Short Term Quant Portfolios - Mar 13 2021
Long-Term Horizon, Growth, Software
Seeking Alpha Analyst Since 2008
I have been trading stocks, commodities, and options for more than 25 years. I have honed my skills in quantitative analysis and various stock investment tools for 15 years at Portfolio123 and offer services as a consultant in stock portfolios. I also own the financial data service Equity Analytx which provides aggregated fundamentals for a wide range of industries.
Summary
- Recent performance for the three short term quant portfolios provided by the Digital Transformation marketplace service.
- Monthly performance, equity curve, and risk metrics.
- Where to find the current holdings (subscribers only).
- About the Digital Transformation marketplace service.
The following three quantitative portfolios were launched at the beginning of 2020 for Digital Transformation marketplace service subscribers. These portfolios are rebalanced weekly. For quarterly rebalance / long term hold portfolios see this post.
SKYY-Light holds 10 stocks taken from the constituents of the First Trust Cloud Computing ETF (SKYY). The SKYY ETF targets X-as-a-Service (XaaS) companies which have a high degree of recurring revenue.
HACK-Less holds 10 stocks taken from the constituents of the ETFMG Prime Cyber Security ETF (HACK). The HACK ETF targets cybersecurity companies.
DT Wide Moat holds 10 stocks chosen from a universe of digital transformation stocks that are designated as having a “wide economic moat” by Morningstar.com.
Monthly Performance (Last 12 Months)
Yearly Performance
Performance Chart
Risk Metrics
Where to Find the Current Holdings
(Subscribers only) The current holdings can be found in the Portfolios Summary Sheets found under the Digital Transformation Tools Tab as shown below.
Starting Out
New subscribers may be overwhelmed when presented with the many portfolios for the first time. I would like to mention here that there are several strategies that you can use to start with, either to hold a subset of the stocks long term or choose stocks with certain attributes to start with while building towards the entire portfolio of stocks.
These strategies include choosing low-valuation, growth, or momentum stocks and I have attempted to provide some help via the Google Sheets provided with the Digital Transformation service.
To start with, I suggest that you go to the Digital Transformation page and click on ‘Portfolio Summary Sheets’. A Google Sheets spreadsheet will open. Then click on the portfolio that you are most interested in.
Value Investing
If you are a value investor, then you want to pay attention to the Frothiness Rating (“FR”). Frothiness represents how overvalued the stock price is on a relative basis. This is a custom indicator only available to Digital Transformation subscribers and is described in detail here. Note that this indicator is based on expected future sales growth and enterprise value, earnings are not considered.
Stocks with a Frothiness Rating less than 0 are considered to be undervalued. Likewise, stocks with a value greater than 0 are considered to be overvalued. But there are two things to keep in mind: (1) the rating is based on relative valuation and says nothing about the entire Digital Transformation stock universe which may be overvalued; (2) stocks may have an extremely low Frothiness Rating for a good reason and you need to be careful in this regard. They may stay undervalued for a long time. Quite often the frothiest stocks present the best opportunity.
Growth Investing
If you are a high-growth investor, then you will want to pay attention to the letter-based Growth Rating, based on my proprietary quantitative scoring system that is used by the quant portfolios: SKYY-Light, HACK-Less, and DT Wide Moat. The letter ‘A’ is assigned to stocks with the best revenue growth characteristics. Likewise, ‘F’ is assigned to stocks with poor growth characteristics.
Momentum Investing
If you are a momentum investor, then you will want to pay attention to the 52-Wk Strength column in the spreadsheet.
The 52-Wk Strength is an indication of where the stock price sits relative to its 52-week price range. A value of 100% means that the stock price is sitting at a 52-week high. A value of 0% means that the stock price is at a 52-weel low.
About the Digital Transformation Marketplace Service
The Digital Transformation marketplace service covers a wide variety of high-growth stocks, mostly software-oriented, that are involved either in shaping the new world of digital or are undergoing a digital transformation. Four portfolios are provided that capitalize on the paradigm shift: SKYY-Light, HACK-Less, DT Wide Moat, and Steve's Picks. The first three portfolios are quantitative in nature. Stocks are rated according to a unique growth formula that has proven successful during backtest and also live. For example, the SKYY-Light portfolio returned 174% in 2020.
New For 2021
Due to subscriber feedback, long-term variants of the three quant portfolios are now being provided. These portfolios are low turnover versions of the originals, and most trades should satisfy the criteria for long term capital gains. The new portfolios are designated with 'LT' at the end and are called SKYY-Light LT, HACK-Less LT, and DT Wide Moat LT.
Analyst's Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.