Franklin Sector BPI Portfolio Review: 26 December 2025

Holiday House

This morning I am reviewing another Sector BPI portfolio, the Franklin.  Take time to listen to Ray Dalio in the YouTube video referenced at the bottom of this blog.  Pay no attention to the movement that has Mr. Dalio riding on a bumpy airplane ride.  Pay attention to the content.

From everything I am reading the three sectors that should perform best during a recession are:  Consumer Staples (VDC), Health (VHT), and Utilities (VPU).  These three asset classes concentrate on products and services people need for living.  Portfolios such as the Carson, Franklin, and McClintock are set up to handle a correction or recession.  Why?

1. These three Sector BPI portfolios will not be invested in sectors that are not performing well.  Overbought sectors will either not be part of the portfolio or will have Trailing Stop Loss Orders (TSLOs) in place to vacate the overbought sector.
2. These three Sector BPI portfolios will be invested in sectors that are oversold.

Should a recession occur, what is the major weakness in the Sector BPI investing model?  Should the recession be deep there is a high probability the model will signal a purchase of a particular sector too early.  Once a sector drops to the 30% bullish or lower, a buy recommendation is in order.  During a recession the BPI for a sector could easily drop lower so one is likely to purchase shares too early in a market decline.  Should this happen, and cash still be available, it behooves one to continue to purchase more shares of the oversold sector at lower prices.

Franklin Security Holdings

Below are the current holdings for the Franklin portfolio.  I just checked the BPI data and only Financial is overbought.  Since we don’t hold shares in VFH no action is required.

Real Estate is close to a Buy with a 32.25% BPI value.  Should the Real Estate sector drop into the oversold zone, I will add more shares of VNQ.

Franklin Performance Data

Since 12/31/2021 the Franklin has outperformed the AOR benchmark, but none of the other potential five references.

Franklin Risk Ratios

Over the past year the Franklin has steadily improved on all four risk measurements.  Of particular significance is the gradual improvement of the Jensen Alpha.  While it is not quite equal to the year high, a value of 3.55 is excellent.

Regardless of how the overall market performs in 2026, the Franklin should continue do well as the Sector BPI investment model appears to work as anticipated.

Now take time to listen to Ray Dalio.  I’ve watched and listed to a number of videos and have read from several sources to test Dalio’s recommendations as I was not sure if this is Dalio speaking or if the YouTube video is AI generated.  Other sources back up what he is stating in the following video.

I will be making some adjustments in ITA portfolios.  For example, I will be selling TLT and IEF and moving to shorter term treasuries such as SHV.