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  • A low drawdown strategy for sector rotation for Fidelity Select Funds 137 comments
    Jan 8, 2012 11:41 AM | about stocks: TLT
    Fidelity Select funds provide a comprehensive basket of investment vehicles for trading using sector rotation strategies. Due to the size of the basket and the fact that there are no transaction costs if the funds are held for sufficiently long periods, there are quite a few free and for-fee services that provide advice on periodic rotation in this basket, and some of them yield excellent returns, though not without large drawdowns.

    The following strategy works quite well in backtesting, somewhat better than many other methods.
    1. Start from the close of the first full week of the year.
    2. Rank the performance of the funds during the period of 8 weeks ending on the close of the previous week.
    3. If the top ranked fund in step two has better return than a long term treasury fund , invest in it for 13 weeks, otherwise invest in the treasury fund for 13 weeks. (For backtesting we used VUSTX for pre 2003 years, and VUSTX and TLT for 2003 and later. These can also be substituted by the more recent Fidelity fund FLBIX.)
    4. Repeat steps 1 to 3 for the whole year, closing out the position in the last week of the year.
    5. Repeat the steps 1 to 4 for every year.


    Backtesting yields the following results for the period 1991-2011 (All results are based upon the weekly adjusted close data from finance.yahoo.com. I will be glad to collaborate if a reader wants to repeat the calculations with data that he thinks to be more reliable.):
    • CAGR 25%
    • Number of years of losses: 2 (out of 21, in 1994 and 1998)
    • Maximum loss: -11% (in 1994).
    • Standard Deviation of Annual Returns: 22%
    • Mean of Annual Returns: 27%
    • 1, 3, 5, and 10 Year CAGRs: 4%, 27%, 24%, 28%
    • 2011 Return: 4%
    • Number of years the strategy beats SP500 index: 17 (out of 21).
    • Mean of positive returns: 28%
    • Mean of negative returns: -1%
    • 95% Confidence Interval for Alpha (%):[8.7,33] (between 8.7 and 33)
    • 95% Confidence Interval for Beta       :[-0.2,1.1]
    • 90% Confidence Interval for Alpha (%):[10,31]
    • 90% Confidence Interval for Beta       :[-.1,1.05]
    (For the last four computations, annual ten year treasury rates were used as the risk free rates, and the annual returns of the SP500 index  were used as the market returns.)

    As far as can be ascertained, by most measures this strategy outperforms all the publicly available strategies for investing in Fidelity Select Funds.

    This strategy starts with FBIOX as the position in the first 13 weeks of the year 2012. We will update it every 13 weeks.

    For comparison purposes, here are some statistics for the whole basket of Fidelity Select funds (each statistic is computed for the life of each fund during 1991-2011):
    • Minimum annual returns of the funds range from -63% to -18%,
    • Mean annual returns range from 0% to 20%.
    • Maximum annual returns range from -2% to 16%.
    • For a basket of equally weighted funds (numbering 40) rebalanced annually, the CAGR for 1991-2011 is 12%, and CAGRs for the last 1, 3, 5 and 10 years are, respectively, -5%, 18.5%, 2% and 6.5%.
                               

    This is not investment advice, but just an effort to track the results of hypothetical investments according to a particular strategy.

    I am not associated with Fidelity funds in any capacity except as an account holder.
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Comments (137)
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  • Market Map
    , contributor
    Comments (476) | Send Message
     
    I wonder if you could use ETF's ? having money locked up in "Fidelity" Co. is not my 1st choice of brokers. For biotech, it looks like there's IBB, FBT, XBI, and PBE ...
    11 Jan 2012, 09:48 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Thanks. Unfortunately it will be hard to find the set of ETFs that exactly duplicate the performance of the Fidelity select funds.
    12 Jan 2012, 11:36 AM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    Would you have a historical spreadsheet of the trades for this method ? I would like to look into it ... st1110@lycos.com
    12 Jan 2012, 10:06 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » http://bit.ly/wqkrn1
    13 Jan 2012, 01:54 AM Reply Like
  • glnagrom
    , contributor
    Comment (1) | Send Message
     
    Where do you find 8 week performance numbers? Most sites, including Fidelity tend to give you only daily, weekly, monthly, quarterly, and yearly performance. Are you manually doing the math on every select fund for 8 weeks? If so, this may not be the strategy for the average bear...
    13 Jan 2012, 02:40 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » yes I am doing it with a program that I wrote.
    13 Jan 2012, 03:02 PM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    Why do you start after the 1st week of the year instead of Jan 2 ?

     

    I followed one touted newsletter using Fidelity. It "switched" every six months. In 2008, my indicators went to cash and he got clobbered by NOT doing so ... http://bit.ly/wQfHcd
    14 Jan 2012, 11:16 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » 1. Just a matter of convenience but it should not matter. I do not want to modify my program.
    2. This method made 12% in 2008 since it went to TLT in fourth quarter of 2008. Most other Fidelity trend following methods seem to have lost a lot in 2008.
    14 Jan 2012, 11:39 AM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    Nice strategy.
    14 Jan 2012, 09:22 PM Reply Like
  • Woodshedder
    , contributor
    Comments (14) | Send Message
     
    Varan, I'm going to attempt to replicate your results, sometime over the next few days. I'll use Yahoo data, but I'm going to use daily returns, meaning that 8 weeks will equal 40 days and 13 weeks will equal 65 days.

     

    It might be difficult for me to replicate the switching from VUSTX to TLT, but I'm going to give it a shot.

     

    Good stuff Varan. I'm looking forward to working with your strategy.

     

    http://bit.ly/whnqlP
    17 Jan 2012, 09:59 PM Reply Like
  • My ETF Hedge Fund
    , contributor
    Comments (49) | Send Message
     
    Interesting work, although I would not call this a "low drawdown" strategy: based on the 13-week return data in your spreadsheet, there are several episodes of 20/25 % drawdowns. The drawdowns would be even higher based on monthly data...
    23 Jan 2012, 04:30 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Agreed. I got carried away because I saw some real results from some for- fee services that had 40% to 43% loss in 2008. So the characterization was just relative.

     

    Most of the other methods did not have a good return during the last ten years. This one yields uniformly good annualized returns: for any three year period the annualized return is in double digits, and except for two years, always greater than 15%. Very few trading strategies can achieve that.
    23 Jan 2012, 05:25 PM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    I was wondering what the performance would be if you selected
    the "top" 2 funds per period ( for a little diversification ). And for the present period what would be the second one behind FBIOX ?
    21 Feb 2012, 09:32 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » You get a slight lower return (23% for 1991-2011), but still pretty good.

     

    The second fund for the beginning of the year comes out to be FSHOX. The re-balancing occurs on 4/6/2012.
    21 Feb 2012, 09:45 AM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    Would you be able to supply a spreadsheet for this ? Thanks !
    8 Mar 2012, 11:31 AM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    The 13 week period ended on Monday 4/9 . (?) What is the top fund ( or the top 2 for diversity ) for the next 13 weeks period ?
    10 Apr 2012, 02:16 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » fsrpx and fsvlx.
    10 Apr 2012, 02:19 PM Reply Like
  • littletiger101
    , contributor
    Comments (9) | Send Message
     
    Vara,

     

    I found your strategy heavily relies on

     

    "Rank the performance of the funds during the period of 8 weeks ending on the close of the previous week."

     

    I have tried to use last Q performance for picking the next Q winner, and the result is much worse.

     

    It makes me wonder, why 8 weeks? how do you get this magic number?
    29 May 2012, 01:21 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » 1. Find the best pair of ranking and evaluation periods (by back testing).
    2. Now make sure that if you change these by one or two weeks the performance does not change drastically.
    29 May 2012, 02:05 AM Reply Like
  • littletiger101
    , contributor
    Comments (9) | Send Message
     
    have you tested it out using 6, 8, 10, 12 weeks for evaluation period?
    and what are the CAGR?
    29 May 2012, 03:03 PM Reply Like
  • traderraider
    , contributor
    Comments (8) | Send Message
     
    Varan - definitely appreciate your work....am I understanding the mechanics correctly?:

     

    ETF Paired Switching:

     

    Ranking period: First full week of quarter to end of quarter.
    Investment period: First DAY of subsequent quarter to end of quarter.
    ======================...
    Fidelity Selects:

     

    Ranking period: Last 8 weeks of calendar quarter
    Investment period: One week exactly after ranking period ends thru 13 weeks..

     

    Thanks
    25 Jun 2012, 03:27 PM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    Hello ... Which Fidelity fund ( or 2 ) has your calc. come up for the 3rd qtr. ? My weekly 8 period ROC ( Fri. 7/6 close ) shows #1 FBIOX and #2 FSAGX to be the selections .
    9 Jul 2012, 04:09 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » FBIOX and TLT

     

    By the way, YTD returns have not been too shabby, either for the single or the two fund portfolio.
    9 Jul 2012, 05:20 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Two Fund: 13.5% YTD
    One Fund 12.5% YTD

     

    compare with:

     

    http://bit.ly/MT1Nms 6.5%

     

    http://bit.ly/GYKJGV 8.9%
    9 Jul 2012, 06:00 PM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    Seems prudent to just switch to TLT for 3rd qtrs. It's beaten the SPX and the Fidelity switch handily over the 21 year history .... ( unless, of course, that evil interest rate "rise" that everyone has been banking on over the last 7 years is going to start tomorrow ! )

     

    Spreadsheet: http://tinyurl.com/6oj...
    9 Jul 2012, 08:18 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » seems reasonable.

     

    yes, someone even convinced to me to lose some money on TBT to bet against TLT.

     

    Nice to see someone following this. Are you actually using this strategy? Just curious. I have been using it since January.
    9 Jul 2012, 09:36 PM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    Yes, I've been using it since Jan. also although, not having access to the Fidelity funds, I've used the sector ETF's (IBB) ...
    3 and 5 year rolling returns have averaged 90%+ for the 3 year, and
    200% + for the 5 year (back to 1991 ) .. amazing for something so simple and with a robust backtest sample size ! Still would like to diversify with at least 2 funds though ....
    9 Jul 2012, 11:33 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » The 4/5/4 strategy (buy the top four on the basis of the returns of the 4 week period ending in the prior week and update every five weeks) yields slightly lower CAGR (19.7% for 1991-todate). This year it has done quite well, returning about 15.8% as it was in TLT during the period 4/20/2012-6/29/2012.

     

    I have also cooked up a strategy based on risk parity and relative strength for the reasons that you mention (you can put only so much of your portfolio in one or two funds). It yields around 15.5% annually for the period starting in 1991 and entails allocating the portfolio (generally unequally) among fifteen top funds, and updates every two months.

     

    In all these strategies, the key of course is to add some assets to the select funds whose returns are negatively correlated with the returns of the select funds. That part of the strategy is missing from most other systems as far as I can tell.
    9 Jul 2012, 11:56 PM Reply Like
  • Jonathan^n
    , contributor
    Comments (5) | Send Message
     
    For this, I get 13% from 2001+ and its not stable.
    29 Aug 2012, 02:28 PM Reply Like
  • Scott L
    , contributor
    Comment (1) | Send Message
     
    Varan,

     

    I use a similar strategy that I learned from an investment class. Using Fidelity Select Sector funds ranked on an annual basis choose the top fund to invest in for the next year. However, there are some simple tests to pass to keep this top ranked fund. If it was in the top 10% two years in a row pass over it and go to the next one. Also, if funds from the same sector are in the top 10% 2 years in a row go to the next fund on the ranked list. Have you thought of incorporating a similar filter for your method?
    2 Aug 2012, 03:50 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Thank you for your comment.

     

    No, I have not attempted to incorporate such a filtering mechanism. It may be worthwhile to look into it.
    7 Aug 2012, 12:44 AM Reply Like
  • Market Map
    , contributor
    Comments (476) | Send Message
     
    I was curious to see what the performance was during 3rd quarters using NDX / QQQ vs. the Fidelity Switch selections. I also implemented a market timing filter that I use and indicated " TLT / VUSTX" during times when the filter went to "cash". Interesting that QQQ outperformed the switch selections in the 3rd quarters in the 90's bull market / internet bubble years and underperformed in the post bubble collapse to present years ...

     

    http://tinyurl.com/9l6...
    14 Aug 2012, 11:12 PM Reply Like
  • Jonathan^n
    , contributor
    Comments (5) | Send Message
     
    Varan,

     

    Since 4 of their funds dont go back far enough, I set this up and tested from 2001 on. Used VUSTX the whole way through. I get a big loss in 2008 which you didnt state in your post. I do get 24.73% CAGR but the system isnt very stable. When I choose a rebalance period of 63 days I get 25%, 64 days is 6.6% for example. Also, I am not synchronized to the calendar year as you are but in my opinion that should not be a requirement for a stable system. What do you think?
    29 Aug 2012, 02:05 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Jonathan:

     

    Sorry your post slipped my mind. I agree that it should not make a difference, but some time this kind of instability that occurs due to some discrete event (distribution for example), cannot be avoided. I have done some robustness calculations with weekly data but not with the daily data.
    29 Sep 2012, 01:30 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Update for the Week of 10/1/2012.

     

    YTD return 20%

     

    FBIOX 1/6 thru 4/6 16.47%
    FSRPX 4/6 thru 7/6 -3.33%
    FBIOX 7/6- to date 6.56%

     

    Bench Mark Equally Weighted QQQ, SPY and DIA: 17.4% YTD

     

    On 10/5/12 the system switches to FSAGX.
    29 Sep 2012, 01:36 AM Reply Like
  • Jonathan^n
    , contributor
    Comments (5) | Send Message
     
    and I bought GDX in place of FSAGX since they track well and commissions are less.
    1 Oct 2012, 02:49 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Your GDX worked out well today.

     

    I will follow the strategy to the letter and switch to FSAGX at close tomorrow.
    4 Oct 2012, 03:56 PM Reply Like
  • hxm
    , contributor
    Comments (2) | Send Message
     
    I read a research paper which says that when ranking using past performance, it's better to skip the latest month just before the ranking date. Could you run the test using the ranking based on week 12 to 4 prior to the ranking date (for example, if the ranking is done on May 1, the ranking would be based on performance of the period Feb 1 to April 1 (skipping the period Apr 1 to May 1)

     

    Thanks
    5 May 2013, 11:37 PM Reply Like
  • Elran
    , contributor
    Comments (63) | Send Message
     
    you can look in my blog i did a similar test , indeed waitin for 1 month will give better performance :
    http://seekingalpha.co...
    5 Aug 2013, 11:20 PM Reply Like
  • sjCurious
    , contributor
    Comment (1) | Send Message
     
    Just curious to see if you continued your strategy through all of 2012 and, if so, how did you end up?
    21 May 2013, 09:53 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Last year it was doing well till the last quarter, when it went into FSAGX, and that reduced the returns by over 15%.

     

    Returns through first three quarters of 2012: 20.76%
    Return during the last quarter of 2012: -15.74%

     

    Total 2012 Return: 1.74%

     

    YTD 2013 Return 12%

     

    There are two ways to deal with the dismal returns of 2012:

     

    1. Accept it, since despite the poor performance for 2012, the CAGR has been more than pretty good: 1991-2013 23%
    2000-2013 24% , 2008-2013 19% (annual return for 2008 was 12.8% - postive).

     

    2. Modify the strategy by excluding FSAGX from the basket. That improves the performance substantially, even for 2012.

     

    Thanks for your interest.
    21 May 2013, 10:06 PM Reply Like
  • marcausn
    , contributor
    Comments (5) | Send Message
     
    Hi varan
    how are the results for 2013 so far?

     

    Marc
    27 Jun 2013, 09:34 PM Reply Like
  • marcausn
    , contributor
    Comments (5) | Send Message
     
    hi varan

     

    how is the performance for this year so far?
    27 Jun 2013, 09:34 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » FASVX 2013/1/11 thru 2013/4/12 6.6%
    FBIOX 2013/4/12 to-date 2.1%
    YTD net 8.8%

     

    Not too good but OK, considering that the CAGR for 2000-2012 was over 20% with actual profit (+12%) in the year 2008.

     

    Thanks.
    27 Jun 2013, 09:54 PM Reply Like
  • marcausn
    , contributor
    Comments (5) | Send Message
     
    varan do you know the pankin swtiching strategie and the version from nelson freeburg. He uses a timing model (pentad) and have together with using the fidelty select strategie over 30 % CAR
    If you interested, i send you the link.
    (interesting: Mark Pankin also removed the gold fund as you suggested)
    28 Jun 2013, 05:53 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » pankin's returns are not as good as the result of this one over the 1996-2013 period for which he has the data on his web site

     

    http://bit.ly/GYKJGV

     

    I assume that this is the pankin you are talking about.

     

    Compare pankin's results to this:

     

    1996 28.00%
    1997 27.05%
    1998 -4.84%
    1999 153.90%
    2000 20.65%
    2001 -7.66%
    2002 41.71%
    2003 53.92%
    2004 19.63%
    2005 33.44%
    2006 18.61%
    2007 16.70%
    2008 12.79%
    2009 40.85%
    2010 25.11%
    2011 4.16%
    2012 28.97%
    2013 8.82%

     

    Of course these have been (re-)calculated by removing FSAGX from the list.
    28 Jun 2013, 08:08 PM Reply Like
  • Elran
    , contributor
    Comments (63) | Send Message
     
    can you please also send me the link ?
    5 Aug 2013, 11:19 PM Reply Like
  • marcausn
    , contributor
    Comments (5) | Send Message
     
    yes, thats a great result

     

    if you don't know the webinar from nelson freeburg i recommend this link (open the pdf an listen the sound track)

     

    http://bit.ly/126BqLq

     

    Do you mean you can add a stop-loss ore timing model at your system? The results an the drawdowns would interested me strongly

     

    What about the drawdowns so far in the system?

     

    by the way the seluts you give me without using the FSAGX ar one of the best i have ever seen (in a period of nearly 20 years with two bear markets- congratulation). And because i spend a lot of time for researching systems i know that your results are no fake.

     

    You an i don'tt know what the future brings but nelson did a lot of reasearch (together with the ned davis group)- fund switching works constant since the 70er. so i am good hope.
    29 Jun 2013, 01:47 PM Reply Like
  • Elran
    , contributor
    Comments (63) | Send Message
     
    Hi Varan ,

     

    How many trades a year for this system ? did you try to test it with commissions ?
    In my tests after the i get a buy signal i usually use next day open price as the buying price , how can this effect your system ?

     

    Nice blog!!
    thanks
    Elran
    5 Aug 2013, 09:35 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » 4 trades a year.

     

    There are no transaction costs for most of the funds in this basket if you use fidelity.

     

    I have not back tested with the open price.

     

    (This year's performance has been really remarkable, mirroring the back test results.)

     

    Thanks for your interest.
    5 Aug 2013, 09:44 PM Reply Like
  • Elran
    , contributor
    Comments (63) | Send Message
     
    Thanks Varan !
    8 Aug 2013, 08:52 AM Reply Like
  • marcausn
    , contributor
    Comments (5) | Send Message
     
    Varan
    what do you think about using stops for this strategie?
    Marc
    2 Jul 2013, 07:53 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » I have tried setting stops on the basis of weekly adjusted close prices. It does not improve the performance.

     

    Thanks.
    3 Jul 2013, 03:29 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » So far good performance this year.

     

    2013/1/11 thru 2013/4/12 FSAVX 6.59%
    2013/4/12 thru 2013/7/12 FBIOX 16.05%
    2013/7/12 to-date (7/19/2013) FSRBX 2.30

     

    Last year the FSAGX did us in late in the year. We will see what happens this year. May be a good idea to take the profits and close for the year.

     

    Obviously this should not be construed as financial advice in any manner or form.
    20 Jul 2013, 01:47 AM Reply Like
  • Tomer35
    , contributor
    Comment (1) | Send Message
     
    There is also a nice site that gives sector rotation signal for free :
    http://www.gosector.com
    5 Aug 2013, 08:50 AM Reply Like
  • marcausn1
    , contributor
    Comments (3) | Send Message
     
    Hi Varan
    Is it possible to send me a spreadsheet for (re-)calculated fonds( by removing FSAGX from the list) from 1996 (or erlear) till today?
    Thank you very much
    marcausn
    28 Oct 2013, 06:44 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » 33% YTD

     

    FSVLX 1/ 7/1991 4/ 8/1991 37.00% 11/ 5/ 0 12/31/ 0
    FBIOX 4/ 8/1991 7/ 8/1991 0.85% 2/ 4/ 1 4/ 1/ 1
    FSAVX 7/ 8/1991 10/ 7/1991 -2.26% 5/ 6/ 1 7/ 1/ 1
    FBIOX 10/ 7/1991 12/30/1991 21.14% 8/ 5/ 1 9/30/ 1
    FSVLX 1/ 6/1992 4/ 6/1992 10.69% 11/ 4/ 1 12/30/ 1
    FSAVX 4/ 6/1992 7/ 6/1992 4.45% 2/ 3/ 2 3/30/ 2
    FSVLX 7/ 6/1992 10/ 5/1992 -5.47% 5/ 4/ 2 6/29/ 2
    FSESX 10/ 5/1992 12/28/1992 -8.93% 8/ 3/ 2 9/28/ 2
    FSVLX 1/ 4/1993 4/ 5/1993 12.33% 11/ 2/ 2 12/28/ 2
    FSESX 4/ 5/1993 7/ 6/1993 6.87% 2/ 1/ 3 3/29/ 3
    FSPTX 7/ 6/1993 10/ 4/1993 -1.02% 5/ 3/ 3 6/28/ 3
    FSVLX 10/ 4/1993 12/27/1993 -1.75% 8/ 2/ 3 9/27/ 3
    FSLBX 1/ 3/1994 4/ 4/1994 -15.41% 11/ 1/ 3 12/27/ 3
    FSELX 4/ 4/1994 7/ 5/1994 -4.63% 1/31/ 4 3/28/ 4
    FSESX 7/ 5/1994 10/ 3/1994 0.83% 5/ 2/ 4 6/27/ 4
    FSCSX 10/ 3/1994 12/27/1994 9.16% 8/ 1/ 4 9/26/ 4
    VUSTX 1/ 3/1995 4/ 3/1995 6.38% 10/31/ 4 12/27/ 4
    FSELX 4/ 3/1995 7/ 3/1995 45.27% 1/30/ 5 3/27/ 5
    FSELX 7/ 3/1995 10/ 2/1995 4.70% 5/ 1/ 5 6/26/ 5
    FSVLX 10/ 2/1995 12/26/1995 4.31% 7/31/ 5 9/25/ 5
    FSESX 1/ 2/1996 4/ 1/1996 19.77% 10/30/ 5 12/26/ 5
    FSAIX 4/ 1/1996 7/ 1/1996 -11.27% 1/29/ 6 3/25/ 6
    FSNGX 7/ 1/1996 9/30/1996 3.41% 4/29/ 6 6/24/ 6
    FSELX 9/30/1996 12/30/1996 16.48% 7/29/ 6 9/23/ 6
    FSAIX 1/ 6/1997 4/ 7/1997 -1.15% 11/ 4/ 6 12/30/ 6
    FSAIX 4/ 7/1997 7/ 7/1997 13.09% 2/ 3/ 7 3/31/ 7
    FSESX 7/ 7/1997 10/ 6/1997 38.76% 5/ 5/ 7 6/30/ 7
    FSESX 10/ 6/1997 12/29/1997 -18.11% 8/ 4/ 7 9/29/ 7
    FIUIX 1/ 5/1998 4/ 6/1998 14.89% 11/ 3/ 7 12/29/ 7
    FSTCX 4/ 6/1998 7/ 6/1998 2.89% 2/ 2/ 8 3/30/ 8
    FSRPX 7/ 6/1998 10/ 5/1998 -21.31% 5/ 4/ 8 6/29/ 8
    VUSTX 10/ 5/1998 12/28/1998 2.41% 8/ 3/ 8 9/28/ 8
    FSDCX 1/ 4/1999 4/ 5/1999 25.43% 11/ 2/ 8 12/28/ 8
    FSESX 4/ 5/1999 7/ 6/1999 24.59% 2/ 1/ 9 3/29/ 9
    FSELX 7/ 6/1999 10/ 4/1999 5.88% 5/ 3/ 9 6/28/ 9
    FSCSX 10/ 4/1999 12/27/1999 53.45% 8/ 2/ 9 9/27/ 9
    FSCSX 1/ 3/2000 4/ 3/2000 13.43% 11/ 1/ 9 12/27/ 9
    FSESX 4/ 3/2000 7/ 3/2000 4.25% 1/31/ 0 3/27/ 0
    FBIOX 7/ 3/2000 10/ 2/2000 -7.74% 5/ 1/ 0 6/26/ 0
    FSNGX 10/ 2/2000 12/26/2000 10.59% 7/31/ 0 9/25/ 0
    FSVLX 1/ 2/2001 4/ 2/2001 -0.50% 10/30/ 0 12/26/ 0
    FFXSX 4/ 2/2001 7/ 2/2001 0.77% 1/29/ 1 3/26/ 1
    FSPCX 7/ 2/2001 10/ 8/2001 -5.13% 4/30/ 1 6/25/ 1
    VUSTX 10/ 8/2001 12/31/2001 -2.95% 7/30/ 1 10/ 1/ 1
    FSAIX 1/ 7/2002 4/ 8/2002 10.36% 11/ 5/ 1 12/31/ 1
    FSESX 4/ 8/2002 7/ 8/2002 -10.79% 2/ 4/ 2 4/ 1/ 2
    VUSTX 7/ 8/2002 10/ 7/2002 7.57% 5/ 6/ 2 7/ 1/ 2
    FSTCX 10/ 7/2002 12/30/2002 33.69% 8/ 5/ 2 9/30/ 2
    FSDPX 1/ 6/2003 4/ 7/2003 -8.35% 11/ 4/ 2 12/30/ 2
    FSELX 4/ 7/2003 7/ 7/2003 36.12% 2/ 3/ 3 3/31/ 3
    FWRLX 7/ 7/2003 10/ 6/2003 15.13% 5/ 5/ 3 6/30/ 3
    FSELX 10/ 6/2003 12/29/2003 7.16% 8/ 4/ 3 9/29/ 3
    FSHCX 1/ 5/2004 4/ 5/2004 9.83% 11/ 3/ 3 12/29/ 3
    FBIOX 4/ 5/2004 7/ 6/2004 -4.61% 2/ 2/ 4 3/29/ 4
    FSDPX 7/ 6/2004 10/ 4/2004 9.96% 5/ 3/ 4 6/28/ 4
    FSNGX 10/ 4/2004 12/27/2004 3.84% 8/ 2/ 4 9/27/ 4
    FSHCX 1/ 3/2005 4/ 4/2005 9.61% 11/ 1/ 4 12/27/ 4
    FSENX 4/ 4/2005 7/ 5/2005 10.60% 1/31/ 5 3/28/ 5
    FSLBX 7/ 5/2005 10/ 3/2005 5.41% 5/ 2/ 5 6/27/ 5
    FSNGX 10/ 3/2005 12/27/2005 4.42% 8/ 1/ 5 9/26/ 5
    FSDPX 1/ 3/2006 4/ 3/2006 10.84% 10/31/ 5 12/27/ 5
    FSAIX 4/ 3/2006 7/ 3/2006 -0.16% 1/30/ 6 3/27/ 6
    FSUTX 7/ 3/2006 10/ 2/2006 7.34% 5/ 1/ 6 6/26/ 6
    FSDCX 10/ 2/2006 12/26/2006 -0.15% 7/31/ 6 9/25/ 6
    FSHOX 1/ 3/2007 4/ 2/2007 3.07% 10/30/ 6 12/26/ 6
    FSUTX 4/ 2/2007 7/ 2/2007 0.20% 1/29/ 7 3/26/ 7
    FWRLX 7/ 2/2007 10/ 1/2007 12.00% 4/30/ 7 6/25/ 7
    FSESX 10/ 1/2007 12/31/2007 0.89% 7/30/ 7 9/24/ 7
    FSENX 1/ 7/2008 4/ 7/2008 4.38% 11/ 5/ 7 12/31/ 7
    FSESX 4/ 7/2008 7/ 7/2008 13.35% 2/ 4/ 8 3/31/ 8
    FBIOX 7/ 7/2008 10/ 6/2008 -22.22% 5/ 5/ 8 6/30/ 8
    TLT 10/ 6/2008 12/29/2008 22.57% 8/ 4/ 8 9/29/ 8
    TLT 1/ 5/2009 4/ 6/2009 -8.44% 11/ 3/ 8 12/29/ 8
    FSAVX 4/ 6/2009 7/ 6/2009 26.64% 2/ 2/ 9 3/30/ 9
    FSELX 7/ 6/2009 10/ 5/2009 28.32% 5/ 4/ 9 6/29/ 9
    TLT 10/ 5/2009 12/28/2009 -5.34% 8/ 3/ 9 9/28/ 9
    FSAIX 1/ 4/2010 4/ 5/2010 16.35% 11/ 2/ 9 12/28/ 9
    FSRFX 4/ 5/2010 7/ 6/2010 -6.42% 2/ 1/10 3/29/10
    TLT 7/ 6/2010 10/ 4/2010 6.09% 5/ 3/10 6/28/10
    FSRPX 10/ 4/2010 12/27/2010 10.87% 8/ 2/10 9/27/10
    FSESX 1/ 3/2011 4/ 4/2011 19.78% 11/ 1/10 12/27/10
    FSESX 4/ 4/2011 7/ 5/2011 -1.78% 1/31/11 3/28/11
    FDLSX 7/ 5/2011 10/ 3/2011 -14.38% 5/ 2/11 6/27/11
    TLT 10/ 3/2011 12/27/2011 3.40% 8/ 1/11 9/26/11
    FSHOX 1/ 3/2012 4/ 2/2012 14.11% 10/31/11 12/27/11
    FSRPX 4/ 2/2012 7/ 2/2012 -3.33% 1/30/12 3/26/12
    FBIOX 7/ 2/2012 10/ 1/2012 9.47% 4/30/12 6/25/12
    FSHOX 10/ 1/2012 12/31/2012 6.80% 7/30/12 9/24/12
    FSAVX 1/ 7/2013 4/ 8/2013 6.59% 11/ 5/12 12/31/12
    FBIOX 4/ 8/2013 7/ 8/2013 16.05% 2/ 4/13 4/ 1/13
    FSRBX 7/ 8/2013 10/ 7/2013 2.47% 5/ 6/13 7/ 1/13
    FBIOX 10/ 7/2013 10/21/2013 5.07% 8/ 5/13 9/30/13
    28 Oct 2013, 07:33 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » By the way the dates in the data above are the dates of the opening days of the weeks at the close of which transactions occurred.

     

    For example, for the second-to last entry:

     

    FSRBX 7/ 8/2013 10/ 7/2013 2.47% 5/ 6/13 7/ 1/13

     

    Buy date 7/12/2014 Sell Date 10/11/2013
    28 Oct 2013, 08:09 PM Reply Like
  • Elran
    , contributor
    Comments (63) | Send Message
     
    Varan , does it matter if you start this strategy in the first week of the year like you specified ? or it will have the same results for other starting point ?
    29 Oct 2013, 08:38 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » It matters. With other starting points you get good but not the same results.

     

    Starting week of the year and CAGR. are in the following table. Of course the number of weeks of the year during which you are invested also decreases if you change the starting week.

     

    1 26.6%
    2 11.0%
    3 20.2%
    4 13.3%
    5 19.7%
    6 10.6%
    7 10.9%
    8 16.0%
    9 9.2%
    10 17.9%
    11 16.4%
    12 18.4%
    29 Oct 2013, 09:30 AM Reply Like
  • Elran
    , contributor
    Comments (63) | Send Message
     
    why is that ? does it have a fundamental reason ? maybe this 26% is only by chance and not because of a clear sustainable edge.
    29 Oct 2013, 09:33 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » I would take the mean (16%) of these returns as the expected return which seems to be quite satisfactory.

     

    There is no fundamental reason that I can think of. Perhaps beginning of the year euphoria?
    29 Oct 2013, 09:38 AM Reply Like
  • Elran
    , contributor
    Comments (63) | Send Message
     
    yes 16% with 12% draw down is nice.
    29 Oct 2013, 09:50 AM Reply Like
  • marcausn1
    , contributor
    Comments (3) | Send Message
     
    varan can you recommend a broker for this strategie or does it make sense to invest directly at the fidelety people?
    Thanks
    Marc
    31 Oct 2013, 04:06 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Sorry I cannot recommend anything.

     

    I just use Fidelity directly though. It is quite easy.
    31 Oct 2013, 04:38 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » 36% YTD.

     

    FSAIX 1/11/2013 thru 4/12/2013 6.6%
    FBIOX 4/12/2013 thru 7/12/2013 16.05%
    FSRBX 7/12/2013 thru 10/11/2013 2.47%
    FBIOX 10/11/2013 to-date 7.59%

     

    Of course, you could have just bought FBIOX and made 62%, but even then pretty good.
    30 Nov 2013, 11:04 AM Reply Like
  • franktx1
    , contributor
    Comments (2) | Send Message
     
    Very nice work Varan. Would you mind posting an updated spreadsheet of returns with a link?
    15 Dec 2013, 09:49 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Thanks.

     

    I should be able to do it in a few days.
    15 Dec 2013, 10:02 PM Reply Like
  • franktx1
    , contributor
    Comments (2) | Send Message
     
    Varan, don't sweat it. I thought you might have it on hand.
    17 Dec 2013, 07:51 AM Reply Like
  • marcausn1
    , contributor
    Comments (3) | Send Message
     
    Hi
    Does anybody know the page sumgrowth.com?
    they offer a fidelety sector fund strategy with over 30% anual return an 15 % drawdown switching only 12 funds.
    But it seems that they sell a blackbox system (not telling, when to sell, they give only email alerts when to switch and dont tell the rules)
    But all in all not expensive.....
    Thanks Marc
    17 Dec 2013, 05:40 PM Reply Like
  • Elran
    , contributor
    Comments (63) | Send Message
     
    I think sumgrowth offers a nice service,I do not see any issue with keeping their trading secrets to themselves.
    Sumgrowth fidelity sector rotation is not exactly using "sectors" but all kind of funds like FSOPX (small cap opportunity) - If you are into sector rotation i would not follow this strategy but a more broader sector rotation strategy like their vanguard sectors or ETF sectors which offers a more realistic performance.
    I also run a sector rotation service : http://www.gosector.com
    It is free , so you can also give it a try.
    18 Dec 2013, 10:13 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » FBIOX has been quite volatile since its purchase on 10/11/2013, much more so than SPY. However, it has come back up again, and the total returns so far have been 7.23% , thus putting the YTD return for this strategy at 35.9%. Not bad. Of course every strategy except ones based on risk parity or other types of allocation has done quite well this year.
    21 Dec 2013, 03:42 PM Reply Like
  • SQM2
    , contributor
    Comments (3) | Send Message
     
    Hi Varan,
    I am very new to investing..but would like to try this method in my Fidelity 401K. There are 35 selects funds to choose from. I have had great success with them this year but I'm looking for a method to safeguard against a drawdown. Yours looks perfect.
    Please forgive my ignorance..but how will I find the performance for this specific amount of time. Do I need to find the NAV for a specific day..and then subtract the NAV 8 weeks later (for all 35 funds?).
    Sorry for such a basic question.
    29 Dec 2013, 03:37 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Thanks.

     

    I use the adjusted close data from Yahoo Finance. An example is here.

     

    http://yhoo.it/1fZ5lOR

     

    Of course you have to do it by means of a program as otherwise it is too cumbersome if not impossible.

     

    Good luck.

     

    For this strategy I will be posting the calls every thirteen weeks during the next year (obviously just to follow up, and not as any investment advice of any kind).
    31 Dec 2013, 04:14 PM Reply Like
  • SQM2
    , contributor
    Comments (3) | Send Message
     
    Thanks Varan. Will give this a try.
    SQM
    1 Jan 2014, 09:21 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » FBIOX continues to outperform the others, and is the ranked fund for investment for the thirteen week period starting today. (Apparently Yahoo Finance has not yet updated its historical closing prices to reflect the distributions at the end of 2013, and so this may be in error, but I am sticking with FBIOX.)

     

    This is not investment advice, of course.
    10 Jan 2014, 02:32 PM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    Wow, FBIOX was up 12.26% last week, and this was not even included in the measurement period.

     

    (ICPT explains the big move)
    11 Jan 2014, 09:39 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » For 2013, the strategy returned 38.5%.

     

    This is in ball park of the returns of the top four Fidelity Select Strategies mentioned on Marketwatch.com (actually it is better than the last of the four listed, but the differences are not very significant.)

     

    http://on.mktw.net/1kC...

     

    All the strategies mentioned there are for fee. At least for one, which I believe costs $99 per year, I am sure that its drawdown is much higher than this one.
    15 Jan 2014, 08:48 PM Reply Like
  • SQM2
    , contributor
    Comments (3) | Send Message
     
    Hi Varan,
    I am going to be moving a Roth to Fidelity within the next 3 weeks. I would like to try this rotation strategy with a portion of it..but obviously won't be able to start the first week of the year. Do you think this will completely throw things off?
    I guess I have to jump in somewhere.
    Thanks!
    Susan
    17 Jan 2014, 01:42 PM Reply Like
  • Mikegavone
    , contributor
    Comments (2) | Send Message
     
    Hi Varan - Is there any way to share the program you are using? Thanks - Mike
    17 Feb 2014, 06:52 PM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    FBIOX had a rough week- down over 8%.

     

    Down four weeks in a row. The draw down since Feb 18 is about 15%. Could be a big rally Monday because of quarter-end, but if not there may be selling from momentum investors next Tuesday using monthly or quarterly models.
    28 Mar 2014, 10:31 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » I agree. What a fall.
    29 Mar 2014, 12:40 AM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    Varan-
    Is next trade coming up Monday?
    11 Apr 2014, 06:18 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Yeah! This was a disaster. Comes with mechanical investing. All other strategies pointed to a blowup in early April as they indicated moving to TLT. Probably this one will too.

     

    I will post over the weekend.

     

    Thanks.
    11 Apr 2014, 06:26 PM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    Varan-

     

    One of the month-end models I run on Sector Surfer (sumgrowth) went bearish on FBIOX at the end of March. A lot of the Sector Surfer guys probably added to the selling the last two weeks.
    11 Apr 2014, 06:35 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » yes it was obvious.
    11 Apr 2014, 07:46 PM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    A lot of the Fidelity Select funds paid out distributions today - not in Yahoo Finance, making things difficult.
    11 Apr 2014, 08:58 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » The current selection calls for replacing FBIOX by FSNGX for the next 13 weeks.
    14 Apr 2014, 11:43 AM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    FSNGX has broken out of the gate with a great start- -already up around 5%. But will the momentum hold or will it fade in the stretch like FBIOX did last quarter?- time will tell

     

    (No need to gamble on horse races when you are a momentum investor- plenty of excitement watching your "horse" run :>) )
    22 Apr 2014, 11:34 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Thanks.

     

    Happily for me the SXL and NS I bought on the basis of the MLP strategy ( http://seekingalpha.co... ) are more than compensating for FBIOX.
    23 Apr 2014, 12:19 AM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    A monthly momentum model at Sector Surfer for Fidelity funds just gave a sell on FOCPX and a buy for FLBAX (long term bonds)

     

    We could see a strong day for bonds tomorrow especially if Good Harbor Financial decides to buy long term Treasuries
    30 Apr 2014, 11:40 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Thanks. Will take a look.
    1 May 2014, 12:00 AM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    Big volume today in IEF (long govt) of 21 million shares. Average volume is around 1 million.
    1 May 2014, 07:20 PM Reply Like
  • Scooter-Pop
    , contributor
    Comments (2967) | Send Message
     
    What is your deduction George?
    1 May 2014, 09:44 PM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    UST (leveraged Treasuries) traded 12 million shares versus the normal 2 million.

     

    I think Good Harbor Financial was the main buyer. Let's see if there is follow through tomorrow. German 10 year Bund only 1.47%
    1 May 2014, 11:03 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » For 7/11/2014, FBIOX comes back up again.

     

    So far this year, the performance has not been good.

     

    FBIOX 1/6/2014 4/7/2014 -15.49% 11/ 4/13 12/30/13
    FSNGX 4/ 7/2014 7/ 7/2014 12.53% 2/ 3/14 3/31/14

     

    CAGR -4.9%
    10 Jul 2014, 10:55 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » A Bit of a recovery in Q3.

     

    A bit of a redemption in Q3. (Note that the dates are the first trading day of the week in which the exchange occurs, if needed.)

     

    FBIOX 7/7/2014 9/29/2014 11.56%

     

    YTD CAGR 4.1%

     

    Selection for Friday 10/10 is still FBIOX, and so no transaction is needed.
    5 Oct 2014, 06:51 PM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    Wow, FBIOX is up another 11% just since October 10.
    25 Oct 2014, 10:27 PM Reply Like
  • YxB
    , contributor
    Comments (2) | Send Message
     
    Hi Varan,

     

    Happy new year, Any updates on this strategy?
    5 Jan, 12:00 AM Reply Like
  • parens
    , contributor
    Comments (8) | Send Message
     
    Happy New Year to one and all!

     

    I did some number crunching over the weekend and this is what I calculated in regards to the top 3 performing Fidelity Select Funds over the 8 week period ending January 2, 2015:

     

    1. Fidelity Select Electronics 9.66%
    2. Fidelity Select Biotech 8.49%
    3. Fidelity Select Retail 7.63%

     

    My calculations included any dividend distributions over this time period.

     

    (Fidelity Select Biotech had a large dividend distribution of $23.84 in the month of December. )

     

    Any one showing anything different?
    5 Jan, 09:47 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » I am waiting for Yahoo to update its numbers with the distributions, and will post the selections for the 13 weeks starting 2015/1/9 some time before Friday. Most probably it is going to be FSAIX.

     

    Including the distribution for FBIOX, the strategy returned 18% for the year 2015. Not bad.

     

    Thanks to all of you for your interest.
    5 Jan, 10:48 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » sorry for the typo. the strategy 18% for the year 2014.
    5 Jan, 06:27 PM Reply Like
  • tmdoherty
    , contributor
    Comments (599) | Send Message
     
    Impressive returns, Varan.

     

    This is a very intriguing and pragmatic strategy. I understand why you focused on Fidelity, and I think what you've done is a real service to those stuck in accounts where their only option is Fidelity MFs.

     

    TMD
    5 Jan, 11:21 PM Reply Like
  • parens
    , contributor
    Comments (8) | Send Message
     
    Happy New Year Varan,

     

    Thanks for all of the work that you do and the support that you provide!
    5 Jan, 01:09 PM Reply Like
  • QuantHead
    , contributor
    Comments (4) | Send Message
     
    For those with access to the ThinkOrSwim platform, I created a TOS study to help with the rotations. The only difference to Varan's study should be that the prices used are close prices rather than adjusted close prices (dividends and interest are not taken into account).

     

    http://bit.ly/1rYS8jm
    5 Jan, 05:13 PM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    FBIOX seems to be making a last minute run and may remain on top of the heap.

     

    http://yhoo.it/1xSCNjV;_ylc=X3oDMTNkZ3E3azRw...
    7 Jan, 04:28 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » According to my calculation that takes the 12/2014 distributions into account, the selection for the thirteen weeks period starting tomorrow, 1/9/2015, is FSELX. FBIOX is a close second.

     

    The transaction dates for 2015 are 1/9, 4/10, 7/10, and 10/9.

     

    I will be posting the updates prior to those dates.
    8 Jan, 11:31 PM Reply Like
  • YxB
    , contributor
    Comments (2) | Send Message
     
    Thank you Varan for all the time and help that you put on.. I'm keeping FBIOX for the period.
    12 Jan, 12:29 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Of course, you have to use your own judgment.

     

    Yahoo has now updated the historical data, and the current selection according to the updated data conforms to my calculation as FSELX starting 1/9/2015.

     

    The final return tally for 2014 was 18.27% if FBIOX was held till 1/2/2014, and 21.9% if held till the first transaction date for the year, 1/9/2015. This together with the 38% return for 2013 (both out of sample years) has been quite satisfactory.
    12 Jan, 02:51 PM Reply Like
  • User 9899211
    , contributor
    Comment (1) | Send Message
     
    Very nice...can you post the top 5...for those of us interested in some options? Thanks for all your work.
    11 Mar, 07:51 PM Reply Like
  • parens
    , contributor
    Comments (8) | Send Message
     
    This is what I calculate to be the top performing Fidelity Select Sector Funds for the 8 week period ending March 31, 2015:

     

    1. Fidelity Select Biotech-FBIOX +11.18% return
    2. Fidelity Select Health-FSPHX +8.98% return
    3. Fidelity Select Medical Delivery-FSHCX +8.66% return
    4. Fidelity Select Pharmacy-FPHAX +7.93% return
    5. Fidelity Select Medical Equip. & Systems-FSMEX +7.47%

     

    Well looks like we have a common theme in all the top performing Fidelity Sector funds the past 8 weeks. The health care field was the place to be for the top returns.

     

    If anyone is calculating anything different, please post and let me know. Thanks!
    1 Apr, 02:37 PM Reply Like
  • swissguyinla
    , contributor
    Comments (2) | Send Message
     
    This is what I get for the period: 02/06 to 04/02

     

    Stock: FSMEX return: 6.59%
    Stock: FSHCX return: 7.16%
    Stock: FPHAX return: 7.59%
    Stock: FSPHX return: 7.63%
    Stock: FBIOX return: 11.11%
    6 Apr, 12:05 PM Reply Like
  • George Spritzer, CFA
    , contributor
    Comments (972) | Send Message
     
    Aren't you guys a little early? I thought the next trade is April 10.
    6 Apr, 12:29 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » The next trade is indeed on 4/10. However, the evaluation period ends on 4/3, and that suggests investment in FBIOX.

     

    FSELX has returned 2.87% since 1/9/15. Better than DIA (1.31%) and SPY (2.21%) but lagging QQQ (3.27%) and, of course, FBIOX (10.5%), which has proved to be one the best investments since 2003.
    7 Apr, 12:41 AM Reply Like
  • kgw247
    , contributor
    Comments (9) | Send Message
     
    Trying to make sure I understand the trading. Should FSELX be sold at the 4/10 closing price and FBIOX bought at the 4/10 closing price. Thanks in advance for your help.
    9 Apr, 12:29 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Well, 'should' is a strong word, but if one follows the strategy of this post, the next trade is to sell FSELX and buy FBIOX with the proceeds at the close of business on 4/10/2015.
    9 Apr, 12:56 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » FSELX if bought on 1/9/2015 and sold on 4/10/2015 returned 5% (including the distribution on 4/10/2015). The system is currently invested in FBIOX as of market close on 4/10/2015.

     

    Out of sample results( for my own records):

     

    2013 38%
    2014 18%
    2015 5% YTD
    11 Apr, 09:33 PM Reply Like
  • zhuanxinding
    , contributor
    Comment (1) | Send Message
     
    Hi Varan,

     

    I looked at your performance table and get confused. For the fourth period, you hold from 10/11/1991 to 1/3/1992 which is only 12 weeks. I thought you said the strategy holds for 13 weeks.
    1 May, 05:49 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » I sell on last trading day of the last week of the year.
    1 May, 06:14 PM Reply Like
  • bazooooka
    , contributor
    Comments (3606) | Send Message
     
    Varan,

     

    How would this strategy's metrics compare to just having held FBIOX for the past 20 years?
    19 Jun, 03:05 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » I have been thinking about that too. Certainly in the last few years it would have been best to just buy FBIOX (or even BIB) and go to sleep. In any case:

     

    The strategy (FBIOX buy and hold)
    1995-todate 18600% (2037%)
    No. of annual looses 2 (3)
    Max annual loss 4.7% (40%)

     

    YTD the strategy has returned 10.9%, and FBIOX the whopping 26%.

     

    The main problem with FBIOX was the two years of consecutive losses (24.9% in 2001, and 40.5% in 2002). The strategy lost 4.7% in 1998, and 2.1% in 2001, the only two annual losses.

     

    I would take the astounding returns of the strategy with a grain of salt, as the back tests are always very optimistic, but even if the backtests over estimate the returns by 100%, it seems to be worthwhile to try it out.
    19 Jun, 09:25 AM Reply Like
  • tmdoherty
    , contributor
    Comments (599) | Send Message
     
    Performance of FBIOX from the beginning of 1995 until today:

     

    CAGR: 16.4%
    Max DD: -72%
    Calmar Ratio: 0.23
    Average of Calendar Year Returns: 17.3% (range, -40.5% to +77.8%)
    Number of Losing Calendar Years: 3 (2001, 2002, and 2008)

     

    ROLLING 12-MONTH RETURNS:
    Mean: 18.6%
    Median: 14.0%
    SD: 31.3%
    Max: 182.1%
    Min: -53.5%
    N: 4901

     

    95% Confidence Interval Limits:
    -44.1% to + 81.2%

     

    NOTE: 25% of all 12-month rolling periods had negative returns.

     

    So, very strong performance in terms of annual returns, but very high volatility and horrendous drawdowns, and one fourth of the time, the trailing 12 month returns are negative. There were times when the trailing returns and drawdowns stayed negative for years.

     

    In fact, from 3/6/2000 until 9/6/12---a total of 12 1/2 years----the fund was trading at a loss. If you had invested prior to March 2000, you would have had to wait a very long time to break even in just nominal terms, and during that time you would have seen 72% of your capital evaporate (on paper that is).

     

    Most of the reason for the high CAGR and annual returns is because over the 4 years since 2011, the fund has continuously posted double-digit returns for the trailing 12 month period. If you look at the CAGR prior to that, it was significantly less impressive----only about 10.9%, which was better than SPY (8.7%), but not dramatically so.

     

    Not many could withstand those sorts of drawdowns.

     

    TMD
    19 Jun, 08:51 PM Reply Like
  • parens
    , contributor
    Comments (8) | Send Message
     
    I am not certain what Varan's strategy would have returned, but the total return of FBIOX from 5-31-1995 to 5-29-2015 was 1651.89% or an annual return of 15.39% (includes distributions for short-term and long-term capital gains).
    19 Jun, 09:50 AM Reply Like
  • parens
    , contributor
    Comments (8) | Send Message
     
    It is hard to argue with Varan's strategy over the long term.
    Looking at the fluctuations in the stock market over the last 20 years, the maximum annual loss of the strategy is 4.7%...that is just amazing to me. Any sector fund can be hot for several years but for outstanding returns year in and year out for an extended period of time, Varan's strategy just stands out.
    19 Jun, 09:50 AM Reply Like
  • tmdoherty
    , contributor
    Comments (599) | Send Message
     
    @parens,

     

    There are a lot of versions of the Fidelity Sector Rotation strategy. The problem with all of them is that some of the sector funds are very volatile, and tend to get selected a lot partly just because of their volatility. But volatility is a double-edged sword. So while returns are very good, risk is high.

     

    This is something that CAGR or yearly returns doesn't give much insight into. Is it worth it to try to achieve high returns at the expense of severe, multi-year drawdowns?

     

    I don't know what the drawdowns have been for this version of the Fidelity Sector Rotation strategy. That would be interesting to see, and also I would like to see what proportion of the time 12-month rolling returns were negative, and how long drawdowns have lasted. A single maximum drawdown statistic of itself give you limited insight, since it is just a freeze-frame view of a dynamic process. It's one thing to experience sharp DD that is made up in 7 or 8 months. It is quite another to experience a sharp DD like 50% or more that takes 5 or 6 years to get back to where it was.

     

    If the general markets are doing well during that period of time, I think most would abandon the strategy and conclude that it is broken, or that the volatility just isn't worth it, or that they could do better just buying index funds or trading more conventional strategies that involve baskets of index funds that are held long-term.

     

    I am not at all saying this strategy is not worth it, but I do think that it would behoove anybody considering deploying the strategy to do a deep dive into the performance over time, then honestly ask themselves if they really could have hung with the strategy through the bad times in the past, which will certainly recur. CAGR always catches eyeballs, but in fact it is a very limited metric that is quite dependent on start/stop dates, and gives no insight at all into risk.

     

    TMD
    29 Jun, 02:21 AM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » The maximum quarterly drawdown of the strategy for 1991-2015 is 23%, and it is computed thus: (a) compute the equity curve: at the end of each 13 week period compute the total return starting from the first period, to get an array c (a) at the end of every 13 week period compute maximum of the equity curve (maximum of the arary c) upto that time, and call the resulting array, say, cm (c) compute the maximum of the difference between cm and c as a percentage of cm.

     

    Of course the daily or monthly drawdown may be higher.

     

    Other quantities of interest: fraction of buys that led to losses: 27.45% (28/102), number of sequences of two consecutive quarterly losses: 3, number of sequences of three consecutive quarterly losses: 1.

     

    Mean losses for the 28 quarters that led to negative return: 8.06%

     

    Mean gain for the 74 quarters that led to positive return: 12.09%

     

    The strategy is truly open source and it can be used for any purposes by any one (with the usual caveat that this is not financial advice of any type whatsoever to anyone). I would be glad if one or more persons did a more thorough study to calculate the various metrics for the historical returns.

     

    Thanks.
    29 Jun, 02:57 AM Reply Like
  • tmdoherty
    , contributor
    Comments (599) | Send Message
     
    Thanks much. Yes, the daily Max DD will definitely be greater than the quarterly Max DD, and I think this is an important metric.

     

    I have looked at a number of similar sorts of strategies, and this one seems to be considerably better than most or all of them. So I am planning to delve into this strategy in considerably more detail at some point, and I have also asked another very skilled person to independently assess the strategy using methods that are distinct from what I do.

     

    I think if this leads to a consensus, then this is very powerful support for the validity of the strategy, and will markedly increase the degree of confidence one might place in it. That's my objective at least, but we'll have to see what the data show.

     

    QUESTIONS:

     

    1) Why not just simplify the procedure to assess 8 week momentum at the close of the last day of each quarter? Does that make any significant difference in performance?

     

    2) Why do you initiate a position at the close of the first full week of the year? Why not the first trading day, since this would be the beginning of the quarter?

     

    3) Why is the ranking done as of the end of the week prior to the initiation of the position? Why not do the ranking at the same time, or at the close of the previous day, as is usual?

     

    Thanks,

     

    TMD
    29 Jun, 02:18 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Most of the choices are essentially arbitrary, even though at the time of the development I had reasons for them that sounded quite compelling. However the skipping of the prior week was inspired by early academic papers on momentum wherein the immediately prior month was not considered for relative rankings.

     

    Yahoo weekly data that can easily be downloaded contains prices adjusted for dividends and distribution s only for the weekly close data. So logistically it is much easier to assume that the transaction is made at close on Friday. Clearly doing the calculation for transactions made on other days is not that onerous but why bother? Lastly, mixing week based and month or quarter based calculations leads to ugly code and does not appear to me to be necessary in light of the added complexity.

     

    I generally try to do only as much computation as absolutely essential for this kind of work. For systems such as this, the added benefits of refining as much as possible are nonexistent to minimal.
    29 Jun, 02:55 PM Reply Like
  • tmdoherty
    , contributor
    Comments (599) | Send Message
     
    @varan,

     

    Thanks very much, that helps.

     

    TMD
    30 Jun, 04:17 PM Reply Like
  • parens
    , contributor
    Comments (8) | Send Message
     
    @tmdoherty

     

    I do purchase the highest rated Fidelity Select sector fund on the first day of each new quarter based upon the 8 week return ending on the last day of each prior quarter. I agree with you that it is simpler to just invest on the first day of each quarter. I have created an excel spreadsheet which downloads pricing data from Bloomberg for each Fidelity select sector fund which makes ranking each fund quite simple and easy to do. I will post the top rated Fidelity select sector funds for the period ending June 30, 2015 tomorrow.
    30 Jun, 11:32 AM Reply Like
  • tmdoherty
    , contributor
    Comments (599) | Send Message
     
    @parens,

     

    Thanks very much. I would be very interested to see your performance results vs. those using the parameters varan uses in his version of this strategy.

     

    TMD
    30 Jun, 04:15 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Come on. This is not MY VERSION of THIS strategy. It is the strategy that I devised.

     

    It is different from all the select fund strategies that I know in using treasury funds as well.

     

    Open source does not mean that you do not give me credit for it on my own blog:)
    30 Jun, 04:29 PM Reply Like
  • tmdoherty
    , contributor
    Comments (599) | Send Message
     
    Fair enough. You are correct, the strategy described here is yours. I apologize.

     

    TMD
    30 Jun, 11:43 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » TMD No need for apology.

     

    This one has been the most profitable this year, almost 10% YTD.
    1 Jul, 10:37 AM Reply Like
  • spielerman
    , contributor
    Comments (244) | Send Message
     
    what was the selection for July?
    6 Jul, 01:23 PM Reply Like
  • swissguyinla
    , contributor
    Comments (2) | Send Message
     
    Ending July 2 I have:

     

    Stock: FBIOX return: 7.35%
    Stock: FSHCX return: 6.14%
    Stock: FSRBX return: 4.68%
    Stock: FBMPX return: 4.67%
    Stock: FSPCX return: 2.43%

     

    Looks like we need to stay put with FBIOX for the next 13 weeks
    6 Jul, 02:07 PM Reply Like
  • varan
    , contributor
    Comments (4468) | Send Message
     
    Author’s reply » Yes.

     

    For exchange at close on 7/10/2015, the selection is FBIOX.

     

    YTD Return 10.7%. Not bad, but of course FBIOX has returned 26% YTD.
    7 Jul, 10:01 AM Reply Like
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