Pauling Portfolio Review: 26 December 2023

Japanese Garden – Portland, OR

Pauling continues to struggle near the performance bottom of the 15 portfolios I track here on the ITA blog.  Pauling is one of the recent accounts moved to the Sector BPI investing model so time is needed to give this style time to show its benefits.  A high percentage currently held in cash is holding down performance.  Patience is necessary as there will surely be buying opportunities in 2024 based simply on historical volatility values.  Volatility values show up in the 5th column from the right in the second screenshot below.

Pauling Security Holdings

In the following table below I include a few equal-weight ETFs.  Those are the tickers that begin with an R.  One reservation I have regarding the equal-weight ETFs is that their expense ratios run approximately four times the expense ratios for the Vanguard cap-weighted ETFs.

Pauling Manual Risk Adjustments

No sectors are oversold so no new purchases are anticipated in that area of the portfolio.  In the following table no recommendations are present for VTI, ESGV, or VOO.  The cash will either remain in the money market or be invested in BIL where there is a recommendation to purchase 434 shares.  BIL is currently yielding 4.57% or not much above money market rates and money markets don’t present any downside risk other than inflation.

Pauling Performance Data

Over the past two years the Pauling lagged the SPY benchmark by nearly seven percentage points annualized.  Examining the IRR for Period comparisons, the separation is quite large.  There is some positive news when we check in on the risk ratios found in the last screenshot.

Pauling Risk Ratios

Information Ratio provides a head to head portfolio to benchmark comparison.  Pauling has been making advances since last April.  Jensen is the most important metric among these five risk measurements and we see a slight decline since November.  However, the general trend over the past year is one of the highest among all the ITA portfolios.  That is the good news.

An update for the Pauling will occur early in January.