Carson Sector BPI Portfolio Review: 6 December 2024

Barn on Mormon Road near Grand Tetons

Carson is the oldest Sector BPI portfolio tracked here at ITA Wealth Management.  We are beginning to see under what market conditions this management style works best and when it lags.  The basic idea of the Sector BPI model is to purchase the ETF that mirrors the sector when the Bullish Percent Indicator drops to 30% bullish or below and then set a 3% Trailing Stop Loss Order when the BPI moves to 70% or higher.  The current situation is for Sector BPI portfolios to hold only one sector at this time, Energy.  VDE is the Exchange Traded Fund (ETF) that “represents” this sector and the Carson is currently holding 70 shares.

When additional cash is available we seek out opportunities to purchase either VTI or VOO and in some situations, ESGV.

Carson Sector BPI Holdings

Below is the current Carson BPI portfolio.  Limit orders are in place to purchase more shares of VOO and VTI.  The market is quite high so buying opportunities are limited as I don’t wish to chase a bull market considering the uncertainties of the incoming administration.

Carson Performance Data

Since 12/31/2021 the Carson has outperformed the SPY benchmark, but there is cause for concern lurking beneath these very positive percentages.  See the Risk Ratio data below.

Carson Risk Ratios

Early in the life of the Carson as a Sector BPI portfolio the market was quite volatile.  As a result we were able to purchase sector ETFs when they were low and sell them when they were significantly higher.  More recently the volatility decline with more sectors spending more time in what I call the neutral zone.  The neutral zone is when the Bullish Percent Indicator percentages range from just above 30% bullish to just below 70% bullish.

In a rising market this type of portfolio needs to hold cash to a minimum and be invested in VOO if it wishes to keep pace with the SPY benchmark.

Based on the Sortino Ratio the Carson is adding alpha.  That is a good sign.  The concern focuses on the Jensen Performance Index and Information Ratio where both indicate the Carson is losing ground to the SPY benchmark.  Those are my two points of concern.

This concern may be temporary.  2025 might well be a volatile period for the U.S. stock market and if so it will be a real test of the Sector BPI investing model.  When based strictly on the return of investment, the Carson is a great success.