Top Core Stocks Analyzed Using QPP Plus Delta Factor Projections

Includes: VTI
by: Lowell Herr

Seeking top core stocks from investors who participate in the Growth Forum, the following analysis shows portfolio projections, the correlations within the portfolio, and the "Delta Stock" projections.

QPP Analysis: Nearly equal percentages are assigned to each stock. The analysis spans five years and the S&P 500 is projected to grow 7.0% per year over the next few years. Readers familiar with this type of analysis see the 9.6% projected return, but one pays for that relatively high return with a rather high 17.4% projected standard deviation. Even though we hold lots of stocks, the Diversification Metric falls short of our intended goal of 40%. As William Bernstein points out, it now requires approximately 100 stocks to build a diversified portfolio due to the high correlations with each other.

This portfolio outperformed the S&P 500 by more than double over the last five years and accomplished this feat with lower volatility -- not by much, but the risk was a tad lower. That is an excellent record.

Correlation Matrix: Now we want to witness how these stocks are correlated when placed in a portfolio. Stocks and the ETF VTI are highly correlated when the background is yellow. A white background indicates a modest correlation, and low correlated stocks have a blue background. Of course, it is better to have an 81% rating rather than a 97% ranking even though both fall into the high correlation classification. Take a moment to look over the correlations. I did not include how each stock is correlated with each other as the screenshot is too wide to fit on the page.

Delta Factor Projections: And now we come to the Delta Factor projections. Based on the above allocations, which stocks are projected to do well over the next six to12 months and which carry a higher risk? I've found the best opportunities are when the Delta Factor indicates a Buy and the background color in the Delta column is green. No investment is showing both signals -- not surprising with this high market. However, there are a number of stocks that show promise over the next few months, something hard to find within ETFs.

(There is one error in the last investment. That should be SO, not AGG.)

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