Bulletproof Investing Performance Update: Week 40

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Includes: ABBV, AMZN, ANET, ASGN, BA, CMA, CXO, EBAY, IBKR, INTC, LPSN, MA, NFLX, SPY, SQ, TWTR, WWE, X, ZOES
by: David Pinsen

Summary

It's been six months since I presented four hedged portfolios and 10 top names in week 40 of my Marketplace service (March 1). Here's how everything did.

All of the hedged portfolios posted positive returns, though none outperformed its expected return, or SPY.

The top 10 names (unhedged) slightly outperformed SPY. This was the 33 top names cohort out of 39 to outperform the market so far.

Safety first: NASCAR driver Johanna Long and her helmet (via Autowise).

Bulletproof Investing: Week 40 Performance

Each week since the beginning of June 2017, 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. As with any investment method, the returns with this approach will vary, but in the interests of transparency and accountability, I have promised to publicly share the final performance of everything I present, regardless of how it does.

Here, I update the final performance of the four hedged portfolios and the top 10 names (unhedged) that I presented in the 40th week I offered my service. Let's look at what I presented in week 40 and how it did.

Portfolio 1

This was the $100,000 portfolio presented here initially. The data below was as of March 1. The primary securities here were AbbVie (ABBV), Square (SQ), Twitter (TWTR), and US Steel (X). They were selected because they had the highest potential return estimates, net of hedging costs when hedging against a >16% decline, and they had share prices low enough that you could buy a round lot of one of them for less than $25,000. eBay (EBAY) 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 14.86% (the "Max Drawdown"), and the best-case scenario was a gain of 20.17% (the "Net Potential Return" or aggregate potential return net of hedging cost). The "Expected Return" of 7.01% 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 did, net of hedging and trading costs.

This portfolio was up 0.3%, underperforming its expected return and the return of the SPDR S&P 500 ETF (SPY).

This was the first portfolio I presented hedged against a >16% decline.

Portfolio 2

This was the $1,000,000 portfolio presented here initially. This portfolio had AbbVie, Boeing (BA), Netflix (NFLX), Square, Twitter (TWTR), World Wrestling Entertainment (WWE), and US Steel as primary securities. Zoe's Kitchen (ZOES) was added in a fine-tuning step to absorb cash left over from the process of rounding down to round lots of the primary securities.

The worst-case scenario for this one was a decline of 14.39%, the best-case scenario was a gain of 21.94%, and the ballpark estimate of an expected return was 7.45%.

Portfolio 2 Performance

Here's the performance chart for Portfolio 2:

This one was up 5.79%, underperforming its expected return and SPY. So far, we have full six-month performance data for six portfolios I've presented hedged against >15% declines. Here's how each of them have done:

Portfolios Hedged Against > 15.0% Declines

Starting Date Expected Return Actual Return SPY Return
April 23, 2017 6.74% 15.45% 10.25%
December 31, 2017 8.90% 13.55% 2.52%
February 1, 2018 7.30% -5.53% 0.59%
February 1, 2018 8.70% 0.99% 0.59%
February 22, 2018 7.91% 5.74% 6.73%
March 1, 2018 7.45% 5.79% 9.37%
Average 7.83% 6.00% 5.01%

Portfolio 3

This was the aggressive portfolio originally presented here at the time. This one had AbbVie, Boeing, Netflix, Square, Twitter, WWE, and X as primary securities. LivePerson (LPSN) was added after to absorb the leftover cash from the rounding down process.

The Max Drawdown here was 19.62%. The best-case scenario was a gain of 23.37%, and the expected return was 7.96%.

Portfolio 3 Performance

Here's how it did:

This one returned 6.48%, underperforming its expected return and SPY. So far, we have full six-month performance for 23 portfolios I've presented hedged against >20% declines. Here's how each of them have done.

Portfolios Hedged Against > 20.0% Declines

Starting Date Expected Return Actual Return SPY Return
June 22, 2017 8.43% 20.00% 11.27%
August 31, 2017 8.03% 9.38% 10.87%
October 12, 2017 9.00% 1.81% 5.38%
October 19, 2017 10.07% 13.06% 6.08%
October 26, 2017 8.57% 9.68% 5.13%
November 2, 2017 9.77% 11.11% 3.11%
November 9, 2017 9.59% 4.46% 5.34%
November 16, 2017 8.95% 1.73% 6.22%
November 22, 2017 9.39% 7.25% 5.90%
November 30, 2017 8.55% -4.37% 3.80%
December 8, 2017 8.34% 4.48% 5.73%
December 14, 2017 7.75% 17.49% 5.87%
December 21, 2017 9.33% 12.82% 3.36%
December 28, 2017 9.92% 9.59% 1.99%
January 4, 2018 9.65% 12.96% 0.59%
January 11, 2018 8.93% 8.96% 1.12%
January 18, 2018 9.40% 7.97% 1.55%
January 25, 2018 9.82% 6.21% 1.10%
February 1, 2018 9.00% 0.90% 0.59%
February 8, 2018 7.35% 12.46% 11.75%
February 15, 2018 8.19% -6.17% 4.08%
February 22, 2018 8.54% 6.90% 6.73%
March 1, 2018 7.98% 6.48% 9.37%
Average 8.89% 7.61% 5.08%

Portfolio 4

This was the top names portfolio originally presented here, along with the list of top names. A few securities appearing in this portfolio that didn't appear in the previous ones from March 1: Arista Networks (ANET), On Assignment (ASGN), and Interactive Brokers (IBKR).

Image via PA.

The worst-case scenario for this one was a drawdown of 8.27%, the best-case scenario was a return of 15.31%, and the expected return was 5.05%.

Portfolio 4 Performance

Here's how it did:

This one returned 4.69%. So far, we have full six-month performance for 40 portfolios I've presented hedged against >9% declines. Here's how each of them did:

Portfolios Hedged Against > 9.0% Declines

Starting Date Expected Return Actual Return SPY Return
June 8, 2017 6.11% 9.24% 9.99%
June 16, 2017 5.13% 11.56% 10.94%
July 7, 2017 6.29% 8.47% 14.07%
July 13, 2017 6.70% 13.02% 14.85%
July 20, 2017 6.57% 10.36% 14.62%
August 3, 2017 8.46% 16.52% 12.66%
August 3, 2017 8.84% 14.00% 12.66%
August 10, 2017 6.15% 1.99% 8.36%
August 17, 2017 7.06% 9.38% 13.48%
August 17, 2017 8.11% 9.11% 13.48%
August 24, 2017 6.79% 8.88% 13.72%
August 31, 2017 7.43% 4.67% 10.87%
September 7, 2017 6.33% 9.54% 11.61%
September 14, 2017 7.25% 11.28% 11.19%
September 22, 2017 6.41% 10.64% 6.67%
September 28, 2017 6.27% 8.36% 4.73%
October 5, 2017 8.36% 8.73% 5.26%
October 5, 2017 7.33% 4.67% 5.26%
October 12, 2017 6.58% 5.03% 5.38%
October 19, 2017 7.91% 9.66% 6.08%
October 26, 2017 7.63% 9.43% 5.13%
November 2, 2017 6.15% 4.72% 3.11%
November 9, 2017 7.09% -1.49% 5.34%
November 16, 2017 7.13% 3.20% 6.22%
November 22, 2017 6.76% -0.87% 5.90%
November 30, 2017 6.53% -2.01% 3.80%
December 8, 2017 5.10% 4.84% 5.73%
December 14, 2017 6.75% 13.48% 5.87%
December 14, 2017 6.15% 12.48% 5.87%
December 21, 2017 6.70% 0.81% 3.36%
December 28, 2017 7.70% 15.10% 1.99%
December 28, 2017 7.88% 6.22% 1.99%
January 4, 2018 9.30% 15.19% 0.59%
January 4, 2018 8.65% 10.87% 0.59%
January 11, 2018 7.59% -3.05% 1.12%
January 18, 2018 6.81% -0.23% 1.55%
January 25, 2018 8.66% 3.47% 1.10%
February 1, 2018 6.59% 1.69% 0.59%
February 8, 2018 4.74% 8.05% 11.75%
February 15, 2018 6.37% -1.95% 4.08%
February 22, 2018 5.44% 1.72% 6.73%
March 1, 2018 5.05% 4.69% 9.37%
Average 6.93% 6.94% 7.09%

Top Names

These were Portfolio Armor's top 10 names as of March 1: Boeing (BA), Amazon (AMZN), Netflix, Cavium (CAVM), Concho Resources (CXO), Comerica (CMA), On Assignment, Mastercard (MA), Twitter (TWTR), and Intel (INTC).

Top Names Performance

Here's how the top names did:

The top names returned 10.64% on average vs. 9.37% for SPY. This was the 33rd cohort out of 39 since June 8th that has outperformed SPY over the next six months. You can see the performance for all of the top names cohorts I've presented so far in the table below.

Starting Date Portfolio Armor 6-Month Performance SPY 6-Month Performance
June 8, 2017 14.49% 9.99%
June 15, 2017 19.85% 10.97%
June 22, 2017 24.46% 11.27%
June 29, 2017 18.24% 11.68%
July 6, 2017 21.03% 14.81%
July 13, 2017 28.25% 14.85%
July 20, 2017 25.04% 14.62%
July 27, 2017 33.52% 17.10%
August 3, 2017 20.72% 12.66%
August 10, 2017 13.05% 8.36%
August 17, 2017 10.71% 13.48%
August 24, 2017 15.23% 13.72%
August 31, 2017 8.42% 10.87%
September 7, 2017 12.75% 11.61%
September 14, 2017 29.19% 11.19%
September 21, 2017 22.56% 9.42%
September 28, 2017 14.30% 4.73%
October 5, 2017 11.53% 5.26%
October 12, 2017 15.46% 5.38%
October 19, 2017 20.73% 6.08%
October 26, 2017 18.10% 5.13%
November 2, 2017 12.64% 3.11%
November 9, 2017 5.41% 5.34%
November 16, 2017 6.11% 6.22%
November 23, 2017 5.18% 6.19%
November 30, 2017 -0.19% 3.80%
December 7, 2017 11.51% 5.99%
December 14, 2017 29.80% 5.87%
December 21, 2017 17.11% 3.36%
December 28, 2017 13.78% 1.99%
January 4, 2018 30.22% 0.59%
January 11, 2018 -2.06% 1.12%
January 18, 2018 7% 1.55%
January 25, 2018 1.73% 1.1%
February 1, 2018 11.02% 0.59%
February 8, 2018 25.21% 11.75%
February 15, 2018 4.31% 4.08%
February 22, 2018 19.48% 6.73%
March 1, 2018 10.64% 9.37%
Average 15.55% 7.74%

So Portfolio Armor's top 10 names averaged 15.55% over the average of these 39 six-month periods vs. SPY's average of 7.74%, an average outperformance of 7.81% over six months.

Top Names Time Stamped

For a few months, in addition to posting those top names in my Seeking Alpha Marketplace service, I also time stamped them on Twitter. If you click on the tweet shown below, and scroll down, it will take you to a thread showing those time-stamped posts as well as charts of their subsequent performance.

Week 40 Assessment

This week's hedged portfolio performance was OK in absolute terms, with all posting positive returns, but none beat its expected return or SPY. The top names (unhedged) edged past SPY.

Amazon again didn't appear in any portfolios because its share price was too high to fit a round lot of it in a $1 million portfolio. I added $2 million portfolios subsequently to capture it and other high-share price top names.

We still see the potential variability of hedged portfolio returns from week to week, but the proximity between the average expected returns and average actual returns in the tables above remains encouraging (particularly with the portfolios hedged against >9% declines, where they're just 1 basis point apart), because it suggests that with four entries per year (putting half of your money in a hedged portfolio now, half in three months, and repeating the process when those portfolios end), your actual returns will likely come close to your average expected returns.

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.