Sector ETF Portfolio for June...Rotating... - Scott's Investments

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I am an independent investor writing at Scott's Investments (http://www.scottsinvestments.com). My site is dedicated to discussing and publicly tracking historically successful investments strategies and sharing free investment resources. I emphasize empirical, historical, and quantitative... More

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Sector ETF Portfolio for June...Rotating... 0 comments

Jun 3, 2011 10:51 AM | about stocks: IXC, IXG, IXJ, IXN, IXP, JXI, KXI, MXI, RXI, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY

Please see the right hand side of Scott's Investments for the June update to the US and Global Sector ETF portfolios. I track the performance of each month's portfolio as well as previous months' performance. A summary of the data is listed below, including the percent each ETF is above/below the 200 day moving average.

US Sector
Last month the top 3 US sector performers based on the sum of the quarterly, half year, and annual returns were XLB (materials), XLE (energy), and XLI (industrial). This month all of the sector ETFs are above their 200 day moving average which was also the case last month. The top 3 based on momentum this month are XLB, XLE, and XLV (Health Care Select Sector SPDR). The US Sector model is a little slow to rotate into health care, which has recently been performing very well. XLV is the top performing ETF over the past quarter. Since the strategy updates monthly, it may not always catch the beginning of a move but it is a long-term strategy.

I have improved the way the performance of the sector momentum strategies are tracked. The strategies are tracked as a hypothetical portfolio with a starting balance of $10,000. Year to date the US Sector portfolio is up 5.09%, including dividends.

Global Sector

Last month the top 3 Global sector performers based on the sum of the quarterly, half year, and annual returns were EXI (industrials), IXC (energy), and MXI (materials). This month all of the sector ETFs are above their 200 day moving average which was also the case last month. The top 3 based on momentum this month are IXJ (healthcare), KXI (consumer staples), and IXC.

As stated above the strategies are tracked as a hypothetical portfolio with a starting balance of $10,000. Year to date the Global Sector portfolio is up 1.81%.

Potential strategies an investor could employ would be the following:

Buy the top 3-6-12 or 6 month performers and hold for one month. Or, buy the top performer based on the 6 month performance.
Buy the top performers only if they are also above the 200 day moving average.
Buy any ETF which is above the 200 day moving average, sell if it drops below the 200 day average. Update once per month
Trade the top 3 momentum performers using a more detailed trading plan such as one I detailed here.

The strategy used for the US and Global Sector ETF portfolios is to buy the top 3 ETFs based on the average of their 3, 6, and 12 month returns. The top 3 momentum ETFs must also be above their 200 day simple moving average. The portfolio is updated once per month, at the end of the month.

For some additional background on the strategy please click here and/or check out Mebane Faber's The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.

The data source for the information below is Finviz.

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	US Sector
Ticker	Company	Performance (Quarter)	Half Year	Year	Average Return	200-Day SMA
XLB	Materials Select Sector SPDR	3.62%	14.32%	38.45%	18.80%	8.65%
XLE	Energy Select Sector SPDR	0.39%	23.49%	55.21%	26.36%	14.69%
XLF	Financial Select Sector SPDR	-3.71%	9.62%	11.39%	5.77%	2.07%
XLI	Industrial Select Sector SPDR	4.35%	16.21%	32.59%	17.72%	9.54%
XLK	Technology Select Sector SPDR	1.93%	10.16%	25.22%	12.44%	6.85%
XLP	Consumer Staples Select Sector SPDR	10.20%	15.23%	26.46%	17.30%	11.49%
XLU	Utilities Select Sector SPDR	7.59%	12.38%	25.82%	15.26%	7.98%
XLV	Health Care Select Sector SPDR	11.93%	19.37%	29.01%	20.10%	13.64%
XLY	Consumer Discret Select Sector SPDR	4.96%	12.65%	28.87%	15.49%	10.28%

	Global Sector
Ticker	Company	Perfor-mance (Quarter)	Half Year	Year	Average Return	200-Day SMA
EXI	iShares S&P Global Industrials	2.60%	15.43%	34.92%	17.65%	8.78%
IXC	iShares S&P Global Energy	-0.35%	21.11%	45.06%	21.94%	11.68%
IXG	iShares S&P Global Financials	-1.78%	11.64%	21.02%	10.29%	3.70%
IXJ	iShares S&P Global Healthcare	12.29%	20.15%	33.18%	21.87%	14.14%
IXN	iShares S&P Global Technology	-0.66%	8.52%	20.95%	9.60%	5.28%
IXP	iShares S&P Global Telecommunications	4.68%	12.36%	36.18%	17.74%	7.13%
JXI	iShares S&P Global Utilities	0.99%	8.35%	19.94%	9.76%	3.42%
KXI	iShares S&P Global Consumer Staples	10.84%	15.04%	29.94%	18.61%	11.61%
MXI	iShares S&P Global Materials	1.29%	12.28%	40.56%	18.04%	7.20%
RXI	iShares S&P Global Cons Discretionary	3.45%	11.13%	32.28%	15.62%	8.98%

Stocks: IXC, IXG, IXJ, IXN, IXP, JXI, KXI, MXI, RXI, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY

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