Dock #5 – Newport, Oregon
Bethe is the Sector BPI portfolio reviewed this morning. This update was scheduled for posting yesterday, but I lost Internet access due to a severe ice storm. We have been housebound for over a week, but experienced only four electric energy (EE) brownouts so we are extremely fortunate compared to many Portland citizens.
Now to the Bethe review. My preference is to always go over portfolios on days when the market is open so as to be sure to follow the guidelines recommended in the second screenshot.
Bethe Security Holdings
Bethe is holding a very high percentage of the portfolio in cash and that is a drag on strong market days as we experienced yesterday. Only two sector ETFs remain in the Bethe and the one share of VDE is a shard holding and will contribute next to nothing to the portfolio.
We are still in a situation where no sectors are oversold so we look to the U.S. Equities for buying opportunities.
Bethe Manual Risk Adjustments
As a reminder, I set the SD Multiplier to 1.67 so the Stop Loss for VTI is 8.0%. This is a standard procedure for me as I work with the Kipling (Bethe) spreadsheet. This setting is done in the worksheet prior to the one you are looking at below. The second setting in the “Auto” worksheet is to adjust the Maximum Trade Position Risk so we see a Maximum Portfolio Risk of 6.0% on the Manual Risk Adjustments worksheet. This setting leaves $38,000 in cash when the Shares to Hold are set as I have them below.
Bethe holds more than the recommended number of shares in VOO so that ETF is fine. We need 40 more shares of VTI and 100 more shares of ESGV. I have limit orders set close to the current price so there is a strong chance those orders will fill next week. To “use” up the remaining $38,000 I set numerous limit orders for all three equity ETFs (VTI, VOO, and ESGV) at prices as low as 15% below the current price.
Yes, this strategy can see the market walk away from the portfolio. Consider this a conservative approach as the owner of this portfolio wants to protect capital.
Bethe Portfolio Performance
Over the past two years the Bethe is matching the SPY benchmark. Unless a number of the limit orders are struck it will be difficult for the Bethe to keep up with SPY, particularly if the market continues to rise.
Bethe Risk Ratios
When the IRR for the portfolio is so close to the IRR for SPY it comes as no surprise that the Jensen Alpha is not adding alpha to the portfolio. The slope is also negative so the Bethe is not performing as expected. Bethe was one of the last portfolios to convert to the Sector BPI investing model so more data is required before one gets down on this account.
Keep an eye on this portfolio over the next few months. I’m considering adding two international ETFs to the investment quiver so as to provide additional diversification. Those two ETFs are VEA and VWO. Neither are currently a buy.
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