Einstein Sector BPI Portfolio Review: 7 May 2024

Spring is here in Oregon

Einstein is the Sector BPI portfolio up for review today and there are a few circumstances that impact this account.  Readers might raise the question as to why the portfolio holds so much cash.  Another event impacting the holdings is solely my mistake and it has to do with missing the buying opportunity for Telecommunications a week or so ago.  In the third screenshot I’ll discuss the problem with the Treynor Ratio.

Follow along as the Einstein is updated and how one handles a portfolio where cash will be withdrawn over the next six to eight months.

Einstein Investment Quiver and Holdings

Below is the investment quiver (standard for a Sector BPI portfolio) and the current holdings for the Einstein.  The owner of this portfolio requires a significant amount of cash to be available for educational expenses.  That is the primary reason for 82% held in cash.

Einstein Manual Risk Adjustments

Even if available cash were not a requirement, no U.S. Equities are recommended for purchase.  As mentioned above, I missed the opportunity to purchase shares of VGT when Telecommunications dipped into the oversold zone.  Big mistake.

Einstein Performance Data

Since 12/31/2021 the Einstein continues to lag the SPY benchmark as well as the other five potential references.  This portfolio has only been operating using the Sector BPI model since early November of 2023 so we don’t have a useful track record.

Einstein Risk Ratios

The Treynor Ratio dropped off the cliff do to a very low beta value (0.09).  I am not a fan of the Treynor as it is so dominated by beta.  One thinks of a portfolio holding a high percentage in cash is a low risk portfolio.  Not so if one relies on the Treynor for this information.  A much better metric is the Jensen Alpha.

The risk-free interest rate for SHV increased to over 5% impacting the Jensen.  If and when interest rates drop it will definitely help the Jensen.

Einstein Sector Portfolio Report

The following sector report would look much stronger had I not missed purchasing VGT.  Regardless, the Einstein is keeping up with the S&P 500 and SPY since the first of October 2023.  Once the cash needs are flushed out of this portfolio and the owner can rebuilt the account I fully expect this portfolio will perform much better.  The next year is simply a holding period for the Einstein.