Investors following the LRPC model have another example with the Huygens. For some reason this particular portfolio is performing better than several other Linear Regression portfolios. I don’t have proof as to why this is the case. I presume it is luck-of-review day, but more likely some other unknown event is impacting the performance.
While multiple portfolio reviews consume more time, breaking a large portfolio into sub-portfolios makes sense if for no other reason than luck-of-review-day variations are minimized. Put your eggs in multiple baskets.
Huygens LRPC Recommendations: The following worksheet, extracted from the Kipling spreadsheet, lays out the recommendations. WOOD continues to hold on to the number one (#1) position, followed by ICLN and DBC. ETFs on the chopping block are: SPEM, BRK-B, and VCR. Trailing Stop Loss Orders of 1% and 2% were set for these three “weak” securities.
Position Sizing Recommendations: Many times I skip over the following table and move right to the Manual Risk Adjustment worksheet. It is included in this review so readers can see how the Position Sizing worksheet provides risk controls for the portfolio. I use the following data as a guide for how many shares to purchase for a particular security. For example, the recommended number for WOOD is 216 and the Huygens currently holds 100. Readers know I prefer to work in round lots, particularly for portfolios of this size. As you will see in a moment, I placed a limit order for 200 more shares for WOOD as it is one of the few securities that currently passes the PnF Ratio screen. Also, as the number one security with a strong Proj-Conv percentage (8.64%), I tend to favor it.
ICLN is also recommended, but it does not pass the PnF Ratio screen. For that reason, I will not be buying anything close to 1908 shares. Of the recommended ETFs from the LRPC worksheet, only WOOD, DBC, and RWX pass the PnF Ratio screen. SH is beginning to show promise so I placed a limit order. More on SH later.
Manual Risk Adjustments: With the Maximum Portfolio Risk set to 6.0%, both the Current and New Portfolio Risk come in under 5.0%. As you look down over the Shares and Shares Required you see that I will be selling SPEM, BRK.B, and VCR. Additions are as follows:
- RWX – Buy 300 shares. While RWX is not among the current recommendations, it passes the PnF Ratio screen and the LRPC graph is beginning to show promise. It may be early, but I’m taking a risk to add this International REIT.
- SH – Buy 300 shares. This is a short ETF so if the market goes up SH goes down and if the market goes down SH goes up. Warning: I’ve not been very successful investing in short ETFs so you may want to avoid this recommendation. I consider this to be a risky investment.
- ICLN – I’m not following the recommendation to load up to 1908 shares as ICLN does not pass the PnF Ratio. Another 200 shares will do it for now.
- WOOD – Buy another 200 shares which will put the Huygens over the recommended number of shares.
- IGOV – Buy only 200 shares as this ETF does pass the PnF Ratio screen. One might rightfully ask, why buy any shares if the PnF Ratio screen is not cleared. Reason: I’m placing confidence in the LRPC projections.
- DBC – Buy 1500 shares. I have three different orders in for 500 each. One order is very close to the current price, the second order is about 20 cents below the current price and the third order for 500 shares is at $16.1, if memory is working.
Huygens Performance Data: As I mentioned in the opening paragraph, the Huygens is performing better than many of the LRPC portfolios. To open up an IRR delta of 7.3% over the S&P 500 is significant. This data includes everything since the launch of the Kipling LRPC spreadsheet.
While I prefer not to hold 56% in cash, buying opportunities are limited. Patience is the watchword in this market.