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Friday, November 18, 2016

DART v2 note

At this time all notes, observations and orders of DART v2 Method pertain directly to my main account and being traded with real money. Still, I would like to caution an excited follower that this remains not a thoroughly tested strategy and money can be lost. You are responsible for your own decisions with your own money (tips hat).

I used September and October dips to enter DART v2 positions, via a synchronization process, outlined in 'Dart Sync' article (post link). DART rule-set was sufficient to navigate softness due to Trump pre-election Slump, and portfolio took off from November low like a bat out of hell.

At time like this, when these six stocks are ripping tits to upside, it is important to remember that DART is not a trend following system, but a dynamic rotational method. Meaning: since there are no losers in portfolio - I must sell a big winner, add profit to cash reserves and re-allocate Standard Position Size into something that didn't rally yet. All according to rule b2 from from original article (post link)

MSM has been in Dart since end of summer. It gave me little trouble, although it was one of possible sell candidates after October low. Since then MSM rallied 20% and presently best performer. As a result of price appreciation, stock yields 2.1% - smallest in portfolio and kind of low by DARTv2 selection criteria. Ex-dividend date was about a week ago, so its a money in a bank, however small... still "one to-day better than two to-morrow" (as Poor Richard would say). Further red flag is short interest, standing at 12% of float (read about 'short qualifier' here (post link). While more like a recommendation rather than requirement, I don't like these expressions of doubt about Dart Picks.
Stop for MSM is 82.22 and will be aggressively trailed until caught.

(UPDATE: stop was trailed for almost a month until MSM was finally sold on 12/14/16 at $91.58 for about 25% gain in 3 months... unbelievable...)

This is Dart v2 Portfolio now:

Portfolio can be viewed in MarketWatch for illustration purposes. as DART v2 Game (link):
(MarketWatch virtual game started 11/9/2016 and expected to end sometime in 2017)

DART v2 trades and occasional commentary are published on my private Twitter feed 
(just send me a request - its FREE for now):  https://twitter.com/SWID_iBergamot
 MSC Industrial Direct (MSM) is a tool, parts and materials supplier for industrial clients. Think of it as Home Depot, but for real. Metalworkers, small factories, machine shops, transportation... you name it... when its serious business - people go to MSC Direct- 'Built To Make You Better'. Its not a retail shop, although they got offices all over the place, mostly everything is shipped from few major warehouses, that keep a cool million of in-stock items.

MSM debt is at manageable level, with small dividend, cash on a books and almost 3 Bil in sales - its a solid company and it almost pains me to sell such a beauty. Alas, rules are rules (that's what they are there for) and stock has to go.  I am looking forward to a possibility of re-purchasing MSM at lower levels, following obligatory 1 month lock-out period.

 .to follow articles in this series - select 'DART' label on a right sidebar.
Read these key posts:
Original DART Article
Loaded Gun - results and observations
Dart v2. System Start
Dart v2. Portfolio Check

Wednesday, November 16, 2016

System 12 Update. 11-2016

I am surprised to see how little changed Mega Dozen (MD) and Second Dozen (SD) have been over a past year or so.

This is MD:

This is SD:

FinViz link
Currently, only few stocks are Disqualified and really only one from MD ( T for sure and FB by a smidge), while half of MD+SD are Not Available... quite a predicament...

MD Control was recently re-balanced and updated. It remains remarkably correlated to S&P500 index. I continue to maintain it as a Motif for tracking and comparison:

This post will not update with recent activities (like I used to do). Instead, I set up a simulation at MarketWatch.  This whole 'virtual account' project turned out to be a major disappointment - I will write about all this in detail later. Meanwhile, this link will have all recent activities in (close to) market representation, but mostly for illustration purposes, rather than for record and comparison.
System 12 Game link
(MarketWatch virtual game started 11/9/2016 and expected to end on 12/30/2016)

This is System 12 AMD today:
with pending sell orders for GOOGL and PG;
with pending buy orders for GE and XOM;

S12 hasn't been fully loaded for-awhile, and it doesn't look like it will happen tomorrow, but I will leave it up to market to sort out. Large cap 'growth' stocks had been laggards on this Trump Stump rally, while 'value' group leads and making decisive new highs.. The whole market split into stocks that rallied like crazy and stocks that dropped like dead. S12 positions managed to side step most of carnage and keep some top performers, with overall results slightly north of zero since summer top. Simultaneously, portfolio suffered only trivial draw-down of about 2% (about $800) at the depths of Trump Slump, which is nothing to worry about and has already been recovered and exceeded.

System 12 Select - AO

This is one of the ideas I am actively working on right now.
Basic recipe is to take MD and upper portion of SD, rank it according to sales, then use Arnott Overlay (post link) to determine 12 stocks in an order of financial 'importance'.

Naturally, this list serves as a blue-print on 'what to buy in panic', in case a big and sudden collapse happens and one needs a good selection of major stocks in an order of importance, although it is not apparent at present time.
This Select group can be treated as a limited universe of stocks, to serve as basis for further selection based on Relative Strength (RS). The goal is to be invested into stocks exhibiting better price performance relative to S&P500 tracking ETF - SPY, and to stay away from laggards. Concomitantly, RS can be used to pick a minor bottom, but only with general guidelines of cycle analysis (I'm working out some kinks there) and within the framework of System 12 Method.

Because selection process is inherently flawed and prone to misjudgement, inevitably S12S-AO will miss some big winners and catch catastrophic losers, if only by chance.
Equally, the opposite is entirely possible...

Test portfolio in simulated environment at MarketWatch:
(MarketWatch virtual game started 11/9/2016 and expected to end on 12/30/2016)

To understand what this article is about, make sure to READ these:
Part 1: System 12. American MegaDozen. Introduction.
Part 2: System 12. Portfolio Construction and Rules 
Part 3: System 12. Trade Management 
Part 4: System 12. Performance and Risk
Part 5: System 12. Portfolio Initiation
and remember that you are responsible for your own decisions with your own money (tips hat)