SECTOR INVESTING FOR MAXIMUM PROFITS
We focus on Sector Investing Strategies using proprietary Money Flow, Momentum and Relative Volume indicators to select Stocks and ETFs. We can go long or short depending on market conditions. A small select group of 2x Index ETFs are also key parts of our portfolio mix.
Follow the Top 3 Sector Portfolio, with a return of +111% from the March low (3/23) and up 156% past 3 years. All charts and data updated daily to keep you in touch.
Highest Total Return thru Sector ETFs in industries that disrupt, innovate and improve the way the world works. Like ARKK. Ark Innovations. Our #1 holding up 314% past 3 yrs.
Friday 9/18/20 11:40 am
The Dow is currently down 67 points, or .3% to 27,811, SP500 -.5%
to 3,340, Nasdaq -1.3% as QQQ falls to 266.6, and Russell 2000 barely
in the green by .14%.
Some heavy selling coming in during the past half hour, we're seeing
negative $TICK readings in the 600's. Adv/Decline line is 1200/1700 and
deteriorating fast. VIX still stuck at 26.15 (nothing much moves this one lately),
Dollar flat, Oil is up .4%, GDX -.3%. It's Quad Witching day, so expect lots
of swings and reversals as the day wears on. There is definitely a whiff of fear
and profit-taking. Caution remains the watchword.
STOCK INDEXES YEAR TO DATE
Nasdaq QQQ +26%
S&P 500 + 3%
Dow Jones -2.5%
Russell 2000 - 7%
Sector ETF Performance Today
Friday 9/18/20 11:15 am
QID +1.8%, Aerospace +1%, ARKK +.8%, Biotech .6%
QLD -2%, Airlines -2%, Real Estate -1.7%, Utes -1.2%, Semi's -.9%
Select Stock* Performance Today
Maxar +7%, Tesla +4.5%, Deere +1.7%, IGT +1.5%
UAL -2.5%, Vertex -2.6%, Western Dig -2.4%, Intuit Surg -2.3%
*This list of "Select Stocks" represents key companies in each sector we track. They are meant to be bellwether sector indicators. Rather than show a ton of stocks just to cover all the favorites, this keeps the list to a minimum, allowing easier observation of unusual volume in each sector.
Friday 9/18/20 10:15 am
Dow Jones Today Dips, Futures Mixed As U.S. Sets Sunday Shutdown For TikTok
Stocks moved down in early trade Friday as markets braced for a volatile session. China stocks made strong moves and Facebook gained after the U.S. Commerce Department set a hard deadline for the shut down of video-sharing site TikTok on Sunday. Tesla rebounded sharply, and Nike stepped up to lead the Dow Jones today after a pair of price target hikes.
Dow Jones futures wrestled out of mild losses, moving narrowly higher. while S&P 500 futures edged 0.3% above fair value. Nasdaq 100 futures added 0.6% on the stock market today.
Tesla (TSLA) rebounded to the top of the Nasdaq 100, up 4.9% as it angles to extend its 13.6% gain for the week through Thursday. Analysts at Wedbush and Piper Sandler raised target prices on the stock, to 474 and 515, respectively.
China's NetEase (NTES) rallied 3%, following a ratio adjustment in its American Despositary Shares. The adjustment equates to a five-for-one stock split. China stocks in general were positive early Friday, with the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) up 1.5% in premarket trade.
On the S&P 500, Facebook (FB) climbed 1.7% after the U.S. Commerce Department announced it would ban downloads and U.S. business transactions with social media sites WeChat and TikTok on Sunday. Facebook shares had dropped 4.4% for the week through Thursday.
Approval is still pending for the possible purchase on a minority stake by Oracle (ORCL) in TikTok's U.S. operations, from China-based owner ByteDance. Oracle shares trimmed their early losses to 0.2%. China-based WeChat owner Tencent Holding TCEHY rose 0.5% in premarket trade.
Dow Jones Today: Nike Gets A Strong Outlook
On the Dow Jones today, Nike (NKE) grabbed the early lead, rising 1.4% after price target hikes from Barclays and Raymond James. Barclays raised it to 132, from 118. Strong Q2 sales indications in China from Adidas and Lululemon Athletica, as well as strong performances from Dick's Sporting Goods and Foot Locker led to upgraded estimates for Nike, the note said.
Raymond James raised its target to 121, from 115, based on strong visibility into acceleration across Nike's operations.
Nike stock, an IBD Leaderboard listing, is extended, up about 12% from an August breakout.
IBD 50 : Futu Holdings, Nvidia
China-based Futu Holdings (FUTU) jumped 2%, leading the IBD 50 list in early trade. The online brokerage platform provider is pulled back in a six-week consolidation, after the 189% rally that followed a breakout in May.
Chip developer Nvidia (NVDA) added 1.2%, after recovering most of its big early dip on Thursday. The stock ended Thursday 2.5% higher for the week, after announcing its $40 billion acquisition of U.K.-based ARM Holdings on Monday.
Nvidia, also an IBD Leaderboard stock, is in the third week of a consolidation, and up 81% from an April breakout.
Quadruple Witching; Oil Prices Slip
Markets are braced for a rough and tumble day of trading, as quadruple witching expirations point to a volatile, high-volume session. Witching sessions occur on days when futures and/or options contracts expire. Quadruple witching means futures and options for individual stocks as well as stock indexes expire on the same day.
Markets in Asia notched mixed sessions Friday. The Shanghai Composite was a standout, punching up to a 2% gain — ending the week 2.3% higher and snapping its two-week pullback. European markets were mixed, led by Frankfurt's DAX, which defended a 0.2% gain in afternoon trade.
Oil price futures slipped, with West Texas Intermediate moving back below $41 per barrel. Tightening supplies sent WTI up more than 8% so far for the week, ending a two-week pullback and tracking toward the strongest weekly gain since mid-June.
Dow Jones Today: Whittling Gains
The Dow Jones today heads toward the starting bell set to whittle further its 0.9% gain for the week through Thursday. The Nasdaq and S&P 500 are both defending 0.5% advances. If the Dow closes below 27,665, it will add a third week to its pullback from a Sept. 3 high.
Small caps continue to be the standouts, with the Russell 2000 showing a weekly gain of 3% at Thursday's close. That points the index toward a possible break in its two-week pullback. For the month, the Russell 2000 remains down 1.2%.
Now beyond mid-month, the Dow is so far down 1.9% in September, and tracking toward its first monthly slip since the deep dive to bear market lows in March. The Nasdaq has dropped 7.4% in September. The S&P 500 shows a 4.1% decline.
Historically, Septembers are mixed ahead of presidential elections. Election-year Octobers, for the Dow, have tended to be down months. The Dow industrials have declined in five of eight election years since 1988, with an averaging a loss of 3.9%. That includes the 14.1% nosedive in 2008 so, generally, the declines are fairly mild.
The Nasdaq also decline in five of eight election year Octobers. In two of those Octobers, 1998 and 2000, the Nasdaq slipped while the Dow gained. The Nasdaq's average election-year loss in October has been 6.8%.
The S&P 500 has a slightly better track record. It is a 50/50 bet, down in four of eight election-year Octobers with an average decline of 5.3%. During those pre-election day Octobers in which it has gained, its average advance has been 1.7%.
STOCKS IN THE NEWS
Home Depot (HD), Lowe’s (LOW) — An analyst at Oppenheimer downgraded both of the home improvement companies to “perform” from “outperform.” He also lowered his price targets on the two stocks, noting that, near term, “we’re increasingly concerned that the market is becoming too lax toward chances of a post-Covid-19 sales growth downshift at HD/LOW and potential impact on shares.” Home Depot and Lowe’s fell 1% and 1.4%, respectively.
Oracle (ORCL) — Oracle shares were down more than 1% after the Commerce Department said it will block U.S. users from downloading TikTok or WeChat starting Sept. 20. The announcement comes as Oracle tries to finalize a deal in which it will become the U.S. business partner of TikTok-parent ByteDance.
Ambarella (AMBA) — Ambarella shares rose more than 1% in the premarket after a Berenberg analyst initiated the semiconductor design company with a “buy” rating and a price target of $67 per share. That price target implies a 28.4% upside over the next 12 months. “Although AMBA’s stock has reflected recent concerns over the impact of revenue churn in non-focus areas, we think the company is through the worst of this,” the analyst said.
Dave & Buster’s (PLAY) — Dave & Buster’s popped nearly 10% as several analysts upgraded the stock even after the company reportedly warned about a potential bankruptcy if a deal with its lenders is not reached. Stifel and Raymond James were two of the firms upgrading Dave & Buster’s. In a note, Stifel said the recent pullback in the stock “creates an attractive entry point for investors with higher levels of risk tolerance. Meanwhile, Raymond James said Thursday’s pullback on bankruptcy concerns “seems overdone.”
Beyond Meat (BYND) — A JPMorgan analyst downgraded Beyond Meat to “underweight” from “neutral,” sending the stock down more than 4%. “The stock is ahead of itself and we view Street estimates as too high, thanks to chief rival Impossible Foods taking share at grocery and restaurants hesitating to add menu complexity during the Covid-19 crisis,” the analyst said.
Tesla (TSLA) — Tesla shares were up 4% in the premarket after an analyst at Piper Sandler hiked his price target on the electric car maker to $515 per share from $480 per share. The new target implies a 21.6% upside from Thursday’s close of $423.43 per share. The analyst said the target hike came after examining Tesla’s energy segment and noting: “We anticipate sharply higher demand for these products.”
Foot Locker (FL) — Argus Research upgraded Foot Locker shares to “buy” from “hold,” highlighting that “have returned to stores with intentions to buy merchandise” while digital sales are still strong.
BEST SECTORS/INDEXES FOR 2020 YEAR TO DATE
Best sectors so far this year include ARKK up 80%, QLD +44% and GDX +43%.
The SP500 is up 5%, so an 80% gain is pretty amazing.
The QQQ ETF leads all other indexes, up 28% so far this year.
Laggards: Energy -44%. Airlines -40%. Banks -34%. Just terrible.
And aren't Banks, Energy and Airlines supposedly the 'cyclical' stocks we have to buy according to the CNBC talking heads?
KEY SUPPORT LEVELS FOR SPY AND QQQ
We are watching some critical levels on SPY and QQQ as we approach the
next few weeks. They are clearly illustrated in the charts below.
Important note: The 50 Day moving avg (orange line) can either be a springboard
resulting in a quick 'V' bounce. But a failure at the 50 and close below it means
we go down further. Make sure you know which way it's breaking before buying.
QLD - 2x Nasdaq etf
The 2x short QQQ etf - QID
Getting close to a break out? We own it in Top 3 Sector Portfolio:
Great market timing indicator - The 10 DMA and 21 DMA crossover - check out how well it works on the 2x Short Nasdaq etf - $QID, one of reasons we are loading up on it now.
AMAZON - Gaps thru 2nd support at 3133, and stops exactly on
Stop 3 at 2997. Normal profit-taking strategy: sell 1/3 at each
support violation. But some wait to see what happens on 50 DMA.
In this case, it broke below to 50.
BEST SECTORS/INDEXES FROM THE 3/23/20 LOW
#1 ARKK 158% #2 QLD +142% #3 ITB Builders 132%
SP500 +51% QQQ +59%
TOP 3 SECTOR PORTFOLIO UPDATE
As of 9/18/20, the Top 3 Sector Portfolio is up 108% from the 3/23/20
March low. The SP500 is up 49% same time frame.
Our #1 holding is ARKK, up 159% since the March lows, #2 QLD +132%,
#3 is Social Media SOCL +89%.
The portfolio is beating the SP500 benchmark by 59% in the past 5 months.
It's up 126% in the past 1.5 years and +144% past 3 yrs.
Important Note: We are now tracking the Top 3 Sector Portfolio from
the 3/23/20 March low, in order to show the most recent activity in the
last 5 months. The portfolio performance from the 12/24/18 low (1.5 yrs)
is published right after the "ETF Charts In Top 3 Sector Portfolio" section below.
Note that our recorded Gains/Losses are based on when we began tracking the Top 3 Sector Portfolio on the 12/24/18 Xmas Eve low.
B. QID @ 8.59 on 9/3/20
VIG - S. 1/3 on 9/17/20 @ 179.88 (Gain +67%)
BOTZ - S. 1/3 @ 26.53
SOCL - S. 1/3 @ 46.63
XBI - S. 1/3 @ (final 1/3) 109.25
VIG - S. 1/3 @ 124.75
FDN - S. 1/3 @ 180.14 Triggered 9/17/20 @ 179.88
IGV - S. 1/3 @ 290.18
QLD - S. 1/3 @ 83.05
QID - s. 1/2 @ 9.73
FDN - S 1/3 @ 174.32
TOP 3 SECTOR PORTFOLIO
Gain from 3/23/20 low to 9/18/20 (past 5 months)
ETF SECTOR PRICE 3/23/20 % Gain
Index Allocation 34%
QLD (28%) Nasdaq 2x 36.54 131%
IVW (6%) SP500 Growth 144.56 57%
QID Sh QQQ 2x 8.59 B. 9/3/20 21%
Index Subtotal: 122%
Sector Allocation 57%
ARKK Ark Innovation (13%) 34.78 3/18/20 158%
SOCL Social Media (11%) 25.19 90%
BOTZ Robotics (7%) 15.47 78%
XBI Biotech (6%) 68.57 69%
FDN Internet (10%) 111.72 61%
IGV Software (10%) 190.47 56%
Sector Subtotal: +95%
Dividend Stock Allocation 9%
VIG Divid Apprec 2% Div* 89.24 45%
Dividend Stock Subtotal: 45%
International Subtotal: 0%
TOTAL RETURN: +108% SP500 +49%
from 3/23/20 low Beating SP500 by 59%
TOP 7 STOCK PORTFOLIO
From 3/23/20 Low as of 9/17/20 (Past 5 months)
Stock Company Price on 3/23/20 % Gain
AMZN Amazon 1902.83 + 58%
SBUX Starbucks 56.55 53%
MA Mastercard 203.30 68%
MSFT Microsoft 135.98 50%
BLK Blackrock 327.43 68%
Total Return +60% SP500 +51%
from 3/23/20 Low Beating SP500 by 9%
TOP 7 STOCK PORTFOLIO UPDATE
We recently sold AMT and Verisign, but will wait until the current downtrend is completed before selecting two new stocks to bring the total to our namesake
(Top 7 Stock). So for now it's the "Top 5 Stock Portfolio" Will advise when we add them. We sold 1/2 of Blackstone (BLK) on 9/10/20.
Update 9/4/20: We expect a market correction in the coming weeks, and will wait for more opportunities before buying our two new stocks for the portfolio
BLK S. 1/2 @ 549.20 on 9/10/20 (Gain: 26%)
AMZN - S. 1/3 @ 3177
SBUX - S. 1/3 @ 83.7
MA - S. 1/3 @ 325.45
MSFT - S. 1/3 @ 202.25
BLK - S. 1/2 @ 549.82 Triggered 9/10/20 @ 549.2
BLK - S. 1/2 @ 537.22
*Note: Sell stops do not necessarily imply an imminent drop is expected,
simply support lines that must be monitored if more downside persists.
AMERICAN ASSOCIATION OF INDIVIDUAL INVESTORS SENTIMENT 9/10/20
The percentage of individual investors describing their short-term outlook for stocks as “bullish” is at its lowest level in five weeks. At the same time, the latest AAII Sentiment Survey shows pessimism at a six-week high.
Bullish sentiment, expectations that stock prices will rise over the next six months, dropped 7.1 percentage points to 23.7%. Bullish sentiment remains below its historical average of 38.0% for the 27th consecutive week
Neutral sentiment, rose by 0.4 percentage points to 27.8%.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose by 6.7 percentage points to 48.5%. Pessimism is at a six-week high, tied with its July 29, 2020, reading. Bearish sentiment is above its historical average of 30.5% for the 29th consecutive week .
Optimism is back at an unusually low level (more than one standard deviation below its historical average). Additionally, pessimism continues to stay at an unusually high level. Pessimism is above 40% for the 24th time out of the past 27 weeks.
The persisting high level of pessimism reflects concerns about the coronavirus pandemic and the economy. The recent decline in the Nasdaq composite may have also played a role. Other factors influencing AAII members’ sentiment include the economy, corporate earnings, valuations, unemployment, the November elections and interest rates.
Under normal market conditions this extreme level of bearishness coincides with market lows. But the Year of Covid 2020 is not exactly normal, and could actually be forecasting more selling ahead. The high flying tech stocks and indexes have not corrected nearly enough.
This week’s 9/10/20 AAII Sentiment Survey results:
ETFs IN TOP 3 SECTOR PORTFOLIO
Please find below all ETFs and Stocks currently in our Top 3 Sector
and Top 7 Stock Portfolios.
ETFs: QLD, ARKK, XBI, BOTZ, SOCL, FDN, IGV, VIG, IVW
Stocks: AMAZON STARBUCKS MASTERCARD MICROSOFT BLACKROCK
Moving Average Key for All Charts
Green line: 21 Day Moving average (or Wkly Avg if Wkly Chart)
Orange: 50 DMA
Purple: 100 DMA
Red: 200 DMA
Blue horizontal lines represent support or resistance, can also be used for suggested sell stops. Click on each chart to enlarge.
QLD - Ran up 205% in the past 5 months at the peak. Our #1 holding in Top 3 Sector Portfolio, we have taken some profits here. Note sell stops. Closed below the 50 DMA - could bounce or fall further.
ARKK - Ark Innovation, rose 181% from 3/23/20, but showing signs of exhaustion. Broke Sell stop #1 and sold 1/3 on 9/3/20.
Note how it bounced EXACTLY off 50 DMA (orange line)
XBI BIOTECH etf: We sold 1/3 of our position on 8/11/20 on a stop out. Broke thru Stop #2 on 9/3/20 (2nd blue line). Now have only 1/3
position. Closed below 100 DMA (purple line), now down 14% from high.
ROBOTICS ETF - BOTZ UP 86% from March low:
SOCL Social Media etf - Up 107% from 3/23/20, now on
50 DMA, down 9% from the peak.
Internet ETF - FDN - The "FANG" stocks, nicely up 92%.
Closed below 50 DMA on Friday, caution. Down 13% from high.
Software ETF - IGV up 80% from 3/23/20, broke sell stop #1
Vanguard Dividend Appreciation VIG. Up 50% past 5 months
SP500 Growth ETF - IVW, rising 74% past 5 months,
but fell 10% to the 50 DMA, a break below that = sell 1/3:
STOCKS IN TOP 7 STOCK PORTFOLIO
Featuring: AMAZON STARBUCKS MASTERCARD MICROSOFT BLACKROCK
Amazon ran up 117% in past 5 months.
But broke the 50 DMA on Friday 9/11/20, caution
Starbucks Just breaking the 10 DMA (white line)
Mastercard approaches the 50 DMA (orange line)
Microsoft up 71% from 3/23/20 low at the peak, but losing 12% now
Blackrock breaks 100 DMA - we sold 1/3.
TOP 3 SECTOR PORTFOLIO & TOP 7 STOCK PORTFOLIO PERFORMANCE FROM 12/24/18 LOW
Here's how both portfolios have done from the well-
documented Christmas Eve 2018 low - approximately 1.5 years:
TOP 3 SECTOR PORTFOLIO From 12/24/18 low
Gain from 12/24/18 low to 8/31/20 (1.5 years)
ETF SECTOR PRICE 12/24/18 % Gain
Index Allocation 34%
QLD (28%) Nasdaq 2x 29.18 197%
IVW (6%) SP500 Growth 140.58 62%
Index Subtotal: 165%
ARKK Ark Innovation 35.34 142%
XBI Biotech 65.42 60%
FDN Internet 107.21 70%
SOCL Social Media 26.60 79%
BOTZ Robotics 16.33 65%
IGV Software 214.22 39%
Sector Subtotal: +107%
Dividend Stock 9%
VIG Divid Apprec 2% Div* 90.55 42%
Dividend Stock Subtotal: 42%
International Subtotal: 0%
TOTAL RETURN: +123% SP500 +42%
from 12/24/18 low Beating SP500 by 81%
TOP 7 STOCK PORTFOLIO
From 12/24/18 Low as of 9/14/20 (Past 1.5 years)
Stock Company Price on 12/24/18 % Gain
AMZN Amazon 1343.96 + 132%
SBUX Starbucks 60.56 41%
MA Mastercard 174.65 89%
MSFT Microsoft 94.13 117%
BLK Blackrock 436.33 24%
Total Return +106% SP500 +42%
from 12/24/18 Low Beating SP500 by 64%
TOP 3 SECTOR PORTFOLIO - Performance past 3 yrs
(from Jan 2017 - 9/14/20) UP 146%
#1 ARKK +325% #2 Internet FDN +129% #3 Software IGV +173%
LONG TERM RETURN - From 12/24/18 Market Low
(as of 8/21/20)
Sector ETF Performance Past 1.5 years
Here are all sector ETFs we track with a longer term performance
from the Xmas eve low 12/24/18 through 9/14/20, approximately 1.5 yrs.
#1 QLD +198% #2 ARKK +142% #3 SMH Semi's +106%
Energy -40%, Airlines -33%, Banks -12%.
The SP500 is now up 42% from the 12/24/18 low.
Best Performing Sector ETFs Past 3.5 Years
ETF Rating* 3 Yr Avg (% per yr)
QLD 890 48% avg gain per yr
ARKK 801 42%
IGV 423 30%
SMH 388 32%
ITB 369 26%
FDN 351 21%
SOCL 349 22%
XBI 249 21%
*Rating is a cumulative score based on multiple performance and technical proprietary indicators unique to Top 3 Sector Portfolio.
SELECT STOCK* PERFORMANCE PAST 1.5 YEARS
#1 Tesla +532% #2 ROKU +415% #3 AMD 359%
Macy's -75%, AAL -64%, Boeing -50%.
SP500 is up 42% since the 12/24/18 low:
*This list of "Select Stocks" represents key companies in each sector we track. They are meant to be bellwether indicators, and rather than cram a ton of stocks in just to cover all the favorites, this keeps the list to a minimum, allowing easier observation of where the money is flowing.
Best Performing Stocks 12/24/18 and 3/23/20 Time Periods and Average Yearly gains past 3 yrs:
12/24 + 3/23
STOCK Rating* 3 Yr Avg (% per yr)
TSLA 965 26% Avg Gain per Year
AMD 519 73%
SQ 494 76%
NVDA 439 43%
AAPL 361 44%
PYPL 286 43%
NOW 259 28%
AMZN 218 36%
FB 195 28%
ADBE 185 48%
MSFT 183 39%
MA 159 44%
TEAM 142 73%
NFLX 135 39%
ATVI 155 26%
*Rating is a cumulative score based on multiple performance and technical proprietary indicators unique to Top 3 Sector Portfolio.
Top 3 Sector Portfolio Strategy
Our investment strategy is unique. In the Top 3 Sector Portfolio, we invest solely in ETFs, both long and short, with an emphasis on Sectors, as they always outperform indexes.
We will also use 2x ETFs, focusing on 6 key indexes only (SSO, QLD, UWM, TWM, QID, SDS) as warranted by market conditions. We do not short sectors.
In addition to the "Top 3 Sector ETF Portfolio," we also feature an all-stock portfolio entitled "Top 7 Stock Portfolio," utilizing the same criteria for selection of stocks as the Top 3 Sector ETF Portfolio.
WHAT DOES "TOP 3 SECTOR" MEAN?
The term 'Top 3 Sector Portfolio' comes from a phenomenon we call the
"Top 3 Effect," where the top 3 sectors that emerge first from a pivot high or low, tend to outperform for longer durations.
After a flush out low, the best ETFs will continue to outperform 2, 3 or 6 months later.
Here's an example of this effect:
The first time period is from the 12/24/18 Christmas Eve market bottom to today, 8/24/20, roughly 1 1/2 years. This is a perfect low, as ALL sectors were levelled by the correction. Ground Zero so to speak. What rises first?
The second period is the past 5 months from the much discussed 3/23/20 low
to today, 8/24/20.
Past 1.5 years (from 12/24/28 to 8/24/20:
Past 5 months (from 3/23/20 to 8/24/20):
Let's look at the first Table (from 12/24/18)
Best 3 ETFs past 1.5 years:
#1 QLD (2x QQQ) +226%
#2 ARKK +154%
#3 ITB (Builders) +98%
When you look at Table 2 - (past 5 months) we see:
Best 3 ETFs past 5 months:
#1 QLD (2x QQQ) +163%
#2 ARKK +158%
#3 ITB (Builders) +134%
Note the QLD, ARKK (Ark Innovation) and ITB (Builders) are in the top 3 for both time frames.
Point being, that the Top 3 that emerged in the longer 1.5 year time frame, tend to continue that out performance as we see in the shorter time frame.
We will also allocate more capital to the Top 3 ETFs - concentrating resources on the best performing assets which greatly improves our returns.
The top 3-6 will vary a bit, but the first ones off that flush-out low, tend to be the ones still on top 6 months later, and 12 months later, etc.
One other thing to note, the Top 3 tend to 'pull away from the pack'
as time goes on. As time increases, this divergence increases as well.
Note that the Top 3 for the last 1.5 years are up an average of 164%, but the average of the next tier of 3 drops to 96%. The same effect can be seen in the 6 month period.
We have observed this effect over the course of nearly 18 years of trading, giving more credence to the power of the "Top 3 Sector Strategy."
The momentum strategy has been documented by two recent research studies, where stocks that outperformed by a wide margin over a 5 month and 12 month period also delivered a much greater gain longer term. The MTUM Momentum ETF follows a similar strategy.
Here are 3 links to the research done on 3, 6 and 12 month momentum studies:
SHORT OR LONG - WE TAKE ADVANTAGE OF THE TREND
The beauty of this strategy is that we make money in both Bull and Bear markets, as we can switch to short ETFs when a positive trend is ending, whereas nearly all mutual funds are long only - giving them a definite disadvantage when markets decline.
Since Sectors always outperform indexes, we have a larger portfolio allocation to this area (57%).
For instance, as seen above in Table 2 (from the 3/23/20 low), ARKK is up 158%,
ITB (Builders) is up 134%, while the SP500 is up 52%.
Yes, sectors always outperform indexes. When you note that 92% of all managed funds have not beaten the SP500 index in the last 15 years, it's even more impressive.
In normal market conditions, we allocate as follows:
2 Index ETFs (QLD and IVW)
5 Sector ETFs (This may vary between 4-6 due to mkt conditions)
2 Dividend Stock ETFs (only VIG currently)
2 International ETFs (Currently none)
As of 8/24/20, our portfolio allocation is currently:
Dividend Stock: 9%
This portfolio strategy is aggressive, and is recommended for experienced investors, especially since we employ the 2x ETFs, as well as Inverse ETFs.
THE POWER OF DIVIDENDS
Dividend Yield ETFs are also critical to outperforming the benchmarks.
Investors today are desperate for yield.
We utilize domestic and international dividend stock ETFs (although currently we are in domestic only).
Currently we have VIG for our Dividend Yield allocation. VIG - Dividend Appreciation etf is up 34% the past 3 months, with a dividend of 2%.
Dividends are taxed at only 15%, (for those with incomes less than $250,000/year). Interest income would be in the 22% to 24% in the same earning bracket.
The power of re-invested dividends for total return is simply amazing.
From January 1990 to today (8/24/20), the SP500 is up 767%. Not too bad for a 30 year return.
But wait, add in dividends reinvested, and that SP500 return rises to
an astonishing +1,494% !
Dividends should ALWAYS be reinvested. Always.
Here's a list of Dividend Stock ETFs, as well as some Domestic and
international bond funds that measures performance from the 3/23/20
low to 8/24/20.
Note that our VIG - Vang Dividend Appreciation is up 43% in past 5 months,
with a dividend of 1.74%.
Top 10 Holdings of Top 3 Sector Portfolio ETFs
The Top 10 holdings in Sector ETFs can vary considerably when it comes
to concentration. Some are heavily top weighted, such as Social Media SOCL with over 65% of stocks in top 10, versus XBI Biotech which only has 20% of the ETF in its top 10 stocks.
The QQQ has 57% of its stocks in the top 10 - that concentration helps to explain its outperformance. But a whopping 45% of the QQQ is only
5 stocks: AAPL, MSFT, GOOGL, AMZN and Facebook.
Nasdaq 100 etf - QQQ Top 10: 57% Internet FDN: Top 10: 48%
Social Media SOCL: 10: 65% Software etf - IGV - 10: 57%
Robotics etf - BOTZ Top 10: 60% ARKK Ark Innov. - Top 10: 57%
Biotech XBI: Vang. Div Apprec. etf: VIG
Top 10: 20% Top 10: 32%
SP500 Growth etf - IVW - Top 10 - 39%
NUALOLO VALLEY, KAUAI
For Real Time Updates and charts - FOLLOW US AT:
The information and material contained within the posts and articles appearing at this site are the opinions of the Authors alone and do not constitute a recommendation of any securities, investment strategy or investment transaction. The information and articles appearing at this site are not intended to be and should not be considered investment advice or a recommendation to any user regarding their personal investment needs or economic circumstances. None of the content provided is intended as investment advice regarding any specific security, portfolio of securities, market strategy or investment transaction.
Copyright 2016 Top3SectorPortfolio
Get our daily e-mail Market update each morning by entering your e-mail address below. Your information will never be given out to anyone,
and this site is free, as well as an advertising-free site.
Your Security Is Important To Us:
We take precautions to protect your information. When you submit your e-mail address via the website, your information is protected both online and offline.
We are the sole owners of the information collected on this site. We only have access to/collect information that you voluntarily give us via email or other direct contact from you. We will not sell or rent this information to anyone.
We will use your information to respond to you, regarding the reason you contacted us. We will not share your information with any third party outside of our organization