QG Fund Update: Another Exciting Week

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The DTAYS Quantitative Growth Fund continued its recent trend of higher volatility this week. We saw THRM jump quite a bit higher on Thursday, and then we saw MTW take a tumble on Friday.While those half-sized positions were bouncing around, our two full-sized positions in AGN and SKWS didn’t make much noise at all this week.

Despite all of the excitement, there were no exits signalled this week. After dropping more than 10% on Friday, MTW is close to it’s 5-ATR stop, but has not broken it yet. It is also still a profitable holding for the QG Fund. Here is what the fund’s holding look like this weekend:

qgholdings050314

All of that action leaves the QG Fund just a touch higher than it was last weekend. The current value of the fund is $96,862.09, which represents a loss of 3.14% on the year. At this point, the fund is still less than half invested, but that is going to chance starting on Monday morning.

New Entries

Here is what the the QG Fund Scan for 20-week highs returned from this weekend’s IBD 50:

qgscan050314

This is the biggest list of new 20-week highs we have seen in a month or so, so I’d say that is a pretty good indication that the market is finding more solid footing. Of course, like always, that could change in an instant first thing Monday morning and we always need to be prepared for that possibility.

As you can see, there are four stocks at new 20-week highs that meet our Rate of Change filter requirement. Those stocks are THRM, TRN, AFOP, and SHPG.

Of those four stocks, both THRM and AFOP have Historical Volatility numbers that are higher than our filter permits. Therefore, we are left with TRN and SHPG as the only new entries open for us this weekend.

The DTAYS Quantitative Growth Fund is currently holding two full positions and 5 half positions, which makes 4.5 total positions. That means we have room for 5.5 new positions, so we have plenty of room for both TRN and SHPG. The fund has $50,607.08 to allocate between the 5.5 open positions, so we will shoot for each of the two new positions to be worth about $9,200 and the buy orders will get put in for Monday morning at the market price.

The New Positions

Since I don’t know much of anything about either of these new stocks, I took a few minutes to look up a bit of background on each of them. This background info won’t contribute to the system in any way, but it makes the stocks more interesting to follow while I am sitting at work all week.

TRN is a company called Trinity Industries. They are ins the transportation sector and appear to be a manufacturer of heavy transportation machinery like railcars and barges. The stock is the best in its industry group, and has a nearly perfect IBD Stock Checkup. Here is the chart:

trn050414

Based on its stock symbol, I had assumed SHPG was some type of shipping company. As it turns out, the company is called Shire PLC and they are an Irish drug company. The stock is a leader in a group that contains stocks like QCOR, VRX, and JAZZ, which have all been IBD favorites for years, as well as current QG Fund member AGN. According to the stock checkup, long-term earnings and sales growth are the only fundamental issue with SHPG. Here is what the chart looks like:

shpg050413

One of the debates I have had internally over the QG Fund is whether it would be a good idea to limit the funds exposure to a particular sector or industry group. For example, now that the fund is holding AGN and SHPG, should I ignore VRX or JAZZ if they were to break out next week?

I hate to over-complicate the fund, but also don’t want to open it up to too much exposure in one particular area. For now, I have no data to support the need to limit exposure, its just a hunch. It is something I plan on keeping an eye on moving forward though.