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Tactical Quant Equities Portfolio – 2016 Review & Current Positioning

|Includes: ALXN, BPR, EOG, GLW, GRMN, HUM, JNJ, LKQ, Leucadia National Corporation (LUK-OLD), MOS, MSFT, PPL, SPY, UDR, WMB

At WingCapital Investments, our automated tactical portfolio is managed using trading signals generated by our quantitative model. Our signals are based on technical and statistical indicators on U.S. large caps and ETFs, and have a short-term horizon between 10-20 trading days. For more information and try our trade signal service for free, please visit here.

Introduction to our Methodology

We have 2 suites of automated trading signals: Statistical Rarity & Statistical Pattern Recognition.

1) Statistical Rarity

Based on a series of technical indicators such as RSI, MACD, Bollinger Bands, our model detects if there is a statistical rarity in the current combination of values in the indicators relative to historical data points. A simple example - if RSI is 75, and only 2% of the time the RSI is higher than 75 historically, then our model would flag this as a statistical rarity based on a 2% percentile. After determining the percentile for each indicator, the model calculates the aggregate statistical rarity. If significant, the model calculates the forward looking returns and % of the time positive, and determine if there is a buy signal.

As an illustration, we went long Leucadia National Corp (LUK) on 2016/11/03 based on a statistical rarity signal and returned 25% in 1 month.

Sample Statistical Rarity Buy Signal - LUK (2016/11/03)

The buy signal was triggered when the model detected a statistical rarity on the combination of Lower Bollinger Band < 0 and Choppy Index > 60, which occurred on 2016/11/03. The model found 4 other occurrences matching the criteria since 2000, and 100% of the time the 20-day forward returns were positive with an average of +7%. Hence, the model gave a buy signal on positive expectancy.

Sample Statistical Rarity Buy Signal Explanation - LUK (2016/11/03)

2) Statistical Pattern Recognition

Conceptually similar to our Statistical Rarity signal, the model detects if current price pattern has positive expectancy by matching vs. historical occurrences. The pattern is combination of candlestick (high-low-close-open combo, e.g. doji candle: open=~close ), standard technical oscillators such as RSI, and proprietary trend indicators. For example, we went long The Mosaic Company (NYSE:MOS) on November 3 based on the statistical pattern recognition method.

Sample Statistical Pattern Recognition Buy Signal - MOS (2016/11/03)

The model found 3 occurrences that matched the pattern on November 3rd, all of which had positive return within 20 days with an average of +19%, which resulted in a buy signal and returned 20% in a month.

MOS Statistical Pattern Matches

While not all trading signals would work out as expected as in the above examples, historically our signals are over 60% of the time positive with returns skewed to the right. Our objective is to filter out the day-to-day noise and find high-probability opportunities in the market regardless of the market environment with a statistical edge.

Quant Trade Signal PnL Distribution

In addition, our signals have stop losses between -5-10%, automatically adjusted based on how far the signals diverge from our statistical projections. In the long-run, our system has a positive expectancy and has outperformed S&P 500 (NYSEARCA:SPY) every year since 2008 based on backtesting.

Click here for more information and try our trade signals out free for 7 days.

2016 Summary

On the year, our portfolio was up 26% vs. 11% in S&P 500 (total return). In 2017, we will be posting weekly and monthly updates.

Monthly Performance Breakdown

PERIOD

PORTFOLIO RETURN

INDEX RETURN

2016

26.41%

11.34%

2016-12

0.81%

1.42%

2016-11

4.84%

3.62%

2016-10

-3.23%

-1.75%

2016-09

2.87%

-0.5%

2016-08

1.85%

0.12%

2016-07

6.98%

3.58%

2016-06

0.93%

-0.17%

2016-05

1.96%

1.69%

2016-04

3.82%

0.39%

2016-03

10.26%

6.1%

2016-02

2.98%

-0.19%

2016-01

-7.24%

-5.11%

Current positions as of 2016/12/30

SYMBOL

NAME

SECTOR

INITIATE DATE

INITIATE PRICE

CURRENT PRICE

TOTAL PNL %

DAILY PNL %

Long

12 Holdings

2.23%

-0.08%

JNJ

Johnson & Johnson

Health Care

2016-12-06

112.06

115.21

2.81%

-0.24%

UDR

UDR Inc

Financials

2016-12-06

33.50

36.48

8.9%

1.84%

MSFT

Microsoft

Information Technology

2016-12-06

59.95

62.17

3.69%

-1.17%

GRMN

Garmin Ltd.

Consumer Discretionary

2016-12-14

48.89

48.49

-0.82%

-1.06%

WMB

Williams Cos.

Energy

2016-12-15

29.12

31.14

6.94%

0.42%

GLW

Corning Inc.

Industrials

2016-12-15

24.24

24.27

0.12%

-0.7%

PPL

PPL Corp.

Utilities

2016-12-20

34.50

34.05

-1.3%

-0.61%

ALXN

Alexion Pharmaceuticals

Health Care

2016-12-20

116.72

122.35

4.82%

-1.04%

HUM

Humana Inc.

Health Care

2016-12-22

202.93

204.03

0.54%

0.55%

LKQ

LKQ Corporation

Consumer Discretionary

2016-12-28

30.88

30.65

-0.74%

-0.74%

GGP

General Growth Properties Inc.

Financials

2016-12-28

24.41

24.98

2.34%

1.92%

EOG

EOG Resources

Energy

2016-12-28

101.65

101.10

-0.54%

-0.18%

Dec 2016 Exited Trades

SYMBOL

NAME

SECTOR

SIGNAL TYPE

INITIATE DATE

INITIATE PRICE

EXIT DATE

EXIT PRICE

TOTAL PNL %

43 Trades

Avg

3.42%

LUK

Leucadia National Corp.

Financials

Stat Rarity

2016-11-03

18.10

2016-12-01

22.77

25.8%

MOS

The Mosaic Company

Materials

Stat Pattern

2016-11-03

24.15

2016-12-01

29.09

20.46%

XYL

Xylem Inc.

Industrials

Stat Rarity

2016-11-03

47.24

2016-12-01

51.81

9.67%

ENDP

Endo International

Health Care

Stat Rarity

2016-11-07

15.68

2016-12-05

15.87

1.18%

GT

Goodyear Tire & Rubber

Consumer Discretionary

Stat Pattern

2016-11-07

28.08

2016-12-05

30.14

7.34%

MUR

Murphy Oil

Energy

Stat Pattern

2016-11-07

26.77

2016-12-05

33.25

24.21%

TRV

The Travelers Companies Inc.

Financials

Stat Rarity

2016-11-07

105.36

2016-12-05

115.87

9.98%

AME

Ametek

Industrials

Stat Rarity

2016-11-08

45.41

2016-12-06

49.52

9.05%

FBHS

Fortune Brands Home & Security

Industrials

Stat Rarity

2016-11-08

54.39

2016-12-06

55.15

1.4%

PXD

Pioneer Natural Resources

Energy

Stat Pattern

2016-11-08

175.04

2016-12-06

184.77

5.56%

DAL

Delta Air Lines

Industrials

Stat Pattern

2016-11-09

45.25

2016-12-07

51.10

12.93%

ORLY

OReilly Automotive

Consumer Discretionary

Stat Rarity

2016-11-09

264.15

2016-12-07

285.20

7.97%

VAR

Varian Medical Systems

Health Care

Stat Rarity

2016-11-09

88.51

2016-12-07

90.22

1.93%

D

Dominion Resources

Utilities

Stat Rarity

2016-11-10

71.13

2016-12-08

73.50

3.33%

ILMN

Illumina Inc

Health Care

Stat Rarity

2016-11-11

137.71

2016-12-01

127.72

-7.25%

AEP

American Electric Power

Utilities

Stat Rarity

2016-11-11

59.99

2016-12-09

60.99

1.67%

AMZN

Amazon.com Inc

Consumer Discretionary

Stat Pattern

2016-11-11

739.01

2016-12-09

768.66

4.01%

EOG

EOG Resources

Energy

Stat Rarity

2016-11-11

91.41

2016-12-09

106.45

16.45%

SLB

Schlumberger Ltd.

Energy

Stat Pattern

2016-11-11

78.66

2016-12-09

84.78

7.78%

MAS

Masco Corp.

Industrials

Stat Rarity

2016-11-15

31.93

2016-12-01

30.33

-5.01%

CF

CF Industries Holdings Inc

Materials

Stat Pattern

2016-11-15

27.80

2016-12-13

28.40

2.17%

WMB

Williams Cos.

Energy

Stat Pattern

2016-11-16

30.29

2016-12-14

29.22

-3.53%

SBUX

Starbucks Corp.

Consumer Discretionary

Stat Pattern

2016-11-17

55.85

2016-12-15

57.71

3.33%

WAT

Waters Corporation

Health Care

Stat Rarity

2016-11-17

138.85

2016-12-15

137.50

-0.97%

ATVI

Activision Blizzard

Information Technology

Stat Rarity

2016-11-18

38.39

2016-12-02

35.71

-6.98%

TRIP

TripAdvisor

Consumer Discretionary

Stat Rarity

2016-11-18

50.79

2016-12-02

46.46

-8.53%

WY

Weyerhaeuser Corp.

Financials

Stat Rarity

2016-11-18

31.13

2016-12-16

30.72

-1.32%

ETR

Entergy Corp.

Utilities

Stat Rarity

2016-11-21

68.42

2016-12-19

73.18

6.96%

JNPR

Juniper Networks

Information Technology

Stat Pattern

2016-11-21

26.36

2016-12-19

28.54

8.27%

BSX

Boston Scientific

Health Care

Stat Rarity

2016-11-22

20.84

2016-12-20

21.53

3.31%

IPG

Interpublic Group

Consumer Discretionary

Stat Pattern

2016-11-22

24.31

2016-12-20

23.71

-2.47%

TMO

Thermo Fisher Scientific

Health Care

Stat Rarity

2016-11-22

143.00

2016-12-20

141.80

-0.84%

VTR

Ventas Inc

Financials

Stat Rarity

2016-11-22

60.56

2016-12-20

61.93

2.26%

MDT

Medtronic plc

Health Care

Stat Rarity

2016-11-25

75.52

2016-12-21

71.58

-5.22%

COP

ConocoPhillips

Energy

Stat Pattern

2016-11-25

45.75

2016-12-22

51.54

12.66%

JNJ

Johnson & Johnson

Health Care

Stat Pattern

2016-11-25

114.13

2016-12-22

115.44

1.15%

MON

Monsanto Co.

Materials

Stat Pattern

2016-11-29

102.39

2016-12-27

105.69

3.22%

LYB

LyondellBasell

Materials

Stat Pattern

2016-12-01

91.18

2016-12-28

86.38

-5.26%

RCL

Royal Caribbean Cruises Ltd

Consumer Discretionary

Stat Pattern

2016-12-01

79.30

2016-12-29

82.96

4.62%

STT

State Street Corp.

Financials

Stat Pattern

2016-12-01

80.39

2016-12-29

77.66

-3.4%

CHK

Chesapeake Energy

Energy

Stat Pattern

2016-12-02

7.23

2016-12-30

7.02

-2.9%

VRX

Valeant Pharmaceuticals International, Inc.

Health Care

Stat Rarity

2016-12-09

15.46

2016-12-15

13.60

-12.03%

VRTX

Vertex Pharmaceuticals Inc

Health Care

Stat Pattern

2016-12-14

78.33

2016-12-30

73.67

-5.95%

Disclosure: I am/we are long THE STOCKS LISTED IN OUR QUANT PORTFOLIO ABOVE.

Additional disclosure: Our trading signals and portfolios do not constitute a personal investment advice or recommendation. Please practice due diligence before investing in any of the securities mentioned above.