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Outperforming In Bull And Bear Markets (With Stocks Only)

Mar. 11, 2020 12:20 PM ETADBE, GOLD, NEM, QQQ, TJX, XLU, ABX:CA, NGT:CA5 Comments


  • I have been using sector diversification and a bias towards business model resilience to create an outperforming, "all seasons" stock portfolio.
  • Today, I talk a bit about my process for picking stocks that I believe can thrive in bull markets and do relatively well in bear markets.
  • Within the framework described in this article, what other stocks would you buy at current levels?
  • Looking for a helping hand in the market? Members of Storm-Resistant Growth get exclusive ideas and guidance to navigate any climate. Get started today »

I have spent the past couple of weeks passionately advocating for asset-class diversification. The strategy basically comprises of risk-balancing a portfolio into stocks, bonds, REITs, precious metals and other commodities. In fact, I have been a fan of the approach for the past couple of years at least.

While the performance of my broadly diversified strategy proved inferior during the stock market's roaring bull years (in absolute terms only, mind you, not always in risk-adjusted terms), the approach has been outperforming the S&P 500 by a mile in the past few weeks. Year to date, the SRG Base (my core storm-resistant growth portfolio) was up about +7% by end of day March 9th against the broad stock market's highly uncomfortable -15%.

Credit: lifehacker.com

But asset class diversification aside, I also have my thoughts regarding equity investing and stock picking. Case in point, I have been tracking my All-Equities Storm Resistant Growth (a.k.a. AE SRG) portfolio on a weekly basis since July 2018 alongside my marketplace community. Inception to date through March 9th, the AE SRG has been lavishly beating the S&P 500, as the chart and table below depict: +13% returns per year vs. the benchmark's timid +2%, on just a bit higher volatility and slightly steeper maximum drawdown.

Source: DM Martins Research, using data from Yahoo Finance

Of course, the AE SRG is much more highly concentrated than the S&P 500, as it contains only 20 stocks. But concentration alone does not seem to fully justify the portfolio's superior performance so far.

Here's what I mean: since the start of the stock market decline, on February 19th through March 9th, the AE SRG portfolio has declined "only" -14% vs. the S&P 500's -19% unwind. In annualized terms, the portfolio's volatility has even been slightly lower: 48% vs. the benchmark's 52%. And the portfolio's worst day during the correction has been a bit worse than -5%, while

Stocks have been on a very choppy ride in the past few weeks, and the future looks even more uncertain. But both my SRG Base and All-Equities SRG portfolios have been beating the S&P 500 while also producing far superior risk-adjusted returns. To find out how I have created a better strategy to growing your money in any economic environment, click here to take advantage of the 14-day free trial today.

This article was written by

DM Martins Research profile picture
Tracking Economic Inflection Points To Guide Your Asset Allocation Strategy

Daniel Martins is a Napa, California-based analyst and founder of independent research firm DM Martins Research. The firm's work is centered around building more efficient, easily replicable portfolios that are properly risk-balanced for growth with less downside risk.

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Daniel is the founder and portfolio manager at DM Martins Capital Management LLC. He is a former equity research professional at FBR Capital Markets and Telsey Advisory in New York City and finance analyst at macro hedge fund Bridgewater Associates, where he developed most of his investment management skills earlier in his career. Daniel is also an equity research instructor for Wall Street Prep.

He holds an MBA in Financial Instruments and Markets from New York University's Stern School of Business.

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On Seeking Alpha, DM Martins Research partners with EPB Macro Research, and has collaborated with Risk Research, Inc.

DM Martins Research also manages a small team of writers and editors who publish content on several TheStreet.com channels, including Apple Maven (thestreet.com/apple) and Wall Street Memes (thestreet.com/memestocks).

Analyst’s Disclosure: I am/we are long ADBE, GOLD, NEM, TJX. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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