Franklin Sector BPI Portfolio Review: 7 March 2025

Long exposure along Columbia River.

“Markets can remain irrational a lot longer than you and I can remain solvent.” – John Maynard Keynes

This update of the Franklin portfolio is a followup to the Bullish Percent Indicator data published earlier this morning.  Technology joins the oversold sectors which now numbers four.  When the Individual-1 tariffs are in place expect more sectors to drop into the oversold zone.  While tariffs rarely make sense to economists, it is difficult to alter an ignorant mind.

In addition to the current oversold sectors, several other sectors are flirting with the 30% bullish zone.

Franklin Sector BPI Portfolio Holdings

Below is the current makeup of the Franklin Sector BPI portfolio.  The portfolio should be holding shares of Health (VHT).  I may have sold shares of VHT back in January when Health either moved into the overbought zone mid-week or butted right against the 70% bullish threshold.

The Strategic or Max AA percentage is calculated based on a three-year average of the ETFs volatility.  The more volatile the greater the percentage to hold in that sector.  Technology is the most volatile so we plan to hold 13.6% in VGT.  Cash is a premium so shares of VTI will be the first to be old when the market opens on Monday.

Franklin Rebalancing Recommendations

Seven shares of VGT will satisfy the recommended percentage.  Franklin should be holding seven shares of VHT.  A limit order is set well below the current price in the event the BPI for Health drops into the oversold zone.

Discretionary (VCR), Financial (VFH), and Industrial (VIS) are all on the brink of breaking down into the oversold zone.  I will check the market next week and will likely place limit orders sufficiently below the current price in order to pick up shares of these three sectors.

Franklin Performance Data

Since 12/31/2021 the Franklin is hanging close to the SPY benchmark.  The Investment Account Manager software shows the Franklin well above the AOA and AOR benchmarks.

Of the six possible benchmarks I am tracking, SPY holds the highest percentage of mega or big-cap stocks.  All the other benchmarks include a significant percentage of mid- and small-cap stocks.  Smaller stocks have not performed as well as big-cap stocks over the past three years.  I don’t see this changing over the next several years as the current government appears to favor large corporations over smaller companies.

Franklin Risk Ratios

Over the past year the Jensen Alpha is nearly flat.  All risk measurements are ahead of where they were a year ago with exception of the Information Ratio.

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