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Kurtis Hemmerling

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  • How High Yield Investing Can Make Or Break Your Portfolio [View article]
    Page 13 of the Tweedy Browne report used a similar approach of 10 buckets. The top 3 buckets had the highest gain, although it was not monotonic. The 8th bucket had the highest gain. Therefore, keeping in line with what research had already been performed I used the top 30%, or buckets 8, 9, and10.

    I was not trying to create a trading strategy right away, but first I wanted to show how their results help up over the past 5 years.
    Nov 16 11:00 AM | Likes Like |Link to Comment
  • Should You Switch To A Low-Risk Defensive Income Portfolio? [View article]
    Different sites list them as different sectors, some are specific others more general. I use Portfolio123 software and they categorize them as Utilities. Lumping these into this sector is not uncommon and is inline with other sites:
    Nov 16 10:55 AM | Likes Like |Link to Comment
  • How High Yield Investing Can Make Or Break Your Portfolio [View article]
    You are right that the average investor cannot see the problem well in advance, but you can sell when it becomes high risk. The banking problems were apparant in 2008 but people greedily traded them thinking they were undervalued. Risk averse traders avoided them altogether once the problems came out and prices began to fall. Even if you quit trading financials by the fall of 2008, you would be protected from the brunt of the fall. It isn't to say that banks are not going to be profitable going forward or that you shouldn't trade them if you are proficient at timing - but they are riskier than other products available right now. This strategy doesn't rely on high risk and volatile products for superior gains.

    Thus, be on the alert for industries falling out of favor and do not be a contrarian investor - at least with this specific strategy - if you want to have lower risk gains. For me that means staying out of gold, financials, solar stocks, Greek and Italian bonds, and a couple of others for now. But I am on the lookout for more droppers.
    Nov 16 08:21 AM | Likes Like |Link to Comment
  • How High Yield Investing Can Make Or Break Your Portfolio [View article]
    Feel free to post your comments and views - even if they run contrary to mine. (I am adding the first post as sometimes it gets lost on its way to the board. I do not want to risk losing out on any of your valuable comments)
    Nov 16 07:06 AM | Likes Like |Link to Comment
  • Why I Am A Market Bull Starting Today [View article]
    I realize there are severe problems with sovereign debt. However, there is always something to point to - in bull markets some say valuations too high, in bear markets there is a plethora of negativity to point to, the real question is when to jump on.

    At the moment there are some reasons why I feel we may go up from here. My experience is that the markets react worse when there is a lack of data or quantification of the problem. Usually, once it is known - no matter how bad - the market tends to look past it. Are we there yet? Maybe not - but for the moment I'm long and I will adjust my stance as the situation as it unfolds.

    We will just have to see I guess...
    Nov 9 10:54 AM | Likes Like |Link to Comment
  • Why I Am A Market Bull Starting Today [View article]
    We trade differently. I am not interested in the smaller swings intra-month or even broader swings multiple times a year. I try to jump in a reasonable earnings forecast trend exists. This is not some buy high sell low system as the last 10 years of entry and exits have shown. But we likely trade different time frames - my signals are generated less than once a year on average.
    Nov 9 10:47 AM | Likes Like |Link to Comment
  • Why I Am A Market Bull Starting Today [View article]
    sure. I do a weekly update on my website as well - AggressiveDividends. The futures look ugly this morning but the forecast earnings are still green (although on the line), and we are above the 100 day moving average.

    If things drop I'll keep you posted.
    Nov 9 09:36 AM | 1 Like Like |Link to Comment
  • How 'Window Dressing' Moves The Markets [View article]
    A good thesis. A report, Window Dressing in Mutual Funds (2011), added some interesting points. Unskilled managers who perform poorly are more likely to use window dressing. But this results in higher fund flows. Since there is a 60 day delay allowed before end of quarter holdings are given - the managers can use the extra funds to boost performance.
    Nov 6 07:20 AM | Likes Like |Link to Comment
  • The S&P 500 is Popping Upwards - Should You Be a Bull? [View instapost]
    Just the utility strategy without any market timing over the past 10.5 years has the following stats:

    Robustness testing with a one year buy and hold tested with over 500 different entry and exit points. Capital gains are 5.89% on average and minimum 5% yields but average is higher.

    Monthly portfolio rebalancing over past 10.5 years with no market timing works out to 10-12% annual gains if you combine dividends and capital gains.

    Same test as above with market timing model works out to 8.75% capital gains per year plus dividends for 13 - 15% total annual growth.

    Doing the simulator portfolio test with low frequency trading rules that I use for actual trading - 5 years of data tested - 8.75% annualized capital gains plus another 5 -7% dividend yields.55% annual turnover of stocks. This includes market timing where you are out of the market over 1.5 years. If you parked your cash in bonds or t-bills you should have higher total 5 year gains than what is listed above.

    Hope this helps
    Oct 28 08:58 PM | Likes Like |Link to Comment
  • The S&P 500 is Popping Upwards - Should You Be a Bull? [View instapost]
    The strategies have been tested over the past 10.5 years. I only report the trailing 24 months on my site to give a more relevant picture. The 10 year stats will come out when my new book is published (hopefully soon). Is there one specific strategy you would like more information on? I'd be happy to post.
    Oct 27 10:19 AM | Likes Like |Link to Comment
  • The S&P 500 is Popping Upwards - Should You Be a Bull? [View instapost]
    stockscreen123 or portfolio123 carries this data
    I report on this information weekly on my website under the Market Timing tab as well
    Oct 26 03:09 PM | Likes Like |Link to Comment
  • Has The S&P 500 Signaled A Market Bottom? [View article]
    The entry and exit dates using the analyst forecast trends and some simple TA for confirmation are as follows:
    Buy January 22nd, 2002
    Sell May 15th, 200
    Buy January 21st, 2003
    Sell October 22nd, 2007
    Buy June 15th, 2009
    Sell July 28th, 2011

    You can verifty these figures by using a fundamental backtesting service that carries these data feeds like stockscreen123 or portfolio123. You are correct that they do not get you out on absolute bottoms, and is sometimes a few months after the absolute bottom, but it also cuts your max drawdown in at least half if nothing else - but if usually adds significantly to your total gain.

    What VIX threshold do you use to buy at? How do you know when 'high is high enough'? Without some fundamental turnaround, it seems like this is similar to buying into 'relatively oversold' conditions.

    In the 2008 paper, Modeling and Forecasting the VIX index, the researchers were able to forecast short-term direction of the VIX little better than 58% of the time (studies almost 20 years ago were able to get as high as 62% but this is declining). Good for options traders but the reliability is a bit too low for my style of equity trading.

    Oct 25 10:59 AM | Likes Like |Link to Comment
  • Has The S&P 500 Signaled A Market Bottom? [View article]
    I realize everyone has their own definition of a correction, bull, and bear - how far from peak to trough, length of time, etc. etc. I appreciate you giving us your take on the market.

    I guess what I meant was since the forecasts have been chopped in June/July and the subsequent market drop - is it safe to jump back in based on analyst upgrades of the S&P with a confirmation signal?

    According to the signals I use, while realizing everyone uses something a bit different, I have a bit more to wait for final. confirmation.
    Oct 25 07:26 AM | Likes Like |Link to Comment
  • The Myth Of Defensive Stocks [View article]
    You have a valid point that defensive stocks go down in bad markets. Research does back up that markets are highly correlated, globally in fact, to bear markets. Asia has the weakest correlation though.

    But many people stay invested in defensive sectors instead of rotating their portfolio in some type of market timing. For instance, the trailing 5 years the S&P 500 has dropped over 10% while the Utilities sector (not the spider) has only dropped 2%. Then compare that the S&P 500 has a low yield of 1.5 - 2%. The utilities sector ranges from 4 - 5%, which translates into being up 25 - 30% in 5 years if you use compound growth from re-investing dividends as opposed to break-even after factoring in dividends for the S&P 500.

    A good piece about being wary of short-term 'market timing' defensive stock rotation, but I would be interested to see the comparative performance once you factor in dividends.
    Oct 16 03:45 PM | 3 Likes Like |Link to Comment
  • Don't Get Trapped By Stocks Under $5 [View article]
    I always enjoy reading your work Rocco. Interestingly, the 2004 paper "Why Do Share Price Levels Matter? Investor Clientèles, Monitoring and Firm Performance" agrees with much of what you are saying. Why should price matter if we use market cap or EV? It does.

    *Retail investors are the biggest buyers of sub $5 stocks
    *Institutional investors generally prefer above $5 stocks
    *Higher quality companies will offer their IPOs, or will split to, higher dollar levels to target institutions who typically investigate deeper
    *Higher priced IPOs and stocks that split to higher price levels generally out-perform those that use lower levels.

    They use IPO and splitting prices as those are the two times that management has control over their share prices (but not market cap).

    That being said, I do think that a careful investor can target great value in the sub $5 stock minefield - but you better be real good at targeting strong candidates by looking for things such as high insider ownership where management cares about share prices, and other fundamentals while going the extra distance on due diligence.

    Good work Rocco. A good investor will often be unpopular as you lead the trend - which means you are in disagreement with the mass. Those that take the popular opinion and jump on trends after they are most obvious will suffer the most.
    Oct 5 08:45 AM | 2 Likes Like |Link to Comment