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March 15, 2008

Getting More 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 March 14, 2008.

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.

Owens And Minor Inc (OMI) - 5.5%
Triple-S Mgmt Cl B (GTS) - 4.4%
Enersys (ENS) - 4.3%
Hawk Corporation (HWK) - 4.8%
Newmarket Corp (NEU) - 5.5%
Hickory Tech Corporation (HTCO) - 5.1%
Zhongpin Inc (HOGS) - 3.5%
Cal-Maine Foods, Inc. (CALM) - 5.8%
Cbiz Inc (CBZ) - 4.3%
Western Digital Cp (WDC) - 5.1%

Screen Two

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

Gencor Industries Inc. (GENC) - 6.0%
Union Drilling, Inc. (UDRL) - 4.0%
Validus Holdings Ltd (VR) - 4.7%
Ryder System Inc (R) - 4.9%
Swift Ergy Hldg Co. (SFY) - 5.0%
Chesapeake Energy Cp (CHK) - 5.3%
Ase Test, Limited (ASTSF) - 5.0%
American National Bankshares, Inc. (AMNB) - 4.5%
Cimarex Energy Co (XEC) - 7.2%
Aspen Insurance Hldg (AHL) - 4.5%

About 0.4% cash was being held, as of the last update.

Returns

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

Equity: $91,406.52
Gain, Past 4 Weeks: -1.10%
Gain, Year to Date: -9.33%
Gain, Since Inception: -8.59%

Four stocks in the Aggressive portfolio went ex-dividend in the past four weeks, AMNB, NEU, OMI, and VR, for a total gain of $121.35 to the portfolio, which is included above.

Changes To Model Allocation and System Weights

Aggressive is an equal-weighted portfolio derived from two different quantitative stock screens, based on companies that trade on U.S. exchanges. In the past, I had been using 10 positions from each system; in keeping with the title of this post, however, I will now be using only the 5 highest-ranked positions from each system. This should make the system generate slightly higher returns, albeit at a higher volatility, and it should also reduce the transaction expenses going forward. The new model allocation is a 10% holding of each of the following stocks.

Screen One

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

Chiquita Brands New (CQB)
Owens and Minor Inc (OMI)
Tecumseh Products Company (TECUA)
Olympic Steel, Inc. (ZEUS)
Bancolombia Sa (CIB)

Screen Two

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

Cimarex Energy Co (XEC)
Plains Expl&Prod (PXP)
Stone Energy Cp (SGY)
Swift Ergy Hldg Co. (SFY)
Seacor Holdings Inc (CKH)

If this system were to be initiated today, the target allocation would be a buy for 10% weight holdings of each stock listed.

Tracking

Shares of GTS, ENS, HWK, NEU, HTCO, HOGS, CALM, CBZ, WDC, GENC, UDRL, VR, R, CHK, ASTSF, AMNB, and AHL will be sold Monday morning, market at open. Additional shares of OMI, XEC, and SFY will be bought, in order to bring that position to the new weight of 10%. New positions in CQB, TECUA, ZEUS, CIB, PXP, SGY, and CKH will be bought at 10% weights.

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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