Fred Piard

Portfolio strategy
Fred Piard
Portfolio strategy
Contributor since: 2012
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Thanks for your comment. My opinion is that he Fed will not significantly increase interest rates as long as central banks in Europe, Japan and China are still running their own QE programs full throttle. It would be too risky for the US economy.
Apart from that, valuations are not attractive in utilities but the trend is.
giofls, thanks for your comment and insight.
(continued) other possibility: a momentum component in the ranking. But it is not a guarantee against falling knives (there is a momentum component in the satellite portfolio of GHI)
Michael,
The most obvious way to deselect falling knives is setting trailing stops. There are various issues with trailing stops:
- after backtesting various models, I came to the conclusion that trailing stops closer than -20% may harm the long-term return without reducing significantly the risk measured in volatility and max drawdown.
- At 20-30%, it might improve the return and/or reduce the risk, BUT...
- From a statistical point of view, it is not sure that the set of events "trailing stops triggered" is large enough to decide if it is profitable or not (sample size issue).
- When deselecting a stock, until when should it be blacklisted?
- You can miss a spectacular reversal on news revealing a mispricing or M/A (remember GMCR... +72% overnight)
These are for "mental" stops, additional issues appears with broker-hosted stops: showing your "cards" to a third party (stop-hunting), and irreversible losses for the whole portfolio in case of a flash crash.
I have also done some backtests to deselect stocks underperforming widely their sector ETF: small improvement in some cases, but nothing definitely convincing.
The best might be to eliminate stocks falling below a strong support. The concept of strong support belongs to chart pattern analysis. Difficult to describe it in a reasonably simple quant model.
My thought in the current state of my knowledge and with a large enough portfolio (25 stocks or more): living with my bad picks with humility. Micromanagement is time-consuming and psychologically stressing. This is my opinion, not investment advice...
Thanks for sharing your insight.
Decider, thanks for your comment. It is a bit out of topic of this article, but here is my opinion: as long as central banks in Europe, China, Japan drive their own QE, the FOMC cannot increase rates too much without harming the ability of US companies to stay competitive. The keyword is 'dollar'.
You are welcome David!
Thanks for your insight. We'll see...
not recommended except if the discount go momentarily far out of its range (flash crash for example). The arbitrage may last longer than you think.
AStroller69, thanks for your comment. This series of articles started in September and no backward calculation has been done until now. A part of this work cannot be easily automated, it is quite time consuming. Q-score and V-score are based on some of the best predictors of future returns among usual fundamental factors, according to 17-year backtests (click the links in the 1st paragraph).
SeekingTruth, thanks for your comment. Statistics since 1999 show that ROE is a better predictor of future returns than ROA and ROI (http://seekingalpha.co...). As a part of this work needs manual processing in spreadsheets, I have limited my focus to 5 indicators.
Thanks for your comment. Gold may bounce higher on the short term, but I doubt that the bear market in precious metals, oil and basic materials is over.
gku, thanks a lot for your encouraging words!
Gayle, thanks for sharing your insights.
David, thanks a lot for your comment.
Merry Christmas Manny.
One more thing: a reverse split is no good news. Especially in this case: it is an obligation and it has a cost. Nasdaq stocks that stay too long below $1 are delisted.
...no debt, the best you can hope is a buyout.
Thanks for your comment. Are you sure? This company is losing money. Charts on all time frames and fundamental ratios are awful: http://bit.ly/1J6tqGs
SeekingTruth, thanks (again) for your encouraging words.
Q/A in private message that may be of interest for other readers:
-What are a couple of names in the "Transport Infrastructure" sector, please?
I don't understand the category.
-Companies managing airport facilities: MIC,PAC,ASR...
Thanks for your comment. Beware of energy, the median ROE is close to zero. In energy, I think the safest opportunities are in refiners. Most of the rest is a bet on OPEC's policy, and OPEC has no policy any more since last year. This is a stock picker's market.
SeekingTruth, Thank you, that's a great compliment.
TBC, thanks for your comment!
I don't make predictions, I just try to manage risks at best using various models and timing indicators... Deflation in oil and metals is a partial reason, the underperformance of value/dividend stocks has spread beyond the industries in meltdown.
Thanks for your comment, and sorry for your bad luck last year.
Thanks for your comment. It may be better to have various strategies in parallel and a sound money management.
Michael, thanks for sharing. I think a lot of value and dividend investors have felt like guinea pigs in an experiment on Murphy's law in the last months. My quant strategies based on valuation and quality ratios have also suffered... My SA premium service Global Household Index is my only model to outperform SPY since public launch in April and YTD (when I write this). http://bit.ly/1LTZYDC
bud, Thanks for your kind words. Momentum is a strong market bias, well researched for decades, but you're right at the end of a trend. In a big correction it's better not to be caught holding a momentum bag.
Thanks a lot Alpha Man!
jj, thanks for the touch of humor :)
Beach life, I am long CEF (moderately as an insurance), and I opened a position a few weeks ago on GGN. Picking a bottom is an even more difficult exercise than picking a top. I don't think we have hit a bottom for gold and oil. Dividend and discount are just a limited safety cushion.