1955 – Returning from Fairbanks, Alaska in 1939 Plymouth. Over 4000 miles of dirt and gravel roads between York, PA and Fairbanks.
Yesterday I posted a Forum notice that Technology dipped into the oversold zone. VGT is now a Buy. This morning I picked up a few shares of VGT for the Kepler and a limit order is in place to bring the Technology sector up to the recommended 10.4% of the portfolio.
The fifth screenshot below shows how well the sector model is working with the Kepler. I also have a link to the Kepler March post so readers can see if the performance is improving or is in retrograde due to the recent market fluctuations. Keep in mind the Kepler has only been using the Sector BPI model for 6.5 months so the historical record is limited.
For some reason AOR, AOA, and VT data did not come through for the portfolio report. I hope to have that information available when the Kepler is updated in May.
Kepler Security Holdings
Below is the investment quiver and current holdings for the Kepler. VGT is approximately 1/2 the recommended percentage. A limit order is in place to bring Technology up to 10.4% of the total portfolio. Since so few sectors are recommended or still in the neutral zone, we rely on U.S. Equity ETF such as VTI and VOO to keep pace with the market.
Kepler Manual Risk Adjustments
VTI and VOO are recommended as a Hold so no additional limit orders are in place to add more shares. I have a limit order in place to purchase 15 more shares of VGT. The $25,000 will remain in cash until we see better buying opportunities.
Kepler Performance Data
Since 12/31/2021 the Kepler lags the SPY benchmark and is also behind both AOA and AOR. We look to the Risk Ratios to see if the portfolio is gaining ground or falling further behind the benchmarks, particularly when risk is factored into the analysis. This poor performance is the primary reason for moving the Kepler over to the Sector BPI investing model.
Kepler Risk Ratios
The Sortino Ratio tells us the Kepler lost money over the first two weeks of April. Based on the Jensen Performance Index the Kepler improved on a risk adjusted basis.
Both the Treynor and Information Ratios improved from March to April. The Omega Ratio mirrors the Sortino Ratio, but is less well known.
The positive slope (0.50) of the Jensen is most encouraging. Keep an eye on the slope over the next few months.
Kepler Sector Portfolio Report
If we consider only the sector ETFs plus VOO and VTI, how well is the Kepler performing? The following data leaves out cash, which is a drag on performance in an up market. Since the beginning of October 2023 the sector and U.S. Equities (VTI and VOO) outperformed the S&P 500 and SPY benchmarks. This is the goal of the Kepler and so far the Sector BPI model is working as anticipated based on the original hypothesis.
The March Kepler link allows readers to see or compare April data with March data.
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Lowell,
Are you using the 3 year volatility? The version of Kiplinger I’ using only lets me do a 63 day period (~3 months) but I’m wondering if the shorter period is better because we don’t expect to be in the sector for a long time. I see a difference between your Max AA and mine.
Bob W.
Bob,
Yes, I use a three-year volatility average. If memory serves, I had Hedgehunter lift the 63-day restriction. That was a long time ago so I may not remember the exact changes precisely.
The shorter period should also work. It might require making adjustments a little more frequently.
Are the Maximum AA percentages significantly different?
Lowell
Bob,
I checked this morning and I am using a one-year volatility average rather than a three-year average. I don’t know why 3 years stuck in my mind.
Lowell
Lowell,
VDE and VGT are biggest difference 2.4% (points) and 1.5% respectively. Most of the others are <=0.8% (points).
Bob
Bob,
Energy and Technology are two of the most volatile. I’d expect Real Estate and Discretionary to also vary as they have volatilities in excess of 10%.
Lowell