Seeking Alpha

Bulletproof Investing Performance Update: Week 94

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Includes: ARRY, AU, AZO, CDNS, CMG, GTN, LRN, MKTX, NXST, NYT, SBUX, SPY, SUI, TWLO, VMW, ZEN
by: David Pinsen
Summary

It has been six months since I presented five hedged portfolios and 10 top names in week 94 of my Marketplace service (March 14). Here's how everything did.

Three out of five hedged portfolios posted positive returns, with two outperforming both their expected returns and SPY.

The top ten names (unhedged) outperformed SPY. They were up 16.04% versus up 8.08% for the index ETF.

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

Bulletproof Investing: Week 94 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 94th week I offered my service. Let's look at what I presented in week 94 and how it did. I close by again referring to recent changes we've made that should improve accuracy and increase performance in the future.

Portfolio 1

This was the $30,000 portfolio. The primary security here was The New York Times (NYT). It was selected because it had the highest potential return estimate, net of hedging cost, when hedging against a >13% decline, and had a share price low enough that you could buy a round lot of it for less than $10,000. Zendesk (ZEN) 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 March 14 and presented in this Marketplace post at the time.

The worst-case scenario for this portfolio was a decline of 11.63% (the "max drawdown"), and the best-case scenario was a gain of 13.82% (the "Net Potential Return" or aggregate potential return net of hedging cost). The "Expected Return" of 7.32% was a ballpark estimate, taking into account the backtested relationship between actual returns and my site's potential return estimates (for portfolios created after July 26th of this year, we have modified our method of estimating expected returns - more on this below).

Portfolio 1 Performance

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

This portfolio was down 6.08%, underperforming its expected return, of course, and underperforming the SPDR S&P 500 Trust ETF (SPY).

So far, we have six-month performance data for 42 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 Nexstar Media (NXST), NYT, Starbucks (SBUX) and Twilio (TWLO) as primary securities. ZEN 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 March 14 and presented in this Marketplace post at the time.

The worst-case scenario for this one was a decline of 13.5%, the best-case scenario was a gain of 16.82%, and the ballpark estimate of an expected return was 7.39%.

Portfolio 2 Performance

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

This one was down 2.33%. So far, we have six-month performance data for 47 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 AngloGold Ashanti (AU), Chipotle (CMG), MarketAxess (MKTX), NXST, NYT, SBUX, and Vmware (VMW) as primary securities. ZEN 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 March 14 and presented in this Marketplace post at the time.

The worst-case scenario here was a drawdown of 14.43%, the best-case scenario was a gain of 18.49% (the net potential return), and the expected return was 7.09%.

Portfolio 3 Performance

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

This one was up 9.53%. So far, we have six-month performance data for 66 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 AU, CMG, Gray (GTN), NXST, NYT, SBUX, and VMW as primary securities. ZEN was added to absorb leftover cash in the fine-tuning step.

The image above was generated by Portfolio Armor on March 14 and presented in this Marketplace post at the time.

The worst-case scenario here was the max drawdown of 20.37%, the best-case scenario was the net potential return of 21.88% and the expected return was 7.79%.

Portfolio 4 Performance

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

This one was up 1.72%, after tumbling over its final week. So far, we have six-month performance data for 75 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. Names that appeared in this portfolio but not in the previous March 14th portfolios were Array BioPharma (ARRY) and K12 (LRN).

The image above was generated by Portfolio Armor on March 14 and presented in this Marketplace post at the time.

The worst-case scenario was a drawdown of 8.47%, the best-case scenario was a gain of 18.48%, and the expected return was 6.09%.

Portfolio 5 Performance

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

This portfolio was up 8.44%. So far, we have a full six-month performance for 93 portfolios I've presented hedged against >9% declines. Here's how each of them did.

Table via Portfolio Armor

Top Names

These were Portfolio Armor's top 10 names as of March 14. Names that didn't appear in the portfolios above were Cadence Design Systems (CDNS), AutoZone (AZO), and Sun Communities (SUI).

The image above was generated by Portfolio Armor on March 14 and was included in the same Marketplace post as the top names portfolio above.

For this cohort, as of March 14:

  • Average 36M Beta = 0.64
  • Average 20% threshold optimal put hedging cost: 2.6%

Top Names Performance

Here's how the top names did:

The top names (unhedged) were up 16.04% on average vs. up 8.08% for SPY. So far, 52 top name cohorts have beaten SPY, one has tied SPY, and 40 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 ten names averaged 7.36% over the average of these 93 6-month periods, versus SPY's average of 5.59%, an average outperformance of 1.77% over 6 months, or 3.54% 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 94 Assessment

The top 10 names (unhedged) outperformed SPY for the 52nd time out of 93 weeks (we didn't post the top 10 in week 1), and three out of five hedged portfolios posted positive returns, with two outperforming their expected returns and SPY. Note that we've incorporated data from these 94 weeks of performance updates into recent algorithm changes that should boost performance and increase accuracy for cohorts created after July 26, 2019. I described those changes here: When Strategy Meets Reality.

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.