Dirac Portfolio Review – 30 September 2021

Fun “Toys” on Lake Powell, Northern Arizona

The Dirac Portfolio is the only portfolio reviewed on this site that holds individual stocks rather than multi-stock funds. Performance to date looks like this:

and recent performance, although in a draw-down, has been better than the benchmark SPY fund as 1 Standard Deviation TSLOs have been hit. The current portfolio quiver looks like this:

where we can see that only one stock (AMD) is currently held in the portfolio – nine stocks were stopped out.

Checking current rankings and recommendations for the BHS model we get the following picture:

where, despite a target of 10 stocks, we only see two Buy recommendations (for DRI and NFLX) in addition to a Hold recommendation for AMD. This would normally be my adjustment action for this month. However, since the portfolio is currently essentially in Cash, and I am looking to fund a new account holding ETFs in the near future, I think I will discontinue this portfolio at this point – at least when my position in AMD is stopped out.

This portfolio was initiated to demonstrate that momentum systems can be used to manage stock portfolios in addition to portfolios built with more diversified funds. However, in order to generate a desirable level of diversification, more assets (stocks) need to be held and more management is required (because the portfolio tends to have a higher turnover). In addition, the arrows in the portfolio “quiver” need to (or should) be checked more frequently (at least annually, maybe quarterly) – and I haven’t been able to find the time to do this in addition to managing other portfolios and working on new “systems”.

I put $70,000 ($65,000 initially plus $5,000 in March 2020) into this portfolio at the beginning and withdrew $40,000 in June 2021 and the portfolio value is currently at ~$55,000 – so, if closed, this results in a $25,000 profit ($95,000 – $70,000) in 21 months or an annualized return of ~20% on the initial investment (ignoring the fact that $40,000 was withdrawn in June and not available for investment). During this time we went through the ~20% Covid-19 Crash of March 2020 and the current ~5% “correction” – so I can’t be too disappointed with this performance – although volatility may be a little un-nerving for some investors.

I hope the discontinuation of this portfolio is not too disappointing for ITA members. I will try to make the new portfolio equally educational and informative.

David