Facing My Investment Limitations

February  14 ,2014

I am constantly searching for a methodology that will allow me to sidestep the time required for the analysis of individual stocks. Then, there is the patience factor of waiting for a stock I would select  to do what I think it should do. Patience is not my strong suit.  That’s why I naturally gravitate to stocks exhibiting strong momentum characteristics; PE Ratios be damned !  But, of  course, every stock involves its own  specific risks.  That’s why I would prefer to invest in 20 stocks and  consider my group of 20 to be just one stock – bought together and sold together.

On the basis of the above, my starting point is to shop for equities found in an index which is outperforming.  Year to date, QQEW ( Nasdaq 100 ) is outperforming other indexes as follows:

QQEW ( + 3.5% ),  SPY ( -0.4% ), VTI ( 0.0% ), Barrons Managed 400, BFOR  ( -1.5% ),  VGK – Vanguard Europe ( 0.6% ) , VEU,  Vanguard, the World ex-USA ( -1.8% ).

OK, so which of QQEW’s 100 stocks is driving its momentum, and which can sustain the momentum ( at least for my purposes ) in the short term.  The answer is that I have no idea.  But, I am aware of a ranking /rating service which has analyzed every one of the QQEW  100 and has an opinion on each in terms of its short term performance.  That service is Zacks,  and it just so happens I am a dues paying subscriber.

So, I sat down with my QQEW prospectus and went through every name with Zacks Ranks at my elbow.

Here are the 20 QQEW stocks Zanks currently ranks Buy or Strong Buy:

Gilead Sciences, Facebook, Biogen, Priceline, Baidu,  Tesla, Alexion Pharmaceuticals, Netflix, Micron Technology, Wynn Resorts, Western Digital, Paychex, Verisk Analytics,  SBA Communications, KLA Tencor,  Akami Technologies, Autodesk,  Expediters International, Garmin, and Monster Beverage.

Do you think I could have come up with this list on my own ?.  Absolutely not.  Is each of these names a risky stand alone  investment? Very probably, YES.

Hate to hark back to my training days  ( 1960 )  at Citibank.  Don’t invest more than 5% of your investable capital in any one risk.  Perfect, here are 20 names each to carry 5% of the risk.  I will treat the entire grouping as one name and call the portfolio either the RMG Lazy Man Portfolio or Zack’s QQEW Portfolio.  I’m sure Zacks won’t mind because there will be only one investor…me. Right ?

So, on Tuesday I enter the water hoping to catch a good wave with this portfolio.  When do I exit the water ?  When the VTI signal turns negative ( see below ) or until the tape tells me this portfolio is sputtering.  I won’t overly concern myself with the performance of any one name because its performance has been dampened by the other 19 names.  Maybe, I can re-balance the portfolio with fresh names every month, eliminating the laggards.  Perfect, I can look forward to the results of this portfolio every mid month and VTI at month end.  That should keep me focused .  Now, all I’m missing is week 3 ( options ? ) and week one.  I’m sure something will turn up.

VTI Update – ( sell when price of VTI is in violation of its 200 day moving average…. at a month end ) Existing trade opened December 31, 2011…533 days without a sell signal … and counting.  Gain as of February 14, 2014….55.37%.  As a market barometer its saying its ok to be in the water.  Let the trend be your friend – till the end !

Back up to the attic where a hot hose awaits me for the purpose of melting the heavy snow on a rather large vinyl awning !


Richard Maurice Gore

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