Franklin (named for Rosalind of DNA fame) is the portfolio scheduled for an update this morning. Moments ago I checked the latest Sector BPI data and Utilities (VPU) remains in the overbought zone. The recommendation is to place a 3% Trailing Stop Loss Order (TSLO) under VPU, assuming investors are holding that ETF in their Sector BPI portfolio. No BPI sectors are in the oversold zone so there are no Buy recommendations.
At the bottom of this blog post is an example output when Bard is asked the question – Create a blog post explaining Sector Bullish Percent Indicator investing.
Franklin Sector Recommendations and Holdings
The following table lays out the investment quiver for the Franklin portfolio and the current holdings. In the second column from the right readers will see the actual percentage invested in each ETF. Compare that percentage with the recommended percentage found in the third column from the left. Most of the sectors are close to alignment with the recommended percentages.
Remember that the Max AA is calculated by taking 0.70 x the three-year volatility of the sector ETF. The more volatile the sector ETF the higher the percentage recommended for investment.
Franklin Performance Data
How is the Franklin performing with respect to the S&P 500 over the past 15 plus months? As you can see from the familiar data below, the Franklin, while still in negative territory, holds a commanding lead over SPY as well as most of the other potential benchmarks. Only the DJIA is performing better than the Franklin. The right hand column is an annualized percentage beginning on 12/31/2021 so we have a little more than a year of data. The Sector BPI model of investing is still quite young.
Franklin Risk Ratios
April data, while still early in the month, is showing great improvement in the Jensen Alpha or Jensen Performance Index. This critical portfolio risk calculation is back in positive territory for the first time in over a year. Since moving the Franklin portfolio from the Dual Momentum™ model over to the Sector BPI model the Information Ratio has also improved.
While it is still very early in the game, every indication points toward success for the Sector BPI model.
As a point of interest I asked Bard to write a blog explaining Sector Bullish Percent investing. Here is the output.
Sector Bullish Percent Indicators
“The Sector Bullish Percent Indicator (BPI) is a technical indicator that measures the percentage of stocks in a particular sector that are trading above their 50-day moving average. The BPI is calculated by dividing the number of stocks in a sector that are trading above their 50-day moving average by the total number of stocks in the sector.
The BPI is a valuable tool for investors because it can help them identify sectors that are overbought or oversold. When the BPI is above 70%, it indicates that a sector is overbought and may be due for a correction. When the BPI is below 30%, it indicates that a sector is oversold and may be due for a rally.
The BPI can be used to identify sectors that are ripe for investment. When the BPI is below 30%, it indicates that a sector is oversold and may be due for a rally. Investors can buy stocks in these sectors in anticipation of a rebound.
The BPI can also be used to identify sectors that are overbought and may be due for a correction. When the BPI is above 70%, it indicates that a sector is overbought and may be due for a correction. Investors can sell stocks in these sectors in anticipation of a decline.
The BPI is a versatile tool that can be used by investors of all levels of experience. It is a valuable tool for identifying sectors that are overbought or oversold and can be used to identify sectors that are ripe for investment.
Here are some additional tips for using the Sector Bullish Percent Indicator:
- Use the BPI in conjunction with other technical indicators to confirm signals.
- Don’t make investment decisions based solely on the BPI.
- Consider the overall market conditions before making investment decisions.
- Use stop-loss orders to protect your profits.
The Sector Bullish Percent Indicator is a valuable tool that can help you make better investment decisions. By understanding how to use the BPI, you can increase your chances of success in the stock market.”
While I may quibble with point #2 above, in general this is a good summary of the Sector BPI investing model. Readers who have been following the development of the Carson, Franklin, Gauss, and Millikan portfolios know where a little more “meat on the bones” has been added. Specifics as to what percent to invest in each asset class is explained as well as when and how to set TSLOs.
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