Adjusting the Quantitative Growth Fund

quantitative growth

quantitative growthThe big news for the DTAYS Quantitative Growth Fund this weekend actually has nothing to do with what happened over the past week. The big news is that I have some legit backtesting information that we can now factor into the rules of the strategy. As you will see, it isn’t perfect. But it is certainly better than the hunches on which I had previously been basing decisions.

Following my podcast interview with Cesar Alvarez last week, we exchanged a few emails discussing the DTAYS Quantitative Growth Fund. Cesar did me a HUGE favor by backtesting my rules over the past 10 years. While he could not replicate the IBD 50 stock universe that the QG Fund is based on, he suggested that if the rules worked well, they should also work on a wider universe.

The thought of having some backtesting data for the QG Fund got me really excited. But even I didn’t expect the 51 page spreadsheet that Cesar emailed me. He literally tested every possible tweak and combination of the parameters. Some of the versions were able to post average annual returns as high as 14% with maximum drawdowns of less than 20%.

The Big Adjustment

The biggest difference between the current DTAYS Quantiative Growth Fund and the versions that Cesar discovered to be more profitable were the values used for the stops. The research shows that both my 8% initial stop and my 3ATR trailing stop are too tight. Using wider stops for both parameters for both types of stops dramatically improved performance.

Because the results were not even close with respect to stops, I have decided to use that data to adjust the rules of the DTAYS Quantitative Growth Fund. I did not want to make a snap decision though, so I continued to follow the old stops until this weekend.

Moving forward, the QG Fund will base its exits exclusively on a 5ATR stop. The initial fixed stop will be completely eliminated. This will simplify the strategy, while at the same time giving each individual position more breathing room. 


Stocks Leaving the Fund

The QG Fund saw three of its 17 holdings signal exits this week. Each of these three exits was triggered by a crossing of the 3ATR trailing stop. (At this point, two of them would have broken through a 5ATR stop as well.)

The exit signals started with ANFI breaking down on Tuesday. Then, JAZZ followed on Wednesday and GMCR signalled a third exit on Thursday. The losses in JAZZ and GMCR were each less than 2%, so they did not take a major toll on the overall portfolio. However, the ANFI trade produced a loss of almost 10%.

Overall Fund Performance

In addition to the three stocks that triggered exit signals, there were also a fair number of holdings that gave pack partial profits this week. At the end of the week, the fund’s total value is $99,381.59. This represents an overall loss of 0.6% for the year. As a point of comparison, the NASDAQ is up 3.98%, the S&P 500 is up 1.50%, and the DOW is down 0.73% on the year.

Here is what the individual positions remaining in the QG Fund look like this weekend:

quantitative growth

As you can see, most of the stocks in the fund have given back some of the profits they were sitting on from last weekend.

Stocks Entering the Fund

Despite what appeared to be a shaky weak for leading stocks, the SPY still continued higher. Therefore, the DTAYS Quantitative Growth Fund is still in buy mode and looking to fill six empty slots in its portfolio.

My weekend scan of the IBD 50 produced the following 15 stocks that make the cut this week:


Of those stocks, the fund already owns MTW, MANH, and WYNN. Since we only need to fill six spots, the new additions will be:


I have placed orders to enter these positions at the open on Monday morning.