Weekly Algorithm Review: 04/15/2023 to 04/21/2023

Performance Rankings

1. Overall Market: +0.68%

2. Base Algorithm: +0.23%

3. Variable Sector Neutral: -0.26%

4. Variable Market Neutral: -0.26%

5. Long Term Portfolio: -0.27%

6. Sector Neutral: -0.73%

7. Market Neutral: -0.83%

With the base algorithm outperforming our portfolio by 50 bps, this is a win for technicals. That said: it is a large loss for fundamentals.

Rather than go through each individual stock in our portfolio and the S&P 500, let’s go sector by sector, from best to worst performing this week:

1. Financial Services (Our portfolio under-allocated into this sector)

2. Consumer Discretionary (Under-allocated)

3. Consumer Staples (Over-allocated)

4. Materials (N/A)

5. Industrials (Under-allocated)

6. Technologies (Under-allocated)

7. Energies (Over-allocated)

8. Utilities (Over-allocated)

9. Healthcare (Over-allocated)

Most of the sectors we under-allocated did well or close to the middle, while all but 1 of our over-allocations was in the bottom 3 sectors this week. At the risk of getting repetitive, our portfolio is defensive. We over-allocate into defensive sectors, and under-allocate into more speculative ones. This week, defensive sectors didn’t do well. At this time, we have considered creating a secondary, more market-bullish portfolio, but are sticking with our long-term defensive strategy.

Interestingly, this is also the reason our hedgers did so poorly. Their value is ultimately based on the long term portfolio, but we can’t hedge them by shorting the whole portfolio (that would be 100+ tickers to trade - restrictions on fractional trading plus commissions make this undesirable). Instead, we have to hedge by shorting SPY. When the market does well, but the long term portfolio does poorly, we get the worst of both worlds in our hedgers.

This makes for an interesting problem, which I would like to research in the future. At this time, I can’t offer a solution I’m happy with.

What’s In The Pipeline?

1. We’re working on adding a “Max Pain Calculator” to our website. This comes up in the daily call pretty often, so we’d like to have this on-hand.

2. We have another project in the works that we aren’t ready to announce quite yet. We’re hoping to debut it next Monday.

Misc. Data For The Week