Wednesday 31 July 2013

How well have those share picking systems performed?

I have a plan

We’re now 9 days in from my first buys on the US market. The overall return has been 2.6%.

I hate the way that Vector Vest shows the Annual Rate of Return to indicate how fast a portfolio is growing over a short period of time. It gives you a clue about the rough trajectory of your stocks but there is nothing to say they will continue on that course. For what it’s worth and using VV's approach the portfolio is making a little over 70% p.a. Over the same period the VVC has fallen back by 0.3% or -9% on an annualized basis. The metrics on the performance of the strategy are good.

The strategy uses a number of different unisearches to pick stocks. See this post for the original analysis.
  • The A search which performs best in backtests but is risky has done well. It has chosen 8 out of the 14 shares. 6 out of 14 are winners- average increase 3.5%
  • The B search picked 3 shares : 2 winners 1 looser – average increase 6.7%
  • The D search also picked 3 shares : 1 winner 2 losers – average loss 11.3%.


So what now?

I have decided to use my ISA account again to buy US shares. I still have some free cash and I will use the C search to pick my next lot of shares. Timing will depend on how the market is moving and my gut. 

We are in a consolidation period. My judgement is that it will burst out to the upside but I must be ready to be wrong and to know what to do if that happens.

My US system has two stop criteria for pulling out:
  • The first is a four week stop. This means I will start selling shares on 15th August
  • The second is a 5% trailing stop which would be triggered if the market moves into a downtrend.

So I have a plan for the US market.



Those pesky UK shares

For the UK market I do not have a plan. The 25% stop loss and 50% take profit are my only strategies and those are based on guesswork and previous experience. The rest of what I do just has to be gut feel.

The two strategies I am using for picking shares are performing poorly (see this post for how they performed in back tests) particularly since they have been running for almost a month. The analysis does not offer much hope for an improvement over the next two months unless the market picks up strongly. 


The results are as follows:
  • DBH has 2 winners and six losers average loss 5.8%

  • VSTPE has 2 winners 2 losers average gain 1.6%
A lot of thought is required about what to do next.

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