Gauss Sector BPI Portfolio Review: 25 May 2023

Old DeLa Haye as many are found before refurbishing.

Gauss portfolio, one of four Sector BPI accounts, is up for review this morning.  The primary reason for this update is due to the Real Estate sector moving into the Buy zone.  Based on yesterday’s data, Real Estate dipped further into the Buy zone as only 26% of the stocks are bullish.

How many shares of VNQ to purchase is based on the three-year volatility.  I’ve explained this in earlier blog posts and can go over it again when the downloading data issue has been resolved.  The current calculation is to hold nearly 18% of the portfolio in Real Estate.

Gauss Sector BPI Recommendations

Before analyzing the following worksheet from the Kipling spreadsheet, readers need to know that Yahoo once more changed their downloading codes.  Descriptions are not coming through and the following data, downloaded from Tiingo, is only accurate as of 5/23/2023.  This will not impact the decision to hold VNQ as a proxy for Real Estate as we allocate our sector decisions to be guided by Bullish Percent Indicator data.

Remember the order of Buy and Sell decisions.

1. Sector BPI recommendations come first.  Currently, the BPI data recommends selling Technology and purchasing Real Estate.  Gauss does not hold any shares of VGT so selling Technology is a moot point.  Keep in mind that the BPI recommendation overrides the Buy recommendations shown in the following worksheet.  Pay no attention to the Buy and Sell decisions for the sector ETFs.
2. After fulfilling the sector requirements, we dip into the Dual Momentum™ section of the investment quiver.  If you have been following the Sector BPI model for the past seven months you will recall this addition of using the DM model was to patch a potential weakness in the original Sector BPI model.  If cash is available, we purchase either VTI, VEA, VWO, or BND.  Note that VTI is a Buy while VEA is a Hold.  This requires a decision.  If VEA were a Sell, we would sell all shares and use the money to purchase VTI.  Since the recommendation is to Hold, I will continue to hang on to VEA and use available cash to purchase shares of VTI.
3. If cash is still available we move down into the Closed-End-Funds (CEFs) and purchase only those recommended for purchase.  No CEFs are currently recommended for purchase.  All are a Sell so I’ll place limit orders to sell shares of the CEFs.

Gauss Manual Risk Adjustments

Below is the worksheet from the Kipling spreadsheet that provides additional guidance as to how to manage the above recommendations and how many shares to purchase or sell of the different holdings.  There are two decisions to make.

1. Purchase 14 more shares of VNQ in order to bring the percentage of Real Estate of the total portfolio up to 17.8%.  Check the third column from the right.
2. Use available cash to purchase 30 shares of VTI.  The recommended number of shares is 67, but there is insufficient cash to fill VTI to the recommended number of shares.  Should CEFs be sold we can use that cash to purchase more shares of VTI.

Gauss Performance Data

The following data runs from 12/31/2021 through 5/25/2023.  Thus far the Gauss is barely topping the S&P 500 as measured by SPY.  It is encouraging to see the Gauss is besting all the potential benchmarks tracked through the commercial software program, Investment Account Manager.  Remember, serious investors track and benchmark their portfolios.

Gauss Risk Ratios

Below is data that measures portfolio risk.  The Sortino Ratio, superior to the more popular Sharpe Ratio, continues to be positive.  I do have some concern that the value is shrinking.  The goal is to turn this around now that I’ve made some adjustments in what CEFs to hold and which to sell.

Jensen’s Alpha or the Jensen Performance Index is the most important risk measurement of the five.  After a rough winter, the Jensen is back in positive territory, but the slope (-0.31) is still negative.  There is much work to be done with the Gauss.

The Information Ratio is another important calculation.  The goal is to keep this value positive.  Currently, we are just exceeding this mark.

Tweaking Sector BPI Plus Model: 20 May 2023

Gauss Portfolio Update: 19 March 2023

Note:  ITA Wealth Management is now free to all users who register as a Guest.  Give me a few days to move new registrations up to the Platinum level.

New subscribers are encouraged to read the Critical Material and Beginning Investor blogs.