FMSUP Shuffle

This post is to update watch-list for Utilities Portfolio (FMSUP).

read this FMSUP article (post link) to understand what is going on.

There was one important change to portfolio construction. It was started with 6 positions, but represented 20% of my account, which proved to be too much. At some point in the beginning of the year the whole thing felt like one giant utility position with tech and industrial kicker. Of course it's not normal and immediate remedy required was a reduction of utilities portfolio. Since I couldn't cut position size, I decided to go with 4 stocks instead of 6.

Two positions sold (PPL in Feb and ES in June) more than covered a deficit that darn mr. Simmons left me, so I felt it was fair to put whole ordeal behind and just continue with sensible portfolio management. Although I would prefer to diversify into 6 or (even better) 10 stocks, FMSUP seems to be doing just fine even with smaller number of positions, and leads me to believe that I can safely
Forget Mr Simmons Utility Portfolio
and just do my own thing.

BTW, I beat the pants off him, XLU and Ass-n-Pee index too... ;-)

FMSUP as of 12/7/16 (this will change soon - I'm rotating)
http://stockcharts.com/freecharts/candleglance.html?SPY,XLU,FSUTX,PNW,PCG,ES,exc|B|P5,3,3|0

Presently, there are still about 50 companies that satisfy selection criteria, but I noticed that I'm pretty much shuffling thru the same stocks. They just seem to come up no matter how I look at a pool of possible candidates. So in a coming weeks and months, I will use this Shuffle List to (hopefully) streamline rotation process in order to further increase returns.
FinViz Link

http://stockcharts.com/freecharts/candleglance.html?XLU,FSUTX,PCG,PNW,ES,EXC,SO,ATO,AWK,NEE,DUK,D|B|J[XLU]|0
http://stockcharts.com/freecharts/candleglance.html?AGR,NYLD,HE,ETR,OGE,SJI,DTE,SCG,AEE,PPL,PEG,NWE|B|J[XLU]|0

I expect that Shuffle list will change in the future, as we are scraping a bottom of barrel here in utilities. Monster rally that started late last year run out of steam during summer months and turned into a nasty, but orderly correction. Most utility stocks are under 200ma and 10-20% off recent highs. Despite the carnage, this is all quite ordinary and historically able to produce a durable bottom somewhere here. For everything else - there are rules...

FMSUP 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

System Update. 1-2016

System12

  ...System12 original rule-set is basically discontinued. I continue to use it exclusively as high quality stock selection tool and timing entry/exit using weekly CSI (Composite Score Indicator)...

Since last update at the end of November 2015 (post link), market went basically straight down, putting a bottom on Jan 20 with extremely oversold readings. I wanted to wait a bit to see some early earnings reports and reaction to it.
One of MD stocks I was especially interested in - AMZN, aka "river of no returns", sporting a farcical 975 P/E just a month ago. Don't get me wrong - I'm a big fan, long time happy customer and successful investor in AMZN (last year), but silly fundamentals of this outfit make me very uneasy.
I saw Television Genius Barry Diller (wiki) opine that Amazon will be one of biggest companies in the World (among some other wild prognostications). I have highest respect for Mr Diller (college drop-out, naturally). He is a visionary, great businessman... and married to a real princess, no less..., but he is not a market practitioner. Had he be one, he would know that AMZN already IS one of top ten companies in the World, although it slid from #6 to #9 due to disastrous earnings call and guidance.
Note to self: never take stock advise from non-market practitioner. Really.

System12BCM:
http://stockcharts.com/freecharts/candleglance.html?WFC,PFE,PG,BRK/B,T,CHL,BUD,GOOGL|B|P5,3,3|0

This is MD:
http://stockcharts.com/freecharts/candleglance.html?AAPL,GOOGL,MSFT,BRK/B,XOM,AMZN,GE,FB,WFC,JNJ,PG,T|B|P5,3,3|0

https://trader.motifinvesting.com/motifs/mega-dozen-Ftnb1cNJ#/overview
.motif is re-balanced to equal weight for better near-term tracking.

MD Control: CHL and JPM out; PG and T in
Disqualified: AAPL, BRK, WFC, CHL and XOM (by a smidge)
Earnings: GOOGL 2/1; XOM and PFE 2/2; BRK 2/5; DIS 2/9; WMT 2/18; HD 2/23; BUD 2/25

This is SD:
http://stockcharts.com/freecharts/candleglance.html?CHL,JPM,WMT,NVS,VZ,BUD,PFE,TM,PTR,KO,V,CVX|B|P5,3,3|0
DIS out; CVX in (CVX was hanging close in last update)
Some of stocks coming up: BAC, HSBC and C; PEP and PM; MRK; ORCL and INTC (not ibm)
also HD almost at SD, with DIS close by and CMCSA down below.
Oiler RDS  hanging out; BABA at #26 and keeps coming down (lol).
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FMSUP Utilities Portfolio.

FMSUP overview here (link)
Started 1/4/2016. Starting equity $20K.
Positions entered on open.
SO    3164.51
PPL   3163.44
PNW  3159.14
ES    3148.25
ATO  3158.95
AWK 3183.18
Cash reserve 1022.53

http://stockcharts.com/freecharts/candleglance.html?SPY,XLU,FSUTX,SO,PPL,PNW,ES,ATO,AWK|B|P5,3,3|0
https://www.motifinvesting.com/motifs/fmsup-M9fcmb13#/overview

Portfolio is mostly large cap with two big mid caps, for average ~20Bil.
ATO and AWK are not in S&P500 (note: Ass-n-Pee has no water utilities... cus people don't need no stinkin' water...)
P/E ranges from 13 to 23; P/S normal; lots of debt (expected).
This mix should yield about 3.5%
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DART Portfolio
(DART overview post link)
Due to circumstances beyond my control, this test virtual account was all screwed up on Monday, January 4. There was no reasonable alternative, so I entered all trades on Tuesday mid-day.

This is a test!
No real money traded, but I keep a virtual trading account with (near) real records.
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FMSUP

UTILITY PORTFOLIO OBJECTIVE
Seeks capital appreciation with focus on absolute returns, irrespective of any benchmarks, but comparative to Utilities Sector of S&P500 (XLU).

STRATEGY
Investing in utilities industry in USA, using common stocks, long only, no margin.
Investing in companies principally engaged in utility operations emphasizing power and gas, generally not including telephone and telecommunications utilities. No out-of-index positions allowed.

INVESTMENT APPROACH
Within the utilities sector, we believe buying companies with rising share prices and above average dividends can make a boat-load of money over time.
There are about 100 American utility companies currently trading in USA. Half of them are active tradeable stocks, profitable and with dividends. 40 of them are 'electric' and 'diversified', with some discrepancy as how to classify some. For simplicity I will use Finviz's sector designation, but  generally following XLU index allocation.

Finviz Utilities screen (link)
Utilities Select Sector SPDR Fund (XLU) from State Street (link)

Utility Portfolio will consist of 6 stocks, selected on basis of dividend yield, market cap and share price performance. Our investment approach focuses on stocks with reasonable valuations and proven track record, as such we lean towards companies included in S&P500 index and generally avoid recent IPO's. In interest of diversification and with objective of consistently meaningful portfolio impact, we allocate equal standard position size to 3 electric, 1 multi, 1 gas, 1 water, with understanding that substitution is permitted at times.

RISK AND PERFORMANCE
The value of portfolio investments will vary from day to day... just because..., and money can be lost!
In order to mitigate an impact of chaotic price fluctuations we deploy risk containment measures designed to sell losers and let the winners run, with goal to be near-100% invested on any 30-day rolling period, unless a bear market strikes and all stocks go to shit.

Portfolio is allowed 12 re-balancing per year (200% turnover) or one switch per month on average, for about 1.2% in expenses of first $20,000. Every effort is made to minimize cost, but keeping in mind that quarterly dividends needs to be re-invested as soon as possible, which requires at least 4 round-trips per year.
For ease of tracking purposes, initial allocation will be made on open of first trading day of new year.
Activities will be reviewed on quarterly basis or as need arises.

Diversified Utilities
http://stockcharts.com/freecharts/candleglance.html?SPY,XLU,FSUTX,exc,sre,peg,es,ni,wr,ugi,vvc,pnm,nep|D|0
Electric
http://stockcharts.com/freecharts/candleglance.html?DUK,NEE,SO,D,AEP,PCG,PPL,EIX,ED,XEL,WEC,DTE|D|0
http://stockcharts.com/freecharts/candleglance.html?FE,AEE,CMS,SCG,PNW,LNT,POM,TE,AES,ITC,OGE,GXP|D|0
Gas and Water
http://stockcharts.com/freecharts/candleglance.html?GAS,ATO,PNY,OKE,STR,APU,NJR,SJI,AWK,WTR,AWR,CWT|D|0

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 A man always has two reasons for doing anything: a good reason and the real reason. - J.P.Morgan

In a previous post (link) I outlined my deep dissatisfaction with performance and management of one of my investments - Fidelity Select Utilities Fund FSUTX (link).
Adorable Mr. Simmons is a really nice guy, I would love to have a beer or two with him while slinging war-stories about dumb investors and gullible speculators ... and a wretched 15% loss in my investment (little less including dividends), while index is down only single digits. I tested my own utility portfolio, based on strategy outlined above. Out of six different runs there wasn't a single case of double-digit loss, with last iteration up 11% -  all during a period when XLU was flat to down.
I am looking forward to putting up some of my own money in a sensible, focused way. Surely it will give me a great pleasure to not only make some profit next year (*what a novel idea), but also at the same time Fuck Mr Simmons's Utilities Portfolio and half a million dollars he dumped on his useless college education...

This is end-of-2015 allocation.
http://stockcharts.com/freecharts/candleglance.html?SPY,XLU,FSUTX,PCG,NEE,TE,ni,ATO,AWR|D|A1,200,1|0

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January 4, 2016. Starting allocation:

http://stockcharts.com/freecharts/candleglance.html?SPY,XLU,FSUTX,SO,PPL,PNW,ES,ATO,AWK|B|P5,3,3|0

https://trader.motifinvesting.com/motifs/fmsup-M9fcmb13#/overview

System Update. 11-2015

System12

.this update covers activity from 11/30/15 to 1/29/2016.
  ...System12 original rule-set is basically discontinued. I continue to use it exclusively as high quality stock selection tool and timing entry/exit using weekly CSI (Composite Score Indicator)...

System12BCM:
http://stockcharts.com/freecharts/candleglance.html?WFC,PFE,PG,brk/b|B|P5,3,3|0

BOT: T on 1/13; CHL on 1/27; BUD and GOOGL on 1/28
SLD:
DIVI received: PFE, WFC

This is MD:
http://stockcharts.com/freecharts/candleglance.html?AAPL,GOOGL,MSFT,BRK/B,XOM,AMZN,GE,FB,WFC,JNJ,CHL,JPM|B|P5,3,3|0

https://trader.motifinvesting.com/motifs/mega-dozen-Ftnb1cNJ#/overview

MD Control: PTR and NVS out; AMZN and JPM in
Disqualified: AAPL, BRK, CHL
Earnings: all done

Four stocks in MegaDozen (MD) don't pay any dividends, the rest are barely 3% on average (+/-).
Three have asinine valuations. Four stocks have slightly below average P/E.
Overall its one of strangest and fundamentally weakest mix of index components I have ever seen.

This is SD:
http://stockcharts.com/freecharts/candleglance.html?PTR,NVS,WMT,PFE,TM,T,PG,VZ,BUD,DIS,V,KO|B|P5,3,3|0
BAC out; KO in (KO was 'coming up' on last update in August)
Some of stocks coming up: C and HSBC; PEP; GILD and MRK; ORCL and INTC (not ibm)
also HD almost at SD, after sitting at #34 in last update (I have HD in System9)
Oilers RDS and CVX hanging out; BABA at #21.
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 System9

 I have a problem. Its this Utility mutual fund FSUTX, specifically its manager - one Mr. Simmons, Harvard MBA no less.
Now, I've been a long term investor in utilities for a long time and it served me well. The main reason for going mutual fund route vs. ETF is a dividend re-investment, which is free and automatic at Fidelity.

I monitor daily activity via XLU, knowing that mut fund is somewhere close, so noticeable underperformance of FSUTX caught me by surprise. He's got 70% of the the fund in same 10 utilities as everybody else, with all he has to do is re-balance, re-invest divi and sit tight. I pay this guy 0.8% to do this for me, not to have a turnover rate of 63% (as of 8/31/2015, even higher before that). What the hell is he trading out there?- I wonder. Upon further inspection I was shocked to find out that there is gambling going on in here, including some wild bets on renewable energy, speculation on oil and gas and some strong opinions based on vague assumptions. The most egregious transgression is completely out-of-index trades in Time Warner Cable, because he "consider cable & satellite companies modern-life utilities"...
Say, what? WHAT? Do I have to do everything myself? Really..?

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System 9 activities.
BOT: TXN on 1/28
SLD: HD on 12/9; HRL on 12/23
DIVI received: HD