Here’s How My Portfolio is Being Adjusted Every Week

The process is entirely systematic, based solely around buying what’s working, but hedged with ‘risk off’ options — if those risk off assets are outperforming. In a sense, my strategy, which I am having immense fun doing, is all about alpha.

Here is how I start, finding a pool of stocks, or quantile. To do this, I drill down to the very essence of risk: market cap. We can talk about growth, revenues, earnings, charts, but at the end of the day, risk is best defined by the size of the company you are buying — best represented by market caps.

I have several options. Here they are with their median % returns for the past week.

Over $50b -0.11%
$10-50b +0.29%
$5-10b +0.36%
$1-5b +0.28%
under $1b -0.58%

TLT +1.38%
GLD -1%

If I were to allocate right now, I’d choose from the $5-10b pool. But once the market starts trading, judging by how close the returns are in those groups, it could change. Last week I shifted down to $1-5b. My returns over the past week is +1.18% — buoyed by IMAX, PAYC and SSD.

Because TLT outperformed all asset class groups, I will be adding 5% of my assets to it — upping my exposure to TLT to 10%. Because gold underperformed, I will be selling out of the balance of my holdings and will not own any gold — unless something changes during the trading day. Cash reserves will remain constant at 20%, set aside for an Exodus overall system oversold signal.

After diligent backtesting, I’ve put together a strategy, based on fundamentals, that produces optimal returns. I will now apply those PE, PS, rev growth, eps growth, gross margin, free cash setting flow settings into a screener and select the stocks with the highest hybrid scores (Exodus’ tech, fundamental scores combined produces a hybrid score) per sector, to ensure diversification.

Because there are limited names in the $5-10b quantile, my new portfolio will be concentrated. Picks are limited to two stocks per sector, in order to avoid over exposure to a particular sector. If I was to construct the portfolio now, this is what it’d look like.

(equal weighted)
MKTX
AGNC
SNI
LAMR
FTNT
TLLP
EQGP
ATHM

And 10% in TLT.

The system will reassess my portfolio on Friday of each and every week, in order to reduce complacency and to make sure I’m not picking around with underperforming pieces of shit. The overarching them of this strategy, as opposed to investing artistically, is that it can be quantified and appropriately graded on its macro qualities. If I find this to be lacking in performance, I can simply adjust the criteria to conform with where Wall Street is getting its dick sucked. I will not, however, trade off fundamentals for hot stocks of the pavement ape varietal.

If you enjoy the content at iBankCoin, please follow us on Twitter