Copernicus Portfolio Review: 27 February 2023

More snow before sunrise.

Copernicus is on the dock to be updated this morning. ITA readers who have been checking in regularly know this portfolio is U.S. Equity specific and the goal is to never sell. Only purchase more shares when cash becomes available. When to buy is not specified and that requires a little discussion as I am competing with the S&P 500 (SPY) and the total U.S. Equities market (VTI). As you will see in a moment, I use four different ETFs to populate the Copernicus, but one could easily select one and invest only in it. There are two advantages to including ESGV as one of the four. 1) It is priced much lower than the other three so one can use up smaller amounts of cash thus lowering cash drag on the portfolio. 2) Stocks within ESGV are classified as socially responsible companies. I’m well aware that companies receiving this classification vary from investor to investor. At least there is some screening of “sin” stocks. While we understand that Coca Cola is bad for ones health, and the Yuka app gives it a zero rating, it is classified as an ESG stock.

The Copernicus is specifically designed for young investors or for those who do not need income and are able to save on a regular basis. Knowing what I know now, I should have invested only in VFINX when it was launched back in the early 1970s, and done nothing else. The performance would have been much better and taxes would have been much lower.

The Copernicus is classified as a passively “managed” portfolio. There is no active trading so it is extremely simple to implement.

Copernicus Investment Quiver

Below is the investment quiver for the Copernicus and the current holdings. The Kipling Tranche worksheet (not shown) lists all four equity ETFs as a Hold when Buy-Sell-Hold (BHS) is the model of choice. If I select LRPC as the investing model and use the default look-back period, all four ETFs are listed as a Buy. Readers familiar with the Kipling spreadsheet know the difference between the BHS and LRPC investing models.

Since I am using the BHS model there is no rush to barge in and use up all $3,177 now in cash. What I’ve done is to set multiple purchase orders. If the market moves down, the cash will help the Copernicus gain on the S&P 500 and limit orders will be picked off. Should the market move higher, I’ll miss out on the buy orders, but the cash should not hurt performance too much as it is only 11% of the portfolio.

I’m betting the market will move lower this summer and the limit orders will be picked off one by one.

Copernicus Performance Data

The following data is closing in on 14 months of less than stellar performance as we witness from the six benchmarks. The Copernicus holds a comfortable margin of 11.4 percentage points over the S&P 500. Note that I wrote “percentage points” rather than percentage. There is a difference.

Copernicus Risk Ratios

Once we clear February of 2022 from the table the slope of the Jensen will turn positive. That in turn will elevate the ranking of the Copernicus and it is already the top performing ITA portfolio.

The goal for all the ITA portfolios is to keep positive values for the Sortino, Jensen, and Information Ratios. The cherry on top is a positive Jensen Alpha slope. The Copernicus is close to hitting on all cylinders.