Franklin Portfolio Review: 29 September 2022

Columbia River viewed from Crown Point.

Franklin is the Dual Momentum™ portfolio up for review this morning.  Since 11/30/2022, the Franklin has been one of the worst performing portfolios tracked here at ITA.  It is not the model that is at fault, but rather due to the luck-of-review-date as the Franklin seems to come up for review and recommend security moves that have not worked out all that well over the past two years.

As a result of record keeping, I have some plans for adjustments as readers will see below.  These changes are planned over the last quarter of 2022 with the hope of pulling the Franklin out of this performance slump.  That may be a difficult assignment should the market continue to slide, as it is doing again this morning.

Franklin Dual Momentum Recommendation Long Look-Back Period

In the following review I am posting something I rarely do.  In the first screenshot, shown immediately below, is the DM recommendation when using a long look-back period of one year.  Another change I made in the following worksheet was to add VOO (S&P 500) to the securities list.  The logic behind this move is that it is extremely difficult to outperform the S&P 500.  Therefore, why not include it as an investing option.

When using a one-year (252 trading days) look-back period the recommendation is to put all eggs in the SCHP basket.  And that is where the majority of the Franklin is currently positioned.  I have a limit order set to add more shares of SCHP to the Franklin so it is set to run into October.  While the next scheduled review is not set to come up until early November, I’ll look at the Franklin in October.

Franklin Dual Momentum Recommendation Short Look-Back Period

What is the Dual Momentum (DM) recommendation if we use the default or short look-back combination (see green arrow)?  With the short look-back combination the recommendation is to place 100% of the portfolio in VOO or the S&P 500.  Another option is to use SPY.  The short look-back combination comes up with a very different recommendation than the long look-back combination.  With the market down and it will eventually recover, it makes sense to set up a faster moving combination.  The short look-back combination will accomplish that.

Since the Franklin is such a poor performer, it makes sense to do something about it and one option is to revisit this portfolio in October or after the SCHP dividend has been delivered.  At that time, if the recommendation stays the same, I will sell all shares of SCHP and invest in VOO with the hope that we have seen the worst of the bear market and the Kipling is calling for a move back to U.S. Equities.

Franklin Performance Data

As readers can see from the performance data below, the Franklin is trailing the AOA benchmark.  This is one of the few portfolios that is not outperforming its benchmark.  This is exactly why I’m seriously contemplating a management change.  Not that I am moving away from the DM model, but rather altering the look-back period and adding VOO as a new ETF option.

Franklin Risk Ratios

How to interpret the following data or making sense of the following values.

• The decline in both the Sortino and Omega values since last September indicates the portfolio is declining in value.
• Both the Jensen Alpha and Jensen slope indicate loss of capital.
• The Information Ratio is one glimmer of hope in that the Franklin is gaining on the AOA benchmark since last year.  Yes, the Franklin lost ground since last Spring, but it is performing a tad better than it was a year ago.

The Franklin is set to operate until I check in on it again sometime in October, or before the next scheduled review.

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Looking Ahead To The Second Half of 2022

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