Gauss Sector BPI Portfolio Review: 22 March 2024

Summer in Portland

“Knowing your tolerance for risk is critical to investment success.” – Richard A. Ferri

Gauss is the Sector BPI portfolio up for review this morning.  Readers who have been following this investment model are reminded we are currently in a “quiet” period when there is little buy or sell action.  Most of the Sector BPI portfolios are holding two sector ETFs, Staples (VDC) and Utilities (VPU).  I use the Vanguard sector ETFs while some of you may use the iShares ETFs.

While holding only two sector Exchange Traded Funds (ETFs) in the sector portfolios we are left with available cash.  To avoid the market walking away from the investor to the upside we participate in the market by investing available cash in VTI and VOO.  Both ETFs provide broad diversification.  To protect capital I’ve been setting Trailing Stop Loss Orders (TSLOs) of 8% under the U.S. Equities (VTI and VOO) holdings.  This limits losses.  While neither Hedgehunter nor I are huge fans of TSLOs it is one way to preserve capital.

Here is another reason for using TSLOs with Sector BPI portfolios.  If you use an 8% to 10% TSLO with VTI and VOO, when sold there is a high probability one or more of the eleven sectors will have dropped into the oversold zone and that cash from VTI and/or VOO is now available to invest in the oversold sector.

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Gauss Investment Quiver and Holdings

Other than the $14,000 held in cash the Gauss is well position for the spring and summer months.  Limit orders are in place to purchase more shares of VOO.

Gauss Manual Risk Adjustments

A TSLO is in place to sell all shares of ESGV.  When that happens the proceeds will be used to purchase more shares of VTI and VOO assuming no sectors are oversold.

Gauss Performance Data

Since 12/31/2021 the Gauss has a slight edge on the SPY benchmark.  Pay no attention to the AOA and AOR data as those figures are in error.

Gauss Risk Ratios

Over the past year the Jensen Alpha value is essentially flat as shown by the slope.  We see something similar with the Information Ratio.

The Gauss has only been using the Sector BPI model for 3.5 months so we cannot draw any conclusion at this point.  We need to see a few buy/sell cycles and that will take months if not longer.

Gauss Sector BPI Portfolio Update: 3 January 2024