Here are the Q1 2016 total return and max drawdown numbers for the various quant strategies I track. For explanations of the various quant strategies see the portfolios page. All equity portfolios consist of 25 stocks and were formed at the end of 2015. No changes in the holdings since that time.
In the table below I list various quant strategies along with their YTD performance and drawdowns. Also, listed are various benchmark indices.
Overall, the start of 2016 is working quite well for the various quant strategies. The utility strategy is leading the pack with a huge Q1. Only the microcap strategy is underperforming the relevant benchmarks. And that is after a great year in 2015. So not a big surprise. The staples value strategy continues to perform very well in almost every environment. I have been consistently surprised by this strategy. It’s probably due for a period of underperformance but not yet it seems.
More aggressive versions of these strategies are also doing quite well. Ways to get more aggressive with these strategies are to run more concentrated portfolios, re-balance and check the portfolios more often, and in most portfolios the use of trailing stops enhances returns. A good stock and portfolio tool like portfolio123.com lets you do any of these quite easily.
Also, for traders, the quant portfolios are fantastic idea generating lists for potential trades. I use them for this purpose every so often.
In general, a great start to 2016 for quant strategies and much better than overall stock indexes and also the TAA strategies.
8 Comments
B · April 3, 2016 at 6:03 pm
Wow, you did your fans good this week since you made 2 posts this past week!
I was wondering if you can post the recent 20-25 stock picks from the Trending Value? Last year around this year, you also did a Trending Value – International. It would be great if you could post the recent 25 too. I’ll try to compare to what I can generate.
Thanks
paul.novell@gmail.com · April 4, 2016 at 9:54 am
Hmm, I may have to pull it back a bit…. 🙂
Mark · April 3, 2016 at 8:03 pm
Hi Paul,
Been awhile since I have responded, but have been following your updates. Trust you are doing well. For those of us who are managing our own 401Ks, using TAA with ETFs is not an issue to implement as part of our investment strategy. However, investing in individual stocks to replicate Quant strategies presents a challenge. Most 401Ks do not allow individual stocks being purchased. I have been impressed with both the Consumer Staples and Utilities Value strategies. Since I am unable to buy the individual stocks within the CS and UV strategy, I have been using the ETFs XLP (consumer staples) and XLU (utilities SPDR) to replicate these two quants.
Per your spreadsheet YTD your returns for CS are 6.46% and UV is 18.96%. YTD returns for XLP is 5.13% and XLU is 13.21%. While not as good, they are directionaly aligned with the quants. I do the 200 moving average on these much like TAA to show buy/sell signals. Do you have a better way to replicate these two quants within a 401K? or is this this the best approach within a 401K? Also, do you have thoughts on how to replicate the other quants? I like the more I can be diversified with my investment approaches vs. putting everything into TAA.
As always, very much appreciate the work you do and the guidance you provide us.
Thanks!
Mark
Tony · April 4, 2016 at 11:06 am
Hi Paul,
Thanks again for your updates.
Have you back-tested different size stops? I would assume somewhere around 10% or so would do pretty well, but wondering if you have any data.
Thanks,
Tony
paul.novell@gmail.com · April 4, 2016 at 11:27 am
Yes, I have. The optimal stop varies by strategy. In very broad terms, more conservative strategy benefit from tighter stops. Riskier strategies need wider stops.
Paul
Tony · April 5, 2016 at 9:47 am
That makes sense. Just to clarify, you are using the stops on each individual stock within a strategy, correct? Not on the strategy as a whole?
You also mentioned in the interview that you use some risk-off triggers for the quant strategies. I would be interested to hear about this as well. I am assuming this is some momentum indicator, and I am curious how this would work considering many of the quant strategies are somewhat counter-trend.
paul.novell@gmail.com · April 7, 2016 at 9:12 am
Yes, stops on individual stocks.
Mark · April 7, 2016 at 9:26 am
Hi Paul,
Been awhile since I have responded, but have been following your updates. Trust you are doing well. For those of us who are managing our own 401Ks, using TAA with ETFs is not an issue to implement as part of our investment strategy. However, investing in individual stocks to replicate Quant strategies presents a challenge. Most 401Ks do not allow individual stocks being purchased. I have been impressed with both the Consumer Staples and Utilities Value strategies. Since I am unable to buy the individual stocks within the CS and UV strategy, I have been using the ETFs XLP (consumer staples) and XLU (utilities SPDR) to replicate these two quants.
Per your spreadsheet YTD your returns for CS are 6.46% and UV is 18.96%. YTD returns for XLP is 5.13% and XLU is 13.21%. While not as good, they are directionaly aligned with the quants. I do the 200 moving average on these much like TAA to show buy/sell signals. Do you have a better way to replicate these two quants within a 401K? or is this this the best approach within a 401K? Also, do you have thoughts on how to replicate the other quants? I like the more I can be diversified with my investment approaches vs. putting everything into TAA.
As always, very much appreciate the work you do and the guidance you provide us.
Thanks!
Mark
Comments are closed.