Bulletproof Investing Performance Update: Week 88

|
Includes: AU, AZO, CIEN, FNSR, IAC, LRN, LULU, O, PAYC, REGN, SPY, TWTR, ULTA, VEEV, VMW, WDAY, XLNX
by: David Pinsen
Summary

It has been six months since I presented five hedged portfolios and 10 top names in week 88 of my Marketplace service (Jan. 31). Here's how everything did.

Four out of five hedged portfolios outperformed their expected returns, and three met or exceeded SPY's return.

The top 10 names (unhedged) were up 16.4%, on average, vs. SPY which was up 11.21%.

Race car driver Mikaela Ahlin-Kottulinsky and her helmet (photo via Forbes).

Bulletproof Investing: Week 88 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 five hedged portfolios and the top 10 names (unhedged) that I presented in the 88th week I offered my service. Let's look at what I presented in week 88 and how it did.

Portfolio 1

This was the $30,000 portfolio. The primary securities here were K12 Inc (LRN) and Xilinx (XLNX). They were selected because they had the highest potential return estimates, net of hedging costs when hedging against >13% declines, and they had share prices low enough that you could buy round lots of them for less than $10,000. Twitter (TWTR) was added in a fine-tuning step to absorb leftover cash from rounding down to round lots of the first two names.

The image above was generated by Portfolio Armor on Jan. 31 and presented in this Marketplace post at the time.

The worst-case scenario for this portfolio was a decline of 11.86% (the "max drawdown"), and the best-case scenario was a gain of 26.88% (the "Net Potential Return" or aggregate potential return net of hedging cost). The "Expected Return" of 9.63% was a ballpark estimate, taking into account the historic relationship between actual returns and Portfolio Armor's potential return estimates.

Portfolio 1 Performance

Here's how the portfolio did, net of hedging and trading costs.

This portfolio was down 1.73%, underperforming its expected return and underperforming the SPDR S&P 500 Trust ETF (SPY).

So far, we have six-month performance data for 36 portfolios I've presented that were hedged against >13% declines. Here's how all of them have done .(Due to Seeking Alpha rules I can no longer include tables with links to interactive charts, so I have included screen captures instead. You can find the interactive charts for every portfolio on performance section of the Portfolio Armor website.).

Table via Portfolio Armor

Portfolio 2

This was the $100k portfolio. This one included Ciena (CIEN), Veeva Systems (VEEV), and XLNX as primary securities. Twitter (TWTR) was added in the fine-tuning step again to absorb cash left over from the process of rounding down to round lots of the primary securities.

The image above was generated by Portfolio Armor on Jan. 31 and presented in this Marketplace post at the time.

The worst-case scenario for this one was a decline of 13.28%, the best-case scenario was a gain of 23.5%, and the ballpark estimate of an expected return was 10.8%.

Portfolio 2 Performance

Here's how the portfolio did, net of hedging and trading costs.

This one was up 11.21%, exceeding its expected return and tying SPY's return. So far, we have six-month performance data for 41 portfolios I've presented hedged against >14% declines. Here's how all of them have done.

Table via Portfolio Armor.

Portfolio 3

This was the $1 million portfolio. It included CIEN, Finisar (FNSR), IAC/InterActive (IAC), Paycom (PAYC), VEEV, Workday (WDAY), and XLNX as primary securities. TWTR was added in the fine-tuning step to absorb cash left over from the process of rounding down to round lots of the primary securities.

The image above was generated by Portfolio Armor on Jan. 31 and presented in this Marketplace post at the time.

The worst-case scenario here was a drawdown of 14.08%, the best-case scenario was a gain of 33.6% (the net potential return), and the expected return was 11.27%.

Portfolio 3 Performance

Here's how the portfolio did, net of hedging and trading costs.

This one was up 13.03%, outperforming its expected return and SPY. So far, we have six-month performance data for 60 portfolios I've presented hedged against >15% declines. Here's how all of them have done.

Table via Portfolio Armor

Portfolio 4

This was the $2 million aggressive portfolio. This one included CIEN, IAC, PAYC, Ulta Beauty (ULTA), VEEV, WDAY, and XLNX as primary securities. TWTR was added to absorb leftover cash in the fine-tuning step.

The image above was generated by Portfolio Armor on Jan. 31 and presented in this Marketplace post at the time.

The worst-case scenario here was the max drawdown of 19.2%, the best-case scenario was the net potential return of 34.79%, and the expected return was 12.22%.

Portfolio 4 Performance

Here's how the portfolio did, net of hedging and trading costs.

This one was up 17.01%. So far, we have six-month performance data for 70 portfolios I've presented hedged against >20% declines. Here's how all of them have done.

Table via Portfolio Armor

Portfolio 5

This was the $2 million top names portfolio. A name that appeared in this portfolio but not in the previous Jan. 31 portfolios was Lululemon Athletica (LULU).

The image above was generated by Portfolio Armor on Jan. 31 and presented in this Marketplace post at the time.

The worst-case scenario was a drawdown of 8.39%, the best-case scenario was a gain of 12.62%, and the expected return was 4.34%.

Portfolio 5 Performance

Here's how the portfolio did, net of hedging and trading costs.

This portfolio was up 7.54%, outperforming its expected return. So far, we have a full six-month performance for 86 portfolios I've presented hedged against >9% declines. Here's how each of them did (click on a starting date to go to an interactive version of that chart).

Table via Portfolio Armor

One note about the table above: It includes both $100k portfolios and $1M portfolios. Starting with the May 24 cohort, I began presenting $100k portfolios hedged against >14% declines, so they appear in a different table from that point forward. My guess is that will slightly improve the average performance of the portfolios hedged against >9% declines.

Top Names

These were Portfolio Armor's top 10 names as of Jan. 31. Names that didn't appear in the portfolios above were Vmware (VMW), AngloGold Ashanti (AU), Regneron Pharmaceuticals (REGN), Realty Income (O), and AutoZone (AZO).

The image above was generated by Portfolio Armor on Jan. 31 and was included in the same Marketplace post as the top names portfolio above.

For this cohort, as of Jan. 31:

  • Average 36M Beta = 0.93
  • Average 20% threshold optimal put hedging cost: 3.17%

Top Names Performance

Here's how the top names did:

The top names (unhedged) were up 16.4% on average vs. up 11.21% for SPY. So far, 49 top names cohorts have beaten SPY, one has tied SPY, and 37 have underperformed SPY over the next six months. You can see the performance for all of the top name cohorts I've presented so far in the table below.

Table via Portfolio Armor

So Portfolio Armor's top 10 names averaged 7.16% over the average of these 87 6-month periods, vs. SPY's average of 5.51%, an average outperformance of 1.66% over six months, or 3.32% annualized.

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 88 Assessment

The top 10 names (unhedged) outperformed SPY for the 49th time out of 87 weeks (we didn't post the top 10 in week 1), and four of the hedged portfolios outperformed their expected returns. Overall, this cohort did quite well.

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.