Carson Portfolio Review: 7 February 2024

Winter scene of Canada geese.

As the oldest Sector BPI portfolio, the Carson is still a relatively young example of this “hypothetical” investing model.  As such I use the Carson as a bellwether for the Sector BPI approach to portfolio management.

No sectors are in the oversold zone.  Energy is closest and I checked this morning to see if it dropped further yesterday.  Energy is still about 10% above the oversold zone.  Readers will notice a change in the investment quiver as I added Developed International Equities (VEA) and Emerging Market Equities (VWO) as a means of diversifying the Carson.  Over time we will see if these additions add or subtract alpha.

Carson Security Holdings

Below is the investment quiver and current holdings for the Carson.  There is little action within the sectors as nearly all are positioned in what we call the neutral zone.  None are not oversold and if overbought we have Trailing Stop Loss Orders in place.  We patiently wait for market movement to see one or more sectors drop into the oversold zone.  In the meantime we look to our equity ETFs for buying opportunities.

Carson Manual Risk Adjustments

Once more, the SD Multiplier was moved to 1.70 so the Stop Loss percentage for VTI is 8.0%.  I could be a tad more aggressive with the Maximum Portfolio Risk as there is plenty of cash in the account.  VTI, VOO, and ESGV are more than fully populated.  After the market opens I’ll place limit orders to pick up 135 shares of VEA.

Carson Portfolio Performance

Since 12/31/2021 the Carson outstripped the SPY benchmark by a wide margin.  It will be difficult to keep this up as the SPY is a difficult benchmark to beat.

Carson Risk Ratios

Over the past year the Carson lost ground to SPY based on the Information Ratio trend.  If this trend were to continue there is a potential solution.  Instead of expanding the investment quiver as I’ve done with the Carson and a few other ITA portfolios, narrow the options.  Check out the idea below this table.

Assume one is striving to outperform the S&P 500 (SPY).  Continue to employ the Sector BPI model as this approach seems to be working very well based on the data thus far.  However, reduce the number of equities down to VOO only.  When a sector ETF is sold, immediately invest that cash in VOO as that will begin to track the S&P 500.  When a sector moves into the oversold zone.  Sell shares of VOO to raise the needed cash to populate the oversold sector.

This approach would keep one fully investing at all times.  There are owners of some of the portfolios I track where cash is needed so this approach would not work in all situations.