Bulletproof Investing Performance: Week 15

Summary

• One out of three of the hedged portfolios I presented in Week 15 outperformed its expected return.
• The top 10 names I presented outperformed SPY, 12.7% for the top names versus 11.59% for SPY.
• This was the 11th week out of 14 that Portfolio Armor's top ten names outperformed SPY. On average they have outperformed by 5.91% over 6 months.

Safety First: NASCAR driver Johanna Long and her helmet (Credit: Gearheads)

Bulletproof Investing: Week Fourteen Performance

Each week since the beginning of June, I have presented at least two hedged portfolios created by Portfolio Armor to my Bulletproof Investing subscribers. This is an "investing with a helmet on" approach, and these portfolios are designed to last six months at most. I have promised to publicly share the final performance of each of these portfolios. Here, I update the final performance of the two hedged portfolios and the top 10 names I presented in the 15th week I offered my service.

Bulletproof Investing Background

In the beginning, when I offered my service, I presented the $1 million portfolio with the highest ratio of possible upside to possible downside over the next 6 months, and the $100,000 portfolio with the highest ratio of possible upside to downside. In many cases, the portfolios that scored best according to that ratio were hedged against smaller than 9% declines. Some of those tightly hedged portfolios have often underperformed their expected returns, so recently I've shifted to presenting portfolios hedged against larger declines, though during the recent correction some of the tightly-hedged portfolios have outperformed.

One thing I've kept doing since the second week is presenting my system's top names each week, and also a portfolio that comprises them, hedged against a >9% decline over 6 months. Let's look at what I presented in week 15 and how it did.

Portfolio 1

This was the $100,000 portfolio initially presented here. The data below was as of September 7th. The primary securities here were Alibaba (BABA), PayPal (PYPL), Royal Gold (RGLD), and Take-Two Interactive (TTWO). They were selected because they had the highest potential return estimates, net of hedging costs at the time when hedging against a >10% decline, and they had share prices low enough that you could buy a round lot of one of them for less than $25,000. Micron (MU) was added in a fine-tuning step to absorb leftover cash from rounding down to round lots of the first four names.

The worst case scenario for this portfolio was a decline of 9.38% (the "Max Drawdown"), and the best case scenario was a gain of 20.13% (the "Net Potential Return", or aggregate potential return net of hedging cost). The "Expected Return" of 6.9% was a ballpark estimate taking into account that actual returns, historically, have averaged 0.3x Portfolio Armor's potential return estimates.

Portfolio 1 Performance

Here's how the portfolio performed, net of hedging and trading costs, and assuming the hedges were opened at the worst ends of their respective spreads.

This portfolio returned 5.05%, which underperformed its expected return of 6.9%.

Portfolio 2

This was the $1,000,000 portfolio presented here initially. This portfolio had FMC (FMC), IAC/InterActive (IAC), Intuitive Surgical (ISRG), PayPal (PYPL), Royal Gold (RGLD), Ryanair (RYAAY), and Sanderson Farms (SAFM) as primary securities, and Micron Technology (MU) to absorb cash leftover from the process of rounding down to round lots of the primary securities.

The worst case scenario for this one was a decline of 7.54%; the best case scenario was a gain of 21.41%; and the ballpark estimate of an expected return was 6.92%.

Portfolio 2 Performance

Here's how the portfolio performed net of hedging and trading costs, and assuming the hedges were opened at the worst ends of their respective spreads.

This portfolio underperformed its expected return of 6.92% with an actual return of 5.01%.

Portfolio 3

This was the top names portfolio, hedged against a >9% decline, originally presented here, along with the list of top names.

The worst case scenario here was a Max Drawdown of 8.36%, the best case scenario, a gain of 19.41%, and the Expected Return was 6.33%.

Portfolio 3 Performance

The actual performance of this portfolio, 9.54%, outperformed its expected return of 6.33%

Interactive Versions Of The Charts Above

You can see interactive versions of the portfolios above, including price data for each position on every trading day, at the bottom of this page: Performance - Tracking Portfolios. From now on, I'll post interactive versions of each portfolio presented in Bulletproof Investing there after the portfolios end.

Top Names

These were Portfolio Armor's top 10 names as of September 7th: Alibaba (BABA), Take-Two Interactive (TTWO), 51job (JOBS) Align Technology (ALGN), Nvidia (NVDA), PayPay (PYPL), Sanderson Farms (SAFM), Royal Gold (RGLD), CoreSite Realty (COR), and FMC (FMC).

Top Names Performance

The top names were up 12.7%, on average, versus 11.59% for SPY. This is the 11th cohort out of 14 that has outperformed SPY over the next 6 months.

Starting Date	Portfolio Armor 6-Month Performance	SPY 6-Month Performance
June 8th	8.78%	9.99%
June 16th	19.75%	10.94%
June 22nd	24.46%	11.27%
June 29th	18.24%	11.68%
July 7th	19.47%	14.07%
July 13th	28.25%	14.85%
July 20th	25%	14.62%
July 27th	33.52%	17.1%
August 3rd	20.72%	12.66%
August 10th	13.07%	8.56%
August 17th	10.71%	13.48%
August 24th	15.23%	13.73%
August 31st	8.42%	10.87%
September 7th	12.7%	11.59%
Average	18.45%	12.54%

Click to enlarge

So Portfolio Armor's top ten names averaged 18.45% over the average of these fourteen 6-month periods, versus SPY's average of 12.54%, an average outperformance of 5.91% over 6 months.

Week 15 Assessment

This was an improvement on week 14, in which 0 of 2 portfolios outperformed their expected returns and the top names underperformed SPY. This time, 1 out of 3 portfolios outperformed its expected return, and Portfolio Armor's top names (unhedged) outperformed SPY over the 6-month period, for the 11th time out of 14.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.