Gauss Portfolio Review: 16 November 2023

Two Women at Crystal Springs

Gauss is a relatively newcomer to the Sector BPI investing model.  It is also one of the portfolios I worked on during the last few weeks of October to purchase the recommended percentage of shares when several sectors were in the oversold zone.  That opportunity is now history as there are no longer any sectors oversold.  Technology is overbought and as you will see below the Gauss does not hold any shares of VGT.

Currently, Gauss holds a little over $11,000 in cash and none of the U.S. Equity ETFs are recommended as a Buy.  The Gauss may be holding cash for several months.  Patience is the watch word.

Gauss Investment Quiver and Holdings

Below is the investment quiver and holdings for the Gauss.  The last two oversold sectors were Materials (VAW) and Staples (VDC).  I missed the opportunity to fully populate VAW while VDC is slightly over populated with a 6.8% holding.

Missing out of VAW is an example where I placed limit orders and the market moved up and away from the limit price.  This is an example of getting too greedy.

Gauss Manual Risk Adjustments

Since I want to hold a few shares in all sectors for performance purposes, I have a limit order in place to pick up two shares of VGT.  Otherwise no changes are required for the Gauss.  Call this the “waiting period” as we now wait for sectors to move into the overbought zone.  At that point I will place TSLOs under the holdings.  Should any sectors drop back into the oversold zone, I will examine each to see if shares need to be added.

When Technology (VGT) moved up to the 80% BPI level I placed a 2% TSLO under the ETF rather than apply the 3% default TSLO.  Were Technology to move up to 85% bullish I would adjust the TSLO to 1.5% as the higher the BPI moves the higher the probability a reversal is likely.  Setting TSLOs is how we protect capital.

Gauss Performance Data

The following data begins on 12/31/2021 or close to two years of operation.  Thus far the Gauss is edging out the S&P 500 (SPY) by a very small percentage.

In the pie chart the Investment Account Manager (IAM) software breaks Real Estate out as a separate asset class.  With the Sector BPI portfolios one can lump Real Estate in with the Sector/Specialty portion of the chart.  Therefore, approximately 70% of the portfolio is investing in the eleven sectors.

Gauss Risk Ratios

There are several positive data points in the following table.

1. The slope of the Jensen is positive.  This trend is very important.
2. The current value of the Jensen is positive.  This despite the higher interest rate for the risk-free short-term treasury.
3. The Information Ratio is positive indicating the portfolio is outperforming its benchmark (SPY).
4. We see an uptick in the Sortino Ratio since October, but still lower than it was earlier in the fall.

Gauss Portfolio Update: 19 March 2023