The official first week of trading the Don’t Talk About Your Stocks Quantitative Growth Fund is in the books. It was a profitable week, but I think that might be more a function of luck than skill. Of course I’m not opposed to being lucky.
The fund was able to dodge a lot of the big names that crashed this week, which is what really hurt the Weekend IBD Portfolio. Being able to avoid those catastrophic losses enabled the QG Fund to finish the week up 1.06%. This shows how minimal the impact of transaction costs is with a $100,000 account compared to the $10,000 Weekend Portfolios.
Winners & Losers
Inside the QG Fund’s holdings, there are some solid winners and some pretty big losers.
The biggest winner for the week was JAZZ, which is up 7.33% since the fund bought it on Monday morning. The fund also benefited from SLXP, ALGN, XRS, and WYNN all booking better than 4% returns on the week. VRX, SAVE, and EDU make up the next tier at 3% returns.
On the down side, MDCO spent the entire week flirting with the fund’s 8% initial stop-loss. The position is currently down 7.31%, so it is likely to signal an exit any day now. PRGO was another big loser on the week, the fund’s position there is down 3.55%. There are also losses in RGR and YNDX, but those are marginal at the moment. Barring a significant crash, MDCO and PRGO are the only stops in danger of triggering the 8% initial stop rule.
In addition to the 8% initial stop-loss, the QG Fund also uses an ATR-based trailing stop. PRGO, MDCO, and RGR are all in the neighborhood of triggering that stop as well.
A New Position
Because the SPY is still well above it’s 100-day simple moving average (SMA), the DTAYS Quantitative Growth Fund is open for adding new positions. The fund currently has 19 holdings, so there is room to add one more this week.
After entering this weekend’s IBD 50 into thinkorswim and running the QG Fund scans, there were 15 stocks that were eligible to be added to the fund this weekend. Since we only need one, we will take the top ranking one. However, the top ranking stock is XRS, which the fund already owns, so we will have to skip to the second ranked stock, which is YY.
As you can see from the chart, YY has been on a tremendous run so far this year. After looking up the company on Investors.com, I found that they are a Chinese communication company that offers voice, text, and video services. Based on what I saw happen with NUS and QIWI last week, I’m a little bit leary of the Chinese companies, but there is no personal opinion involved in the QG Fund strategy, so I will place the order to buy YY on Tuesday morning (Monday is MLK day).
Expectations Moving Forward
One of the biggest things I have learned from the action of the past week is that because of the small position sizes that this type of strategy implements, it is difficult for one or two stocks to completely wreck the entire portfolio. The strategy is able to stand tough even when stocks are taking 30+% losses.
Another thing that has been interesting to watch is how the strategy is going to rotate from stocks that are performing poorly into stocks that are performing well. As the losing stocks approach they 8% stop-loss, we know that they are not going to be in the portfolio much longer. However, as stock approach 8% on the opposite side, they are free to continue running higher.
The ability to allow profits to run while keeping losses in check (for the most part) is what makes this strategy successful over long term trending periods. It is also what protects the strategy from blowing itself up in a single day. The DTAYS Quantitative Growth Fund is relatively safe in terms of protecting capital, yet still has tremendous power to produce earnings when the timing is right.