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Kurtis Hemmerling

 
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  • 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, 2011. 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, 2011. 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, 2011. 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, 2011. 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, 2011. 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, 2011. 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, 2011. 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, 2011. 08:45 AM | 2 Likes Like |Link to Comment
  • How To Be A Profitable Bull In A Bear Market [View article]
    I have since made a couple of tweaks to it.

    I have also ran it across the broad market from March 2001 until today. It earns on average 0.90% per week. Out of that test period - the strategy was profitable 290 out of 545 weeks. While this is 'ho-hum' it rose 2.71% on up weeks and fell 1.17% on the down weeks.

    Of course, you would need to account for slippage or stick to the bigger stocks. And if you used small sums the fees would eat up much of the profits.

    If anyone is interested I can write about it - if not I'll just archive it.
    Sep 13, 2011. 03:01 PM | Likes Like |Link to Comment
  • 8 Stocks With Risk of Leveraged Losses In Case Of A Market Drop [View article]
    I don't know Lampert well and cannot comment on his management expertise. This article was based on downward revisions and how it might affect the short-term trading of the stock.

    But looking at Sears, yes they have a book value 40-50% above current price. If you take away goodwill and intangibles, however, the number drops to only $33 per share. Also, negative earnings are eroding net asset values.

    If things start to turn around... but at this point I'm not too sure what the upside is. Any insights would be welcome.
    Sep 13, 2011. 11:02 AM | 1 Like Like |Link to Comment
  • 10 Buffett Stocks: Amazing Value Or Value Traps? [View article]
    Thanks for the comment. There were at least 9 separate filters that had nothing to do with P/E ratios. Debt, Earnings, ROE, Retention, filtering the top 15% compared to industry averages, Current ratio, etc.

    The P/E was an extra timing tool filter added on at the tail end. I agree that nobody should buy on P/E either - and I never suggest this. These are quality stocks and P/E is just one ratio to suggest a time to buy that Buffett is reported to use - but I also offer other alternatives.

    Buffett may not buy Google - but that doesn't mean those who respect his principles cannot do so.
    Sep 12, 2011. 08:59 PM | Likes Like |Link to Comment
  • 10 Buffett Stocks: Amazing Value Or Value Traps? [View article]
    I am sorry you found this an eclectic piece that was hard to follow.

    I was trying to highlight a strategy that utilized decent fundamentals with market timing. Warren Buffett is mostly the style of Ben Graham - thus the reference to Mr. Market. Buffett is said to time the market through such practices as P/E ratios below long-term averages (also in reference to Mr. Market), which is a crude form of timing a stock purchase. A newer alternative was suggested at the end.

    I thought the components went well together and it had backtesting - which many writers do not even bother with these days. They rely on readership credulity.

    I will try to make my objective more straight-forward and clear for a variety of readers. Thanks for the feedback.
    Sep 12, 2011. 08:50 PM | Likes Like |Link to Comment
  • 10 Buffett Stocks: Amazing Value Or Value Traps? [View article]
    Using Buffet-style screeners on AAII or Portfolio123 and other sites - you can achieve far better gain than Berkshire Hathaway. Berkshire shares are only up 52% in 10 years. Its the burden of being too large are being limited to larger companies or buyouts.

    With both the aforementioned sites you can follow their backtesting or do your own to see that this is so. I like to follow some of his more basic principles - but then branch out.
    Sep 12, 2011. 08:40 PM | Likes Like |Link to Comment
  • How To Get Huge Yields Plus Large Capital Gains In Dividend Stocks [View article]
    I use a few - AAII and Portfolio123 are two of my more major ones since they combine fundamental analysis with varying degress of how well the strategies worked over time. More in-depth fundamental with AAII, better TA and back-testing (along with portfolio creation) with Portfolio123
    Sep 10, 2011. 03:16 PM | Likes Like |Link to Comment
  • How To Get Huge Yields Plus Large Capital Gains In Dividend Stocks [View article]
    It is using analyst forecast earnings for the current year or for next year. The trailing earnings do not change until the companies report. They scan all 500 stocks for the aggregate consensus earnings estimate and change it daily accordingly.
    Sep 10, 2011. 10:30 AM | Likes Like |Link to Comment
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