We are pleased to announce our portfolio performance numbers which include all fees including management expenses and all trading costs.
We have decided that due to the diverse number of holdings per account that the fairest and most accurate way to distinguish performance is to group accounts into two classes: More than 20 holding and under 20 holdings. Most new accounts will be over 20 holdings by default.
RMHI over 20 holdings year to date as of June 30, 2013: + 21.74% net
RMHI under 20 holdings year to date as of June 30, 2013: +18.68% net
These numbers compare to the S&P 500 for the same time of +12.63%
According to Evestmentalliance.com our 20+ portfolios rank Top 5% nationwide for year to date small cap category.
Music in the background: The Black Keys “Have Love Will Travel”. I’ll pull no punches I love listening to the Black Keys especially at the gym. But, for all their appeal has there been a band that has borrowed from more artists? Bo Diddley should be collecting some of their royalties.
Frequently, we have to tell clients to ignore the noise of the media which will bombard the investor with combinations of fear or euphoria bordering on the manic. Frequently those opinions are jaded with political or investment biases which make their statements virtually worthless. Even more frustrating are the multi-handed economists who never appear to make a decisive stance “On one hand, then on the other hand etc.)
Its essential to tune out the noise and find sources of information that are purely data driven without biases and one very good source is Recessionalert.com (RA)
This morning RA released their Long Leading Index (USLLGI) and I’ll use their own words to describe the USLLGI:
“The USLLGI takes a far-reaching forward view of U.S economic growth by tracking 8 reliable indicators which have consistently peaked 12-18 months before the onset of NBER defined recessions since the early 1950?s. The growths of these indicators, together with their diffusion index, are combined into a 9-factor composite to give a generalized view of future overall U.S economic growth. When the USLLGI falls below 0 for 2 consecutive months you have a signal that recession will occur in 12-18 months.”
This is an economic timing method not a stock market timing system. The lead times are long, for example in the 2007-2008 “Great Recession” the LLI tipped its hand in early 2006 by crossing over the 0 level. In 2011 it made a near miss by approaching 0 but it never broke through. At present its at a healthy reading of .1 which largely eliminates the chances of recession in 2014. Its too early to say for 2015 but we’ll have an idea by the end of this year.
In the meantime, ignore the fear and noise. The potential for a new secular bull market has some real potential.
Be careful out there
Brad Pappas
Its late July and the slow season for markets may be settling in but so far its been an astonishing year. The stock market this year reminds me of The Terminator it just never stops moving higher and all sell offs so far have been very minor representing a brief chance to add to positions. Eventually the rally will end but anyone’s guess is as good as mine as for when it will be.
The two websites that we use for determining our equity exposure:
recessionalert.com and nospinforcast.com are both in agreement that no recession is in site for at least nine months from now. So, with that information we remain fully invested in stocks. Expanding economies are generally a negative for bonds and that has been the case for Treasuries as well as for gold. It appears markets are moving back to their normal pre-2008 levels and investors who’ve been under a rock the whole time are putting money back to work again.
Trading for us has slowed down as well which I’m grateful for. Our models are now set in stone and other than very minor tweaks I don’t envision any changes to them as they have been astonishingly effective.
We do have a few recent buys:
American Electric Technologies AETI
Penford Corp PENX
National Technical Systems NTSC
all three score at the top of our ranking system
sold from portfolios are
Mutual First Financial MFSF
Netsol Technologies
Brad Pappas
RMHI is long all positions
Welcome to our new website and a return to blogging.
So much of the past year has been spent on formula research in an effort to put forth the most productive and reliable models for our clients that we placed blogging on the back burner. But now is the time to switch gears and let our models and research speak for themselves. In the coming weeks and months we will be publishing our results and comments of how our real time results compare to the years of testing.
On our home page you might have seen our links to Collective2.com which is a real time simulated trading platform for developers and investors. We presently have three models listed on C2 and by their standards they have presently graded us a score of 994 out of a possible rank of 1000.
In the meantime, thanks for visiting.
The bullish data released within the past few days solidifies the probability that the Fed will not have to go another round of quantitative easing (others may call it quantitative wheezing) but the data confirms that the economy may be bottoming here in the third quarter with a slight acceleration into the new year.
This is great news for stocks as our holdings are finding a great deal of traction since the data release but what about bonds?
Bob Farrell was the long time head of technical analysis for Merrill Lynch many years ago and he had a list of rules, of which the first three must be kept in mind regarding bonds, especially Treasury Bonds:
1. Markets tend to return to the mean over time.
2. Excesses in one direction will lead to an opposite excess in the other direction.
3. There are no new eras – excesses are never permanent.
This is a chart of the 20-30 year Treasury ETF “TLT”. Its been in a primary bullish mode since the early 1980’s when Voelker broke the inflation spiral. But in recent years the gains have accelerated and now the current yield is under 3% which means its primarily a capital gains trading vehicle now. But just consider if the TLT were to eventually trade merely to the lows of last year? That would mean a loss of at least 25%! Can it happen? Absolutely. But your guess is as good as mine in terms of the timing but my guess is that it will be fast when the selling starts as investors will desperately want to lock onto their gains.
The selling of Treasuries will likely lead to the purchase of stocks and what I’ve referred to as the “Great Reallocation”. Just keep in mind that its likely that good economic news will be the catalyst.
Long TLT
Brad
Two weeks ago for the first time in a very long time small regional banks started to show up on our model selection list. It was refreshing to see them after a half dozen years in financial Siberia and one of them appears will have a very good short term payoff. Just as in the case of Sun Healthcare in June, we’ve only had a short time to build the position but the position is in place for most client portfolios.
Citizens Republic Bancorp is a small regional bank operating in Ohio, Michigan and Wisconsin.
Our client cost basis is in the $17 t0 $18 range which may not seem like much with the stock now trading at $19.17 up $1.53 on the day. Its the news that matters: CRBC announced it is hiring JP Morgan to seek a buyer for the bank.
Assuming JP Morgan can find a buyer the big question will be at what price. Here we have to dig into the financials of the bank:
CRBC Book Value: $26.53
Capital ratios are healthy and non-performing assets are improving.
Over the past three months insiders have purchased 11,200 shares.
Long CRBC
