Author Archives: Dpinsen

Our Top Names Versus The Market

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Each week since June 8th, we’ve been presenting the top 10 names in Portfolio Armor‘s daily ranking to subscribers of a service we run on another site. The performance of our top 10 names from June 8th and eight subsequent weekly cohorts exemplifies the alpha our security selection delivers, as we elaborate below.

How Our Security Selection Method Works

In a nutshell, here’s how our method works. First, we apply our 2 screens to avoid bad investments. Then, for the securities that pass both screens, we start with the assumption that securities will begin to revert to their long term average returns over the next several months, and then we use our gauge of option market sentiment as a “sanity check” on that to arrive at a potential return estimate. We then subtract the cost of hedging from each potential return, and rank every name by potential return, net of hedging cost. The top 10 names each week refer to the top 10 names on that ranking. (more…)

Testing The Hedged Portfolio Method In Real Time

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Fellow Slopers may recall I wrote about the hedged portfolio method a few years back. The basic idea was to find securities that had high expected returns over the next six months and were also relatively cheap to hedge, and then to buy and hedge a handful of those names every six months.

I backtested the approach a couple of years ago, and wrote it about here at the time (Does Hedged Investing Work?). You can also find interactive versions of those backtests on the Portfolio Armor website. Since April though, I’ve been tracking the performance of portfolios posted in real time. Out of the 6 portfolios created in late April / early May, 5 were beating the market as of Friday’s close. Here’s a look at the first one. (more…)

A Hedged Bet Against Small Caps

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Another 3x Bearish ETF Appears In Our Top-10

Happy New Year, Fellow Slopers.

I just saw a 3x bearish ETF (TZA) pop-up among the ten highest-ranking names on Portfolio Armor‘s daily ranking of optionable stocks and exchange-traded products by potential return net of hedging cost. Usually, it’s just stocks in that top-10, but the last time an ETP appeared there it was another bearish ETF, YANG. I posted about that here in November (“A Hedged Bet Against China“), and since then, YANG has gone on a decent run. Maybe something similar will happen with TZA? Just in case it goes pear-shaped, though, I’ve posted a hedge for it below. First, a quick look at how YANG has done since our November post on it.

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Background On How We Calculate Our Ranking (more…)