Condition Bear Market Rally
S&P Target 1020
Small Portfolio IAU & XLF 16.19%
Hedge XLU -1.04%

Position Date Return Days Call
GCI 7/14/2011 12.71% 249 Hold
CSGS 10/3/2011 27.37% 168 Hold
NLY 10/25/2011 -1.65% 146 Hold
DD 10/27/2011 10.11% 144 Hold
KBR 10/27/2011 27.46% 144 Hold
VG 10/27/2011 -32.67% 144 Hold
TTM 11/30/2011 65.25% 110 Hold
BT 1/4/2012 10.74% 75 Hold
PDLI 3/7/2012 2.20% 12 Buy
CLF 3/19/2012 1.65% 0 Hold

S&P Annualized 5.98%
Small Portfolio Annualized 20.18%
Mousetrap Annualized 22.53%
Hedged Annualized 21.23%

The CLF trade was executed, selling CLH and buying CLF at the open.

I’ve still been working on the periodicity problem (i.e. how often to rotate). Yesterday I went through the daily returns of all open AND closed positions – showing the gains of the open positions and the gains the closed positions would have had if they were kept open. I also eliminated the random price movements of the S&P by subtracting the S&P returns from the date each trade was opened and then re-adding the average daily gains of the S&P over the course of the last 62 years. (You have to love this kind of thing)…

In any case, so far it appears that the ideal holding period is even further out than I suspected. 210 days per stock is currently the highest annualized score. That’s basically three weeks between each trade.

As time goes on the ideal holding period may be even further out, and it’s not impossible that we could find ourselves further out than a year.

Nearest I can tell, the technicals manage to give each stock liftoff into about 70 days before it begins to stall, and then the fundamentals give it a second wind at 150 days for another advance. Compound interest makes it worthwhile to hold the trade until at least 210 days, rather than trade at 70 as I originally thought.

So far I’ve initiated 20 long positions, ten open and ten closed:

OPEN Win Loss
GCI 1 12.71% 0.00% Hold 7/14/2011 12.71% 249
CSGS 1 27.37% 0.00% Hold 10/3/2011 27.37% 168
NLY 0 0.00% 1.65% Hold 10/25/2011 -1.65% 146
DD 1 10.11% 0.00% Hold 10/27/2011 10.11% 144
KBR 1 27.46% 0.00% Hold 10/27/2011 27.46% 144
VG 0 0.00% 32.67% Hold 10/27/2011 -32.67% 144
TTM 1 65.25% 0.00% Hold 11/30/2011 65.25% 110
BT 1 10.74% 0.00% Hold 1/4/2012 10.74% 75
PDLI 1 2.20% 0.00% Buy 3/7/2012 2.20% 12
CLF 1 1.65% 0.00% Hold 3/19/2012 1.65% 0

CLOSED
BKI 1 17.05% 0.00% Closed 5/31/2011 17.05% 149 10/27/2011
CFI 1 4.10% 0.00% Closed 6/22/2011 4.10% 127 10/27/2011
AWR 0 0.00% 3.64% Closed 7/5/2011 -3.64% 45 8/19/2011
AGO 1 14.41% 0.00% Closed 8/5/2011 14.41% 83 10/27/2011
DISH 1 17.87% 0.00% Closed 8/10/2011 17.87% 78 10/27/2011
GTAT 0 0.00% 35.32% Closed 9/8/2011 -35.32% 84 11/30/2011
AMGN 0 0.00% 2.16% Closed 10/27/2011 -2.16% 35 11/30/2011
WHR 0 0.00% 1.45% Closed 11/30/2011 -1.45% 30 12/30/2011
SE 1 17.60% 0.00% Closed 6/27/2011 17.60% 254 3/7/2012
CLH 1 29.07% 0.00% Closed 7/6/2011 29.07% 257 3/19/2012

These collectively amount to the 22.53% annualized return I reported above. HOWEVER, had I not closed the original positions I would have had a 41.75% annualized return.

As I said the other day – less is more.

The good news is that I’ve finally solved the rotation problem, and can actively track how often to rotate a position.

It’s well ahead of the S&P. Now it’s just a matter of fine tuning…

Tim