Momentum Portfolio Year-One Review - It Gained 145.19% Vs. S&P 500's 12.73% Return

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Includes: AEHR, AKS, ANIX, ARWR, BSTI, CRC, DRYS, DUST, DWT, EKSO, EMES, ENDP, FTK, GBTC, GNC, GROW, HCLP, HIMX, HMNY, JDST, JNUG, LABU, MBI, NADLQ, NETE, NVAX, NVTA, NXTD, SLCA, SRAX, SVXY, SWN, UVXY, X
by: jsIRA

Summary

Our Momentum Portfolio was launched on April 11, 2017, and it gained 145.19% in year one vs. the S&P 500's 12.73% return.

Review of the Momentum Portfolio’s month-by-month performance.

Our target and the investment strategy are discussed.

Our Momentum Portfolio Gained 145.19% in Year-One vs. the S&P 500's 12.73% Return

Our Momentum Play marketplace service manages two Portfolios - Momentum Portfolio and Core Portfolio.

Core Portfolio

Our Core Portfolio uses both buy-and-hold and swing-trade strategies to grow our investment money.

We set $300,000 as the seed money to start with. Our goal is to achieve an average of 40% annualized return and try to grow the money to the one-million-dollar mark in four years. That is $300K -> $1.00 million in 4 years.

The portfolio gained 56.20% in 2016 and up another 55.98% in 2017, and the money has grown from $341K to $832K by the end of 2017. The portfolio grew further to $870K by the end of last month.

We hope to grow it to the one-million-dollar mark by the end of this year. That means we need to gain an additional $130K for the portfolio in the next seven months to achieve our goal. Click here and here to see the detailed results and discussions of our investment strategy. A half-year portfolio update will be given by the end of this month.

Momentum Portfolio

Our Momentum Portfolio was originally named as "Short-Term Play" in our official website, and we have run the service for over 10 years before transferring it to the Seeking Alpha platform in 2017.

The Momentum Portfolio is for active investors who have time to trade during the market hours. Short-term trades will be used for this portfolio. A detailed trading strategy will be discussed in a later session.

The Momentum Portfolio was launched on April 11, 2017, with $30,000 seed money. Our goal is to achieve an average of 150% annualized return and try to grow the money to the one-million-dollar mark in less than four years. That is $30K -> $1.00 million in less than 4 years.

By the end of April 10, 2018, the portfolio grew to $73,558.32, a gain of 145.19% vs. S&P 500's 12.71% return during the same period, which is a little shy of our target.

The portfolio started well, up 23.38% and 9.77% in April and May last year respectively. But suffered big losses in the next two months, down 11.08% in June and fell an additional 7.45% in July last year.

After we revised our risk-control strategy, the portfolio performance made a big improvement and started its real run. From August 2017 to January 2018, it made a run from $33,436.65 to $72,395.37, more than double in six months. If we had kept up the momentum, the portfolio could have given us more than 400% return in 12 months.

But we could not keep up the momentum, and the portfolio was flat in the next three months.

The chart below shows the portfolio's month-by-month performance. A detailed month-by-month review will be given in the following session.

Source of Chart and Table: Own Data

Please be noted that all the source of the charts below, if otherwise indicated, are all from StockCharts.com

Review of the Momentum Portfolio's Month-by-Month Performance

2017

April +23.38%. Net trading gain: +44.62%.

Our Momentum Play had a very good start. The Momentum Portfolio was up 23.38% in three weeks.

The big returns are from the gains traded on our two energy stocks and two gold miner 3x bear ETFs.

  • North Atlantic Drilling Ltd. (OTCPK:NADLQ) +20.79%;
  • Fairmount Santrol (FMSA) +8.79%;
  • Direxion Daily Junior Gold Miners Index Bear 3x Shares ETF (JDST) +7.63%; and
  • Direxion Daily Gold Miners Index Bear 3x Shares ETF (DUST) +3.60%.

NADL - It is now traded in the pink sheet market. We made a short-term trade back in April 2017. See its daily chart back then:

FMSA* - It is the best performing stock in the frac sand stock group since it bottomed last August. It more than doubled from its year low while others in this group gained much less. We have traded this stock quite a few times even before it bottomed, and we never lost money.

*FMSA merged with Covia Holdings Corporation (NYSE:CVIA) last Friday.

We also gained on our gold miner 3x bear ETF trades as I turned bearish on gold's near-term direction on April 20, 2017. Click here to read the details as to why I made the switch.

May +9.77%. Net trading gain: +22.85%

The portfolio made another run in the month of May, up 9.77%.

  • Direxion Daily Junior Gold Miners Index Bull 3x Shares ETF (JNUG) +16.18%; and
  • Novavax, Inc. (NVAX) +6.92%.

The play of the month has to belong to our trade on JNUG, a 3x bull junior gold miner ETF. We captured JNUG's big run and made a good return when I switched my view on gold's near-term direction again on May 10.

June -11.08%. Net trading loss: -25.41%

  • California Resources Corporation (CRC) -13.43%; and
  • Emerge Energy Services LP (EMES) -9.15%.

The Momentum Portfolio suffered big setbacks in the next two months after our initial success, as we bet too early on energy stocks' possible rebounds.

The energy sector ETF (XLE) topped on December 2016 and is in decline since then. Energy stocks continued their drops until they all bottomed in the middle of last August.

We had a net loss of 13.43% on our CRC be; bought it at $10.32 and sold it at $9.31, then bought it back at $9.38 and had to sell it at $8.71 later.

We also suffered a trading loss on EMES, another stock in the frac sand group.

July -7.45%. Net trading loss: -18.06%

  • CRC -7.60%;
  • Hi-Crush Partners LP (HCLP) -11.40%;
  • NVAX -16.14%; and
  • FMSA +14.04%.

Our bet on energy stocks gave us a mixed result in the month of July.

While we suffered another trading loss on CRC, in at $8.25 and exited at $7.27, and was down -11.40% on HCLP, another stock in the frac sand group, we made a good return on the FMSA trades, up 14.04%.

FMSA - We were lucky on our FMSA trades no matter the stock was in the downtrend or in the uptrend. We managed to gain further trading on FMSA this month.

CRC eventually bottomed at $6.47 in last August and started its incredible run. It closed at $36.61 last Friday. See its one-year weekly chart below:

The play of the month belongs to our NVAX trade as we turned a big win into a big loss.

We bought NVAX at $1.48 two days before its earnings release. It did have a pre-earnings-release run to up to $1.75, or up 18.20% from our buy price. But we were too greedy and thought it could move to $2.00 area after its earnings release. Instead, the stock crashed after its earnings release. We eventually sold it at $1.15, down 22.44% on this trade, a 40% one-day swing.

See NVAX's pre-earnings run and after-earnings crash below:

We learned the lesions and modified our risk control strategy:

  • Never hold any pick over its earnings release as it is hard for us to predict how the market reacts to a stock's earnings. Our Momentum Portfolio is not a diversified one, and we need big efforts to recover from a possible single big loss.
  • If we have a profit of more than 3% on any trade, we should not let it turn into a loss.

August +18.54%. Net trading gain: +36.27%.

The modified risk control strategy gives us an immediate improvement on the portfolio's performance in the following six months.

There was no trading loss of over 2% in our August trading. The maximum loss was 1.99%.

The big gainers for the month were

  • ProShares Short VIX Short-Term Futures ETF (SVXY) +8.63%;
  • VelocityShares 3x Inverse Crude Oil ETN (DWT) +5.59%;
  • FMSA +5.46%; and
  • EMES +4.15%.

SVXY - This ETF has been following the market's moves most of the time. Its recent big run has to be from February 2016 to February 2018. During the two-year period, the S&P 500 index moved from a 1,829 low to a 2,872 high, a gain of 57.02%. SVXY soared over 1,000% from $15 to $139, and we only captured a very small portion of its run.

We were also very lucky that we did not play it on Feb. 6, 2018, when the market made a big one-day rebound from its crash mode, but this ETF did not follow at all. The S&P 500 index was up 1.77% that day, but SVXY crashed 82.95% overnight. This shows another risk to hold any stock/ETF overnight.

See its daily chart below:

FMSA - Made another good return on our FMSA trade; three winning trading months in a row.

September +3.03%; Net trading gain: +6.80%.

  • Arrowhead Pharmaceuticals (ARWR) +9.62%;
  • AK Steel Holding Corp. (AKS) +7.25%;
  • ITUS Corp. (ITUS) +5.28%; and
  • United States Steel Corporation (X) -8.08%.

ARWR - in the biotech sector - a big winner since it bottomed last July. The stock made a huge run from a $1.50 low in last July to last Friday's $10.91. Once again, we only captured a very small part of its huge run.

October +23.24%. Net trading gain: +43.06%

  • Social Reality, Inc. (SRAX) +14.74%;
  • Helios and Matheson Analytics, Inc. (HMNY) +13.96%;
  • FMSA +9.77%;
  • EMES +6.33%;
  • Endo International plc (ENDP) +5.12%;
  • Aehr Test Systems (AEHR) +6.06%; and
  • MBIA Inc. (MBI) -8.42%.

This is the second best performing month for this portfolio during our one-year run.

SRAX - A small-cap stock in social media advertisement sector and was one of our momentum picks for our Core Portfolio. We bought it at $2.11 in last September for our Core Portfolio and made few short-term trades in October for our Momentum Portfolio with a 14.74% net return, not impressive but still made a good contribution for our Momentum Portfolio gains.

MBI is in the insurance business, and we have played this stock many times over the years and always made good returns, but not this time.

We bought it at $7.22 for a possible breakout run. But instead it broke down and we have to exit our position and take our loss.

The market makers tried very hard to push the stock down further to try to shake all weak hands out before buying the stock up and making a 50%+ run later. This is a typical example to show how difficult it is for small investors to make money in the stock market.

FMSA - The winning streak has extended to four.

EMES - After one losing bet, we started our winning streak on our EMES trades.

November +16.62%. Net trading gain: +29.61%

The run continued for our Momentum Portfolio, up another 16.42% in a month.

  • Ekso Bionics Holding (EKSO)+16.04%;
  • FMSA +7.44%;
  • HMNY +5.80%;
  • ENDP +4.93%;
  • Best, Inc. (BSTI) +4.38%; and
  • SRAX -11.03%.

We made additional gains trading on FMSA, HMNY, and ENDP. But the biggest winner among our picks has been EKSO.

EKSO, another small-cap stock in industrial machinery sector and was a big winner for our Core Portfolio.

Source of the Chart: Ameritrade.com

We first noticed this stock after reading the company's 8-K filing on Sept. 7, which showed that Ted Wang, an ex-Goldman Sachs partner, invested $20.50 million at $1.00/share into the company and named its BoD. We followed and bought it one month later at $1.16 for our Core Portfolio. The stock finally made its run in November after the company released its Q3 earnings. We played it for our Momentum Portfolio during its run and made a good return.

December +11.46%. Net trading gain: +35.29%

  • EMES +17.14%;
  • GNC Holdings, Inc. (GNC) +7.22%;
  • ENDP +7.46%;
  • FMSA +6.46%;
  • SRAX +5.53%;
  • U.S. Global Investors, Inc. (GROW) +4.98%;
  • Flotek Industries, Inc. (NYSE:FTK) +4.99%;
  • Net Element International, Inc (NETE) -6.30%;
  • DryShips, Inc. (DRYS) -5.13%; and
  • EKSO -10.20%.

The portfolio's run extended into five months, up 11.46% for the month. We had more gainers than the losers and the top gainer was EMES.

EMES - This frac sand stock spent the whole month trading in a well-defined range. We took advantage of it and made a few winning trades: bought in at the $7.05-7.15 level and sold at the $7.50 area. It finally made a breakout run next month.

We also tried to make the blockchain plays but with a mixed result. Gained some on the GROW trade but lost more on our NETE trade. We finally made a good return from our blockchain play on Xunlei Networking Technologies (XNET) in January.

2018

January +10.67%. Net trading gain: 23.94%

The portfolio winning streak extended to six, up 10.67% for the month.

  • XNET +20.67%;
  • EMES +14.20%;
  • Invitae (NVTA)+8.97%;
  • JDST +4.85%;
  • SRAX -9.98%;
  • NXT-ID Inc. (NXTD) -7.57%; and
  • Himax Technologies, Inc (HIMX) -7.08%.

EMES - The stock finally took off and made a quick breakout run. Our patience paid off and we captured a good portion of its run.

XNET - During our search for better blockchain plays, we noticed that this stock had much stronger fundamentals than many others. Its revenues grew rapidly after introducing its OneCloud product. The stock started its run from the middle of last October and gained more than 600% in less than two months. Then it stayed at its highs and found strong support at the 12.00 level. We made a good profit trading this stock during its January rally.

JDST - I turned bearish on gold in late January after its big run and played JDST again. But we only made a tiny profit from trading JDST as our attention was on ENES and XNET.

February -1.74%. Net trading gain: +3.79%

The portfolio did not suffer when the market had a mini-crash at the beginning of February. Instead, it ran further as we shorted the market by buying into the ProShares Ultra VIX Short-Term Futures ETF (UVXY). By the February 15th, the portfolio grew to $76,090, or up 5.50% for the month as our UVXY trade gave us a very good return.

  • UVXY +16.45%;
  • NXTD +10.40%;
  • FMSA +4.51%;
  • Southwestern Energy Co. (SWN) +4.40%;
  • U.S. Silica (SLCA) -9.87%;
  • DUST -6.60%;
  • HMNY -5.19%; and
  • NVTA -5.21%.

But one bad trade prevented the portfolio from gaining any further. It suffered a one-day big drop on April 21 and brought it down all the way to the January 19th level:

The problem: We violated our own risk-control rule again by holding our SLCA pick over its earnings release and paid the price.

SLCA - A fundamentally sound stock in the frac sand group. We bought it on April 14th at $28.55. It closed at $30.75 on April 20th before its Q4 2017 earnings release. We were optimistic about its earnings results and forgot the possible risks. And the risk came. The stock gapped down and dropped 18% next day. We managed to sell it later at $27.48 and were only down 3.81% on that trade.

We tried to trade SLCA two more times but only brought in more loses. SLCA finally bottomed at $24.00 in early April and made a huge run in the next two months.

FMSA - Gained another 4.51% for the month and the winning streak extended to 7. That is, 7 for 7, and the total accumulated return is 56.47%. We cannot trade our beloved FMSA anymore as it merged with CVIA.

The bad trades on SLCA eventually cost the portfolio from a 5.50% increase through the middle of February to a 1.74% decrease for the month.

March +1.79%. Net trading gain: -8.27%

  • JDST +9.72%;
  • UVXY +7.87%;
  • EKSO +5.39%;
  • Direxion Daily S&P Biotech Bull 3x Shares ETF (LABU) -20.95%; and
  • Bitcoin Investment Trust (OTCQX:GBTC) -5.25%.

The market showed more volatility in March: up the first two weeks and down more the next two.

We gained on our JDST and UVXY trades but down big on our LABU trade as we switched our bull view on the market direction a little early. LABU dropped from $110 high to $65 low at March end following the market's downtrend. Our buy was at the $80.00 level.

But overall, the portfolio had a small gain for the month while the market was down.

A Discussion of Our Target and Trading Strategy

Our Target

Our target is to make a sustainable gain of 150% each year and grow the money from $30,000 to $1,000,000 in less than four years.

That is, we set our goal to grow the money from $30,000 to $75,000 in year one, to $200,000 in year two, to $500,000 in year three, and finally to $1,000,000 in year four.

We are short of achieving our year-one target as we only made a 145.19% return. But we are not going to lower our goal.

To achieve our goal, the portfolio needs to grow 8% per month on average or 26% every three months. At a first look, this seems a mission impossible task as everyone knows that it will be very hard for any investor to beat the market in a sustainable manner. And it is impossible to see the market grow 100% in any year.

No matter how difficult it may be, we have done it in year one. Can we do it again in year two? Only time can tell.

We want to make a few major modifications to our trading strategy for our Momentum Portfolio in its second year of runs such as the holding period, risk-control strategy, etc.

The following is our revised trading strategy for our Momentum Portfolio during our year-two run:

Trading Strategy

1. Stock/ETF Selection criteria:

- We are in constant search for stocks which may give us > 3% return within one week; or >8% return in one-month period.
- The stock/ETF must be traded in three major markets.
- The stock/ETF must have enough liquidity.
- We do not short stocks, longs only, and only use available cash to trade, no margin.
- Fundamentals are still our main consideration when selecting a stock to trade. But we do not give up speculative plays.

2. The maximum number of picks we can hold at any given time:


3. Holding Period:

In general, we will limit our holding period to one-week, but we can extend it into one-month if we feel the momentum is very strong and the run can last more than one week. That is if the stock gained 8% in less than one month and we think that the run is not over, we will hold it longer.

4. Risk Control:

In general, we will limit our loss to less than 3% on each trade. We will not hold a stock over its earnings release, and avoid holding stocks which may have share offerings, analyst downgrades, etc.

5. Profit Protection:

We will not allow a profit turn into a loss if the stock gained over 3% after our buy.

We may make additional revisions during the run.

Conclusion

Our Momentum Portfolio finished its first year with 147.13% return. Not a bad result. But we identified many problems.

As such, we made a few major modifications to our trading strategy for the second round of run.

The market seems tired now after a nearly 10 year run. It may be more difficult to achieve the same kind of returns as we did in 2017.

But we will not lower our goal.

If you have $30,000+ to invest, if you have time to make trading during market hours, if you want to become a millionaire in four years, if you can afford the higher volatility for the Portfolio, I sincerely invite you to join us.

The month of June is our promotion month and we offer two weeks of free trial for you to test our service. You can cancel our service at any time during the free trial period if you are not satisfied with our service, and it is free of any charge.

Please note that past performance can never be used to judge future results. What we will try is to improve our service over time.

Disclosure: I am/we are long JD, AAOI, C, LEN, AMD, VRX, FB, UAL, LB, SOXL, NVAX, EIGR.

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.