2005-2008 Bill Rempel

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