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General Category => Shares => Topic started by: Pilot on April 11, 2016, 11:39:17 pm

Title: The Perfect Portfolio
Post by: Pilot on April 11, 2016, 11:39:17 pm

Hi everyone

Attached is some interesting reading on a perfect portfolio I developed.
I will post here for anyone interested in it for the next month.


Pilot

Title: Re: The Perfect Portfolio
Post by: Hamster on April 12, 2016, 06:40:41 am

/attempts to open possible dodgy attachment on android

Title: Re: The Perfect Portfolio
Post by: Hamster on April 12, 2016, 06:41:35 am

DENIED! Why no PDF? :'(

Title: Re: The Perfect Portfolio
Post by: Patrick on April 12, 2016, 07:37:19 am

Last year you did quite a few trades, so is it a set of trading indicators? Well done on the 7th place though, did you also do as well with your real portfolio?

Title: Re: The Perfect Portfolio
Post by: Pilot on April 12, 2016, 11:52:26 am

Hi Patrick

Yes, it is 3 sets of 7 indicators that I use. I did not use that many last year though. It is 3 different indicator running in 7 different time frames.

The time frames being 3 days, 10 days , 30 days, 90 days and then 3 weeks, 10 weeks and 30 weeks.

For the trading and Investing I use different weighting on each of the timeframes.
See below. I can change the weighting as I like, but these are good guidelines. I could also change the weighting for a long term investor.

   Trader   Investor
D3   10%   0%
D10   15%   5%
D30   10%   15%
D90   15%   40%
W 3   20%   5%
W10   20%   10%
W30   10%   25%

I don't have enough invested to really live of my portfolio, and hence I am looking for an income and not live off my investment for the next couple of years. I am still too young to retire and would like to work in the field that I love.

Title: Re: The Perfect Portfolio
Post by: Pilot on April 12, 2016, 12:07:48 pm

Attached is the latest Perfect Portfolio updated with yesterdays closing prices.

Only 19/45 shares are bullish on the investor portfolio. BTI and NPN has moved from Bullish to bearish.
Mostly resources and retailers are now favourites in our market , with the highest ratings.

Title: The Perfect Portfolio
Post by: Pilot on April 12, 2016, 12:59:55 pm

I think I should rather post in this thread rather than the Investor Challenge.

Attached is more detail on a Perfect Portfolio I have been working on. I also attached the last 2 days of the portfolio with 8 and 11 April closing prices.

Pilot

Title: Re: The Perfect Portfolio
Post by: jaDEB on April 13, 2016, 07:05:22 am

Nice, good post.  :TU:

Title: Re: The Perfect Portfolio
Post by: Patrick on April 13, 2016, 08:22:47 am

Merged the two topics

Title: Re: The Perfect Portfolio
Post by: Pilot on April 13, 2016, 09:42:40 am

Thanks Patrick :) That makes it easier.

Yesterday there has been quite a few shares gaining bullish momentum and some changing from bearish to bullish and in very volatile conditions.

Sasol has been most notable, changing from a negative index to now having the most scope for upside of all shares. Tiger brands, PPC and Truworths have also changed into very positive territory with the most scope for upside. Of these PPC could be an excellent entry point for longer term Investment, and coming from a very low base. I do not monitor other Construction Stocks, but these could also be following suite.

First Rand and Standard Bank has been the first 2 banks changing into bullish territory, with ABSA and Nedbank now being least favoured stocks of the 45 shares being monitored.

There are also some shares that are changing from bullish into bearish, and it's our two heavyweights, BTI and Naspers. Although not extremely bearish, It does give a feeling that investors are moving from safety stocks to taking on some more risk and finding value elsewhere.

Enjoy your day

Title: Re: The Perfect Portfolio
Post by: Pilot on April 14, 2016, 09:49:51 am

So it's been 3 days since the first Perfect Portfolio has been posted. Let's take a quick look at how the first 2 PP's have done.

Because it is mostly Top40 shares that we are working with, and the Top40 index is the best representation of the average fund out there and our market, this is the one we need to outperform.

Attached is the current results for the first 3 days on the 11th of April's Perfect Portfolio. The Top40 gained 2,8% since Fridays close and the Perfect Portfolio did 4,6% for the 3 days. The perfect Portfolio outperformed the Top40 by 66% in the 3 days. On a R1bil fund, that is R18mil in 3 days.

For the 2 days since the 12th of April's Perfect Portfolio, it managed to gain 5% and the Top40 gained 3,1%, and outperforming the Top40 by nearly 59%.

Now, it is impossible to have the perfect portfolio every day, as it changes every day, and with every price change having an impact on the future exposure of that share. The ideal would be to constantly adjust a portfolio or fund, if it deviates too far from the Perfect Portfolio. I will keep the updates coming.

Interestingly, Anglo American, which was the best share on Monday, has since changed to the 27th spot and should now only be 2,25% of today's Perfect Portfolio, because it now has more downside potential than Monday's price.

There hasn't been much changes since yesterday's Perfect Portfolio, but WHL, RMH and DSY has changed trends from slightly Bearish to slightly bullish. See attached.

Title: Re: The Perfect Portfolio
Post by: brad on April 14, 2016, 10:39:33 am

How is the index and net index derived or arrived at.  :(

Title: Re: The Perfect Portfolio
Post by: Pilot on April 14, 2016, 12:22:02 pm

Quote from: brad on April 14, 2016, 10:39:33 am

How is the index and net index derived or arrived at.  :(

Hi Brad


It is 3 different chart (and other) indicators that I use, but I prefer not to tell which they are. I add the daily price every day and I have 3 spreadsheets doing the calculations for each indicator on each share. It does it in 7 time frames, being 3 days, 10 days , 30 days, 90 days and then 3 weeks, 10 weeks and 30 weeks.

The 3 spread sheets combine their data into another spread sheet which adds the weighting. For the trading and Investing I use different weighting on each of the timeframe.

See below. I can change the weighting as I like, but these are good guidelines. I could also change the weighting for a long term investor.

   Trader   Investor
D3   10%   0%
D10   15%   5%
D30   10%   15%
D90   15%   40%
W 3   20%   5%
W10   20%   10%
W30   10%   25%

With the weighting taken into account, it gives a total index for each share. Either being negative (bearish) or positive (Bullish)

It takes quite a lot of information and squeezes it into one, easy-to-work-with index.

Hope it helps.

Title: Re: The Perfect Portfolio
Post by: Pilot on April 15, 2016, 10:20:07 am

With yesterdays closing GFI made the most notable change, from being bullish to now having the most potential downside. Shares that also turned bearish have been FSR , RMH and PFG.
 
Of the 6 least favoured stocks being monitored, four are Banks, and have the most potential for downside. Should there be a downturn in the market, the banking sector have the potential to loose the most ground.
 
I know there are many people that favour Banks and it will be interesting to see how it unfolds. With yesterdays closing prices, I have to be bearish on this sector.
 
Enjoy your day and weekend
 
Quintin

Title: Re: The Perfect Portfolio
Post by: Pilot on April 20, 2016, 02:10:44 pm

I have been bearish on Banks over the past few weeks, and must admit that my view changed 2 days ago, with BGA (Barclays Africa) making an unexpected 4,2% gain on Monday and is now a share that has the most upside potential of the 45 shares I monitor. This has the potential  to become a short squeeze for a lot of traders/ investors over the coming few days/weeks.

There are a large amount of short positions on this share, because of Barclays that will be selling 60+% of their holdings over the next 2-3 years. This could be a huge move in the opposite direction for a lot of traders, and could cause a very dramatic move in the share price. The next few days will reveal the outcome and I will be watching this share very closely.

Naspers and Telkom has been now fallen out of favour as it seems Banks and Construction are the most favoured sector to get into currently.

The Perfect Portfolio now has 3 Banks in the Top 10 and PPC, still being my Top pick at the moment.

Title: Re: The Perfect Portfolio
Post by: gcr on April 20, 2016, 03:00:42 pm

Pilot - I am making a presumption here that your perfect portfolio is in fact a trading portfolio and not a medium/long term portfolio
If it is a trading portfolio - then I presume that you are making a profit from these transaction?

As a further note - should the country end up being downgraded to junk status, then there is every likelihood that the banks will be downgraded as well, and we are likely to see an even greater exit of foreign investments compared to what has happened over the last month or so

Title: Re: The Perfect Portfolio
Post by: Pilot on April 21, 2016, 02:30:34 pm

Hi gcr

Yes, I use it as a trading portfolio, and yes I am turning a profit. But the Perfect Portfolio is really not just designed to do trades.

It should guide you on a daily basis, in the direction in which the market is moving, and in which way to steer your portfolio.
Let me give an example. The Perfect Portfolio I gave on the 11th of April made 7,5% to date, and the Top40 made 4%. The PP (Perfect Portfolio) outperformed the Top40 by 87%.

The 15 April PP did 4,7% until today, and the Top40 did 1,3%. Outperforming the Top40 by 250%.
The 20 April PP did 2,1% until today, and the Top40 did 0,3%. Outperforming the Top40 by 582%.

Every Perfect Portfolio since then has outperformed the Top40 and will keep on doing it, given some time. It will always recognize a share with the most upside (or downside) potential, and the best time to buy (sell) it.

Every PP the last few weeks has been a different portfolio, but they were the best stocks to have at that specific date. That is why I believe, you can never have the perfect portfolio, but you can strive to have it.

On the downgrading issue, I agree that banks could be in for the worst. At the moment they will probably recover and crash on the day the downgrading happens (if it happens). 

I am not too concerned about the downgrading, as the system (all the indicator and triggers) will recognize overvalued shares and trend changes, and I will adjust my holdings accordingly.

See attachments

Title: Re: The Perfect Portfolio
Post by: gcr on April 21, 2016, 03:17:20 pm

Pilot - thanks for the clarity that it is a trading portfolio.
Here's a question around the algorithms that you may be using.
Say I want to buy 2,000 Truworths shares, but don't want to buy in one parcel as the price may be a bit too high for liking to make the investment - will you PP give me indicators as to when I should enter the market and at what price which is closely associated to the price I am prepared to pay. You state that it does give price points for potential buys/sell. Thus if it is giving a sell indicator one could then put in a purchase order at a price close to your deflection point and at a later stage it then shows a reversal to a higher price you can adjust your buy order to buy "on the turn"

Just fantasizing here a bit as to whether you "system" could be used even for medium/long term purchases where you dribble your funds into the market (being mindful of broker costs) and get the total 2000 shares over an extended period

As a for instance - bought some more Santova but have had my buy order on for about 5 weeks but only today did it match my bid price, also sometimes I place orders at two or more different bid prices to fill my orders - some call it the falling knife principle.
 

Title: Re: The Perfect Portfolio
Post by: Pilot on April 21, 2016, 08:24:30 pm

Gcr - I believe that this should and could definitely be used with a medium/long term portfolio.

I have already made a spread sheet that works with longer term holdings. Unfortunately that spread sheet has some sensitive formula's that I currently use, but I could make one later for everyone.

It basically takes your current portfolio and matches it against the perfect portfolio and suggests the largest deviations as actions. You can set the deviation to the % that suits you, as well as (your port)/(PP) ratio. But I will get a simple one ready soon.

If you should have a share that you have for 2 years and don't want to sell it, you could take a short position for a portion of the shares that you need downside protection on. This helps with your tax benefit by not selling the share and only paying Capital gains tax. I hope it's still 3 years.

The prices and entry points for most deals are usually on the previous days closing prices, and that is usually very good entry points to buy at. The whole system compares each share relative to the other to find value. Trades don't have to be in the market for a long time, but the criteria can be set higher for the next deal, as your cash portion becomes lower and you have time to wait for the best deal.

I agree with you on different levels for your orders. If you want to get into a new share and you want 6% exposure. Buy 2% at the current level, 2% at a 3% discount and the last 2% at a 6% discount (especially with longer term views). With the Perfect Portfolio it does work too, but too a lesser effect.

I got a lot of work, but hope to get the longer term comparison spread sheet out soon.





 
   

Title: Re: The Perfect Portfolio
Post by: gcr on April 21, 2016, 09:41:42 pm

Look forward to seeing the results - don't stress yourself about producing it "soon" long term portfolios are not too time sensitive :)

Title: Re: The Perfect Portfolio
Post by: Pilot on April 22, 2016, 12:44:51 pm

Perfect Portfolio vs. JSE Top40

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Who was your money on? ...... Did you really think the TOP40 stood a chance? Although not the absolute best of the 470 SA funds, for the last week,  and only falling to the KIO heavy resource funds.
But for the nine trading days until yesterday's close........the (11 April) Perfect Portfolio has gained 7,1% in the last 9 days, outperforming the Top40 by 116% (3,3%gain) and outperforming  468 funds  on their best monthly gain! Only Old Mutual's Mid and Small Cap fund could do 7,29% in the past month and the Perfect Portfolio done it in 9 days.  Every Perfect Portfolio since 11 April has outperformed the TOP40, and each looking a little different than the one before.  The 15 April PP  (Perfect Portfolio)for instance, has gained 4% vs. the 0,6% of the TOP40, outperforming it by 525%.

So will this continue or just a flash in the pan? The Perfect Portfolio should outperform the index given some time. The 11 April  PP, will probably outperform the index for the next 3 months and maybe the next 3 years, but it will become outdated with the latest PP. It needs constant adjusting and steered in the best future direction for your investment.

So what does the latest Perfect Portfolio look like........ a little different from the 11 April portfolio.  Anglo, Anglo Gold, Exxaro, Kumba Iron Ore and ARI have all lost their shine and does not offer any value in the longer term, and should be nearly 0% of your portfolio currently. (Although KIO is defying gravity at the moment)

Currently Banks, Construction and some Retailers are most favoured. PPC has been moving up and has now had the top spot for quite a few days, and has a lot of upside potential.  Unfortunately or luckily, I only monitor 45 shares and most of the construction shares are outside the top50. I dare not think how much better the Perfect Portfolio would be, picking from 150 shares, and only selecting the best of the best.

See below or attached the portfolio's in mention, and if there are Fund Managers that need an assistant, and want to improve the timing on trades, I am all yours.  Hopefully I haven't  wasted the last 25 years on this model  for nothing.

Enjoy the weekend and may all your teams win :-)

Regards


Ps. I have improved from 38th to 17th in the Investor trader competition, if you would like to have a look at my current holdings visit   http://www.shareforum.co.za/competition/com_rankings.php?year=current    username (Pilot)

Title: Re: The Perfect Portfolio
Post by: hilgardvr on April 24, 2016, 09:28:07 am

This is an interesting post, thanks.

Pilot could you please provide a some more info on the selection of shares (don't have to give exact details)?

Do you trade this with a real account and real money? If so, how do you do that in practice? Do you update your holdings everyday?

It just seems like transaction costs could be a significant barrier to effectively using this as the list quickly changes?

Title: Re: The Perfect Portfolio
Post by: jaDEB on May 11, 2016, 08:02:31 am

See Darkside says there is no Perfect portfolio....  >:(   , he obviously reads the heading and stops ..

Title: Re: The Perfect Portfolio
Post by: gcr on May 11, 2016, 10:51:00 pm

Pilot - just a question on your PP in an earlier post you alluded to the tax implications i.e. CGT versus income. In your post more recently you indicate that you should not really be holding resources counters - agree, but if your PP only bought them recently, then, because your original purchases were less than 3 years holdings you would be categorized as a dealer by SARs and as such would end up paying tax at your marginal tax rate - which would have an effect on your profit margins and you could potentially not outperform the Top 40 which you are using as a bench mark

Not trying to torpedo your processes but just trying to understand how it could work effectively for a medium to longer term type of portfolio
Do find these posts fascinating in the sense that if it had a predictive component to it which could (base on histograms) forecast which counter to buy over the next 3 - 6 months
Keep playing with the model because you could potentially come up with a winner 8)