Super-Sizing the QG Fund’s Position Sizing


Heavy_eaterAbout three weeks ago, I discussed reducing the total number of positions in the Quantitative Growth Fund from 20 down to 10. Since that big announcement, we have not yet had a stock qualify to come into the fund at the new position size…..until this weekend.

The action of the past few weeks has reduced the QG fund to only five current holdings, which we will now refer to as half positions. That means that they combine for a total of 2.5 positions, leaving us room to take on as many as 7 new full-sized positions.

These new larger position sizes are going to allow the Quantitative Growth Fund to more closely replicate the results of the backtesting analysis done by Cesar Alvarez that has been so instrumental in the strategy’s evolution. The smaller number of positions will also cut the total number of trades by more than half, which will equal a huge savings in commissions for anyone trading with limited capital.

Getting to Know Our Stocks…..Really?

Another perk of limiting the QG Fund to ten positions will be that we can take the time to get to know the companies behind the stocks. Yes, I actually said that.

Following the Baseball Fund has opened my eyes to two different ideas about this topic. First, just like baseball teams, stocks are more fund to watch when you know the story of the ones your are rooting for. Limiting the fund to ten stocks will make each stock a more significant presence in both my personal life and the fund’s success.

The second idea that the Baseball Fund has shown me is that I now have the discipline to keep my personal thoughts and opinions completely separate from my strategy. Every morning when I calculate the odds for each baseball game, I see places where I disagree. However, my job is to follow the system, not to give it any input. The system must lead, and I must follow.

So while getting to know the stocks we are following will make the process of following the QG Fund more interesting and more entertaining, we certainly won’t be altering any entries or exits because of our rooting interests. This weekend is a perfect example of that, because I am not confident that it is a good time to be making a new entry. Luck for me, it’s not my call.

Overall Fund Performance

Before we get into the new stock, let’s take a look at where the DTAYS Quantitative Growth Fund sits this weekend. The fund currently has a value of $94,179.62, which represents an overall loss of 5.82% since its inception at the beginning of the year.

Here is a quick snapshot of the 5 stocks the fund currently holds in half-sized positions:


Exits and Entries

The QG Fund started off the week by exiting GRFS like we talked about in last weekend’s update. After that, the market cruised higher all week, so we didn’t see any more exits.

During the strong week that we had, the SPY was able to climb back above its 100-day moving average. That means that we get to run our weekend scan and look for new entries. Here are the stocks from this weekend’s IBD 50 that are at new 20-week highs:


Of these five stocks, all but HOLI pass out Historical Volatility filter. However, only CAR and AGN meet our minimum Rate of Change requirement as well. Since the QG Fund already holds a half-sized position in CAR, we will just be making a new entry in AGN.

I did consider adding to the fund’s CAR position to make it a full-sized position, but that seemed to make things more complicated than I wanted them to be, so I decided to just let the half-sized positions run their course.

The fund has about $69,000 in available capital that will be allocated between 7.5 positions, so that means I will need to place a purchase order for about $9,200 worth of AGN.

Who is this AGN?

It just figures that the first stock to take a new SUPER-SIZED position that we will be following more closely is one I have never heard of. According to IBD, the company is called Allergan, and they are a drug company that makes name-brand drugs for ophthalmic, neurological, and dermatological disorders.

The stock also appears to be the leader of its Medical – Ethical Drugs group. Other stocks in that group include QCOR, SLXP, VRX, and AKRX. Based on the fact that SLXP and VRX have both been traded in the QG Fund this year, I’m going to venture to guess that the drug makers are having a pretty good year.

While the technical picture seems solid, the IBD Stock Checkup shows concern with respect to AGN’s current earnings. There are also some red flags in the annual earnings and sales areas. Of course, none of that matters to the QG Fund. The fundamentals were good enough for the stock to make this weekend’s IBD 50, and that’s all we need to see.

So as this week kicks off, we have our first SUPER-SIZED QG Fund stock to root for. Let’s go AGN!!!