Laws Railroad Historic Site – Bishop, California
McClintock is one of several Sector BPI portfolios managed here at ITA. I described how I plan to handle these portfolios through the end of this year in the blog I posted yesterday. Follow along as I move through the analysis steps in this McClintock review.
McClintock Security Holdings
Below is the investment quiver and holdings for the McClintock. I missed out on fully populating Technology (VGT) when it dropped into the oversold zone mid-week. Since that time VGT made significant moves to the upside, hurting the performance of the McClintock. It was not a total loss as I would have had to sell shares of VTI and/or VOO to raise cash to purchase shares of VGT.
Cash is in short supply as the owner made a $500 contribution just yesterday so that money was not available to add more shares of VGT when Technology was in the oversold zone.
McClintock Manual Risk Adjustments
No purchases are planned as neither VTI or VOO are recommended for purchase. No sectors are oversold so no sector ETFs are a Buy. Pay no attention to the Buy for VPU as the McClintock already holds more than the recommended percentage.
I have TSLOs set to sell VTI and VOO should the market drop. I anticipate a market decline during the dog days of summer. That likely scenario plus a wacky election season could easily disrupt a “normal” market. Unemployment rose recently so the U.S. economy might be slowing. It seems prudent to be cautious in the near term or a good time to raise cash.
McClintock Portfolio Performance
Since 12/31/2021 the McClintock is just matching the SPY benchmark. The other five potential benchmarks are behind the McClintock with AOA and AOR bringing up the rear.
McClintock Risk Ratios
It is much too early in May to pay much attention to the data in the far right hand column. The positive slope (0.37) of Jensen’s Alpha or Jensen’s Performance Index is very positive news. The goal is to turn the Jensen positive and maintain a positive slope for this important risk ratio. Right now we are battling a high risk-free treasury (SHV) yield of 4.95%. If and when this yield begins to come down it will definitely help the Jensen value.
McClintock Sector Portfolio Report
If we isolate the McClintock holdings to see how well the individual sector ETFs performed, we find the Sector BPI investing model is working quite well. A return of 29.7% vs. 19.4% for SPY is a positive sign for this investing model. Since there is no way to accurately back-test the Sector BPI model, we went out on a limb to test the hypothesis using in-sample data. I still think of the Sector BPI model operating in the hypothesis phase as we need a few more buy/sell cycles to cement this investing model.
Note the IRR Period as the McClintock has only been using the Sector BPI model for a little less than seven months.
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Lowell,
Are the TSLOs on VOO and VTI 3%?
Bob W.
Bob W.,
No, those are set around 7% or 8%, if I recall correctly. I’m not eager to sell either. Why the 8% TSLO value? This goes way back to the 1970s when i was reading William O’Neil and he recommended placing an 8% limit on all stock purchases. That reasoning, good or bad, stuck with me. O’Neil’s recommendation came long before TSLOs were available – or at least I knew nothing about them. His recommendation was to place 8% limit orders so one never lost more than 8% on a given stock.
If the market, as defined by VOO for example, drops 8% there is a high probability one or more sectors will dip into the oversold zone. So I think of it two ways. 1. The 8% TSLO for VOO protects capital and 2. Cash becomes available to purchase the sector ETF now calling for a purchase.
Hope this logic makes a little sense.
Lowell