My model went into 2014 with zero net exposure to equities and was mainly cautious throughout the year. There were a total of 21 weeks during 2014 where my model recommended a zero exposure. That stance was probably too conservative but when I look at the poor performance of the average stock last year I'm not discouraged. The S & P 500 was up about 11% and the Russell 2000 was up 3.5%. My model was up 8% without any shorting and an average exposure of around 25%. The last two years have been difficult ones when it comes to beating the major cap-weighted indices because their haven't been any corrections to speak of. With earnings problems now surfacing and continuing geo-political stress, 2015 may be much less kind to investors. I begin the year with a 25% stock exposure.
Earnings: This year's earnings estimate trend (adding in next year during second half) - Positive Earnings estimates 52 weeks out - Negative Gap between future 52 week estimate and latest 12 month results - Neutral Total earnings exposure and maximum total exposure under these conditions - 50% Sentiment: Equity put/call ratio - 20% Small investor put/call ratio - 5% NAAIM Manager cash position - (10)% Average sentiment exposure this week - 5% Valuation: Long term valuation - 0% Stock prices represented by net current assets - 20% Stock earnings yeild compared to ten year treasury yield - 30% Average valuation exposure this week - 17% Total exposure from above three factors - 16% Technical Adjustments: Comparison of Treasury Bond yields compared to lower quality corporate bond yields...-10% New highs minus new lows on the NASDAQ...+20% Trend indicator for new highs minus new lows...0% Total technical adjustments...+10% Total stock exposure for the week - 26% Rounded to the nearest 25th percentile - 25% Stock Ideas: This week the top five ranked stocks used in my aggressive screen are: STRT, AMOT, LDL, CTP and SGC.
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With my wife on Aruba
December 2019 Categories |