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Top 3 Sector Portfolio Market Update

Updated: 6 hours ago


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. The portfolio 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 +189% from the March pandemic low (3/23/20) up 235% in the past 2 years and +253% past 4 years as of 4/27/21.

All charts and data updated daily to keep you in touch.


Mission:


Highest Total Return thru Sector ETFs in industries that disrupt, innovate and improve the way the world works.



TOP 3 SECTOR PORTFOLIO MARKET REPORT


We publish our market report every day, usually around Noon, as it allows time for the market to find its 'balance' for the day. On highly volatile sessions, we will post a closing report around 5:30 pm Eastern.


Always check our Sell Stops section of the Top 3 Sector Portfolio for the latest information. Another area to review is the "Hot Charts Today" for Stocks and ETFs currently in the news and getting high money flows. We also publish the Reddit and WallStreetBets stocks with the highest mentions in past 24 hours.


We send a daily morning email to our subscribers. We will also send an intraday

email alert if market conditions change, or we buy a new stock.



Top 3 Sector Site Map


  • Sector ETF Performance for 2021 – Best and Worst this year

  • Market Dashboard Stock indices, Adv/Decline, Volume, VIX

  • Market Overview – Summary of today’s activity

  • Stocks In The News Today – Earnings, Upgrades/Downgrades, Mergers

  • Sector ETF and Stock Performance Intraday - Best and Worst

  • Breaking News Links

  • Hot Charts Of The Day

  • Stocks Trending on Reddit/WallStreet/Bets

  • Top 3 Sector Portfolio - Buy/Sell Stops

  • Top 7 Stock Portfolio - Best Stocks in 2021

  • Best Dividend ETFs

  • Key Stock Indices – SP500, Nasdaq and Russell 2000 Charts

  • Historic Performance of Top 3 Sector Portfolio (1 yr, 2yr, 4 yr return)

  • The Top 3 Sector Strategy - Giving You An Edge




Best Sector ETFs In 2021*


#1 Retail XRT +48%

#2 Energy XLE +44%

#3 Builders ITB +39%

#4 Banks KBE +32%

#5 Transports IYT +27%

#6 Basic Matls XLB +23%


Laggards:

Bonds -12%, ARKK -4%, Biotech -3%


The Top 6 ETFs above are a graphic example of how Sector ETFs can significantly outperform the SP500. The SP500 is up 13% so far this year, but Retail is +48%, Energy +41% and Builders +38%. Staying in those Top 3 Sectors paid off handsomely this year.


And the supposed 'safer' Bond mkt is a disaster. The 20 yr bond etf TLT

is down 12% for the year, and -17% past 12 months. Biotech also not great -12% ARKK -15% and Software -4%.


SP500 +13%, QQQ +6.5% IWM +15% for 2021


*This is our select list of representative sector and index ETFs. We do not cover every sub- sector. We also look for lowest expense ratios & highest relative strength in selecting ETFs.


TOP 3 SECTOR PORTFOLIO - Update 5/10/21



A very ugly day in the market.


It started at the open with the downgrade of two titan bellwether stocks

Facebook and Alphabet, as Citigroup said they have reached peak earnings

and ad revenue would slide in the next two quarters.


High PE growth stocks were sold hard, with investors moving into energy and materials. Trade Desk took a breathtaking 26% plunge that added to the nervousness. The ARKK fund fell 5% to its lowest level since November.


The Dow rose nearly 300 points to a record early on as Dow components managed to

stay strong, but by the end of the day, it fell 35 points, the Nasdaq dropped

2.6% and Russell fell 2.6% as well. The Nasdaq sank below its 50 day

moving average, a level last seen at the end of March. The Advance/Decline

line was 2-1 declining and 3-1 declining on the Nasdaq. Volume was a bit

above average, with the SPY trading 81 M shares.


In terms of sectors, Semiconductors had the worst of it, with the SMH down

4.4%, Social media fell 3.7%, Biotech 3.5%, Software -2.3% and Cloud Stocks fell 2.5%.

Even the energy stocks were hit, as Energy Service sector dropped 2.3%.


Individual growth stocks were hammered, Square fell 7%, Qualcomm 6%,

Tesla -6.5%, and Roku sank 5%. Yes it was an ugly day for Tech all around.


And the puzzling thing about the damage was that there was no specific catalyst

to point to, other than simple overvaluation and the sense that we've reached

peak earnings.


We added to our QID and TWM holdings this morning, and reduced our ARKK

allocation to 8%. In the past these one day wonders have had little stamina,

but we will have to wait and see if this is indeed the start of a bigger pullback

of 8% to 10% that we've been anticipating.


Watch the futures tonight, and we will keep you informed as to our moves in the portfolio. We did not like the fact that most indexes and sectors closed at the

lows of the day.


Update 9:30 pm


Futures turn red, with Nasdaq down 1.2%, Russell -.7%, and SP500 -.6%.

Not a frenzy, but still down. The VIX is up 2.6%, but Futures do not always

predict the opening action. Down volume was 3-1 today on Nasdaq - an extreme.


Today's selling was concerning. We may be approaching a downturn,

and we need to be prepared for that. Raise cash, reduce posiiton size,

and put some money into the dividend ETFs like SCHD or VIG.

Avoid the high PE growth stocks are getting slaughtered daily lately.



We are seeing some sell signals in charts of the Top 3 Sector Portfolio.

We posted new sell stops for several sector etfs including

QLD, SOCL Social Media and IGV Software.


Taking profits is always a good idea, especially near recent highs.

But the selling today seemed awfully one sided, with declining

volume at 3.3 M versus Advancing volume 1.3B.


One of the indicators we follow is the Rydex Bear/Bull ratio - measuring

the $ invested in bear funds over Bull funds.

Here's the chart, note that it is at .03%, which is at least

an 8 year low. These kind of lows often precede a spike in Bear

bets, i.e., a correction.


Here's the Rydex Bear/Bull Ratio chart:



Here's QID





ARKK

Fell through all 3 support lines (blue), broke 200 Day Avg, now off 34% from recent high






QLD - 2x Nasdaq

Sitting on the 50 DMA, fell thru the 2nd support level,

a break below that 100 DMA (purple line) would trigger a sell signal.





MARKET DASHBOARD

Monday 5/10/21 Market Close






MARKET OVERVIEW

Monday 5/10/21 Market Close


"Growth stocks bleed into the close


Dow -34.94 at 34742.82, Nasdaq -350.38 at 13401.89, S&P -44.17 at 4188.43


"The S&P 500 fell 1.0% on Monday, as negative momentum accelerated in the heavily-weighted growth stocks with selling interest leaking into the broader market late in the day. The Nasdaq Composite and Russell 2000 both dropped 2.6%.

The Dow Jones Industrial Average was up as much as 0.9% intraday at all-time highs above the 35,000 level, but it retraced from that level and closed lower by 0.1%.

Growth stocks simply looked awful today on no specific macro catalyst, but some investors blamed the horrendous reaction to The Trade Desk's (TTD 489.60, -171.83, -26.0%) earnings report, Citigroup downgrading Alphabet (GOOG 2340.66, -57.03, -2.4%) and Facebook (FB 305.97, -13.11, -4.1%) to Neutral from Buy, and the early preference towards cyclical stocks as potential catalysts.

In addition, indiscernible efforts to buy the dip in growth stocks appeared to stoke concerns about further downside, and an intraday uptick in long-term interest rates added fuel to the fire. The Nasdaq Composite closed below its 50-day moving average (13,534) for the first time since the end of March. The 10-yr yield increased two basis points to 1.60%.

From a sector perspective, the S&P 500 information technology (-2.5%), communication services (-1.9%), and consumer discretionary (-2.0%) sectors took the brunt of the damage amid weakness in the mega-caps and semiconductor stocks. The Philadelphia Semiconductor Index dropped 4.7%.

Losses piled on in the afternoon, and the pronounced weakness in growth stocks took some steam out of the cyclical sectors. The materials (-0.4%) and energy (-0.1%) sectors, for example, closed lower after they were the top performers at the open, as copper and energy prices briefly keyed off reopening optimism and the shutdown of the Colonial Pipeline over the weekend.

The defensive-oriented utilities (+1.0%), consumer staples (+0.8%), real estate (+0.4%), and health care (+0.1%) sectors finished as leaders in positive territory alongside the industrials sector (+0.1%).

Investors faded the commodity-related theme, as copper futures eventually settled down 0.3% to $4.72/lb after being up as much as 2.8% and RBOB gasoline futures settled fractionally lower (-0.02%) at $2.13/gallon after being up as much as 4.2%. WTI crude futures increased 0.1%, or $0.05, to $64.80/bbl.

The 2-yr yield increased one basis point to 0.15%. The U.S. Dollar Index was little changed at 90.22.

Investors did not receive any economic data of note on Monday. The NFIB Small Business Optimism Index for April and the JOLTS - Job Openings report for March will be released on Tuesday.



Sectors Up

TWM +5%, QID 5%, SDS +2%, Utilities +1%. That's it.


Sectors Down

ARKK -5.2%, QLD -5%, Semi's -4.5%, Social Media -3.7%, Biotech -3.6%,

Robotics -2.6%, Cloud -2.4%, Energy Svc -2.3%, Software and Internet -2%



STOCK INDEX PERFORMANCE FOR 2021 YTD


DOW JONES +13.5%

SP500 +12%

NASDAQ 100 +4%

RUSSELL 2000 +12%



STOCKS IN THE NEWS TODAY

Click on stock name for real time quote


"Marriott (MAR) – Marriott earned an adjusted 10 cents per share for the first quarter, beating the 3 cent consensus estimate, with the hotel operator’s revenue very slightly below forecasts. Marriott said it was seeing a rebound in demand as more people receive Covid-19 vaccinations. Shares fell 1.2% in premarket trading.


Coty (COTY) – Coty reported a breakeven fiscal third quarter, matching analysts’ estimates, with revenue in line with estimates as well. Sales were 3.3% below year-ago levels as European lockdowns muted demand for Coty’s cosmetics.


BioNTech (BNTX) – The drug maker beat estimates on both the top and bottom lines for the first quarter, helping its stock surge by 8.7% in premarket action. BioNTech also said there’s no current evidence that points to the need to adapt its Covid-19 vaccine to emerging variants of the virus, although it is prepared to do so if necessary.


Tyson Foods (TSN) – The beef and poultry producer earned an adjusted $1.34 per share for its fiscal second quarter, beating the $1.12 consensus estimate, with revenue also above forecasts. Tyson said it expects its chicken segment to continue to experience some pressure due to a challenging labor environment and severe winter weather.


Freeport McMoran (FCX), Hecla Mining (HL), Southern Copper (SCCO) – These and other copper mining companies are getting a boost as copper prices hit record highs on tight supply and expectations of high demand. Freeport-McMoran rose 3.3% in the premarket, while Hecla jumped 3.6% and Southern Copper jumped 4%.


Simon Property (SPG) – The mall operator and Authentic Brands are buying apparel retailer Eddie Bauer from private equity firm Golden Gate Capital for an undisclosed amount. Eddie Bauer will join several other well-known brand names owned by the two companies, including Aeropostale, Forever 21 and Brooks Brothers.


Live Nation Entertainment (LYV) – Live Nation was upgraded to “buy” from “hold” at Jefferies, which said a 13% pullback has provided an attractive entry point for the concert and live event promoter. Jefferies calls Live Nation a “pure-play recovery” and long-term growth story, and the company’s shares added 2.5% in premarket trading.


Intel (INTC) – UK competition regulators have begun a formal inquiry into the proposed acquisition of Intel’s flash memory and solid state hard drive businesses by South Korea’s SK Hynix. Intel agreed to sell the units to Hynix in October for about $9 billion. Regulators want to determine if the transaction would lead to a substantial lessening of competition."

-CNBC.com 5/6/21



SECTOR ETFs TODAY


Sectors Up

TWM +5%, QID 5%, SDS +2%, Utilities +1%. That's it.


Sectors Down

ARKK -5.2%, QLD -5%, Semi's -4.5%, Social Media -3.7%, Biotech -3.6%,

Robotics -2.6%, Cloud -2.4%, Energy Svc -2.3%, Software and Internet -2%




STOCKS TODAY


Moving Up

MMM +2%, PG 1.9%, NEM 1.5$, ATT 1.5%, VZ 1.4%, JNJ 1%


Moving Down

SQ -7.2%, LRCX -7%, QCOM -6.5%, TSLA -6.5%, PENN -6.5%, AMAT -6%



*These select stocks are chosen for their representation of key Sectors, and large

trading volume. We are aware that not all stocks are covered. These bellwether stocks show where the big money is flowing.






BREAKING NEWS LINKS


MONDAY MARKET ACTION


CLOUD STOCKS DROP TO 6 MONTH LOW


ARKK FALLS 35% IN TECH/BIOTECH SELL DOWN


ETHEREUM SOARS ABOVE $4,000 FOR FIRST TIME


ARKK MANAGER CATHIE WOOD LOVES THE

SET UP OF HER STOCKS AFTER 50% SELL OFFS,

EXPECTS BIG RETURNS


FED FEARS STOCK MARKET DECLINE AHEAD


APRIL JOBS REPORT DISAPPOINTS, MARCH REVISED LOWER


U.S. BACKS WAIVING PATENTS FOR VACCINES


PELOTON LOSES $4 B IN MARKET CAP OVER TREADMILL

MINI-CRASHES TAKE HIGH FLYERS DOWN 50% OR MORE


THE PANDEMIC ADDED 18 M NEW INVESTORS


15% OF CURRENT RETAIL TRADERS 1ST TIMERS

75% OF STOCK OWNERS WILL NOT PAY

BIDEN'S NEW CAPITAL GAINS TAXES






HOT CHARTS TODAY



Copper maker Freeport FCX - Wild, wild ride!



Chart Key For All Charts:


Green line: 21 Day Moving Avg

Orange: 50 DMA

Pink: 100 DMA

Blue: 150 DMA

Red: 200 DMA


Blue horizontal lines represent support or resistance, can also be used for suggested sell stops. In most cases, we will place the first sell stop midway between

the top and middle blue line, selling 1/3 if conditions warrant. But each investor must decide based on their position size and risk level. These blue line levels are raised as price increases, think of them as trailing stops.




TESLA drops 30% off the recent high:






Oil Services etf OIH - Chart is superb!

We own it in Top 3 Sector Portfolio. Up 10% from purchase on 5/5/21.






GDX - Is the Rally for Real?






Energy ETF - XLE - Breaking out

It's in Top 3 Sector Portfolio.





Black Rock - still powering up, we own it in

Top 7 Stock Portfolio:





SCHLUMBERGER - SLB Monthly Chart is Coiled Spring

We may buy some for Top 7 Stock Portfolio:




Stocks Trending on Reddit/WallStreetBets -

Greatest % Increase In Mentions Past 24 Hrs


See All Mentions - Link to "Memeberg Terminal"



Reddit Largest % Change in Mentions Past 24 Hrs


WalMart WMT

Trade Desk TTD--

Weyerhauser WY+

Plug Power PLUG-

Semi LEDS LEDS+++

Digital Turbine APPS+




WallStreetBets


Nikola NKLA-

Ark Genomoic ARKG-

Air Products APD+

Schw Dividend SCHD+

Roku ROKU-



*Stock showing above average price movement, + is up - is down, ++ and -- indicate

a more extreme move.



REDDIT, WALLSTREETBETS HOT STOCKS PERFORMANCE TODAY






Semi Leds skyrockets 45% today:






''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''




Sector ETF Performance From 3/23/20 Pandemic Low

Past 12 Months


Let's take a look at how all Sector ETFs have done since the Pandemic low on 3/23/20. This is how we measure current performance in the Top 3 Sector Portfolio,


NOTE: We like to use significant pivot lows (not a calendar) to evaluate true performance, as those kind of 'Armageddon' sell downs tend to level all Sector ETFs and Stocks to ground zero. The 3/23/20 date is such a low.

#1 Russ 2x UWM +354%

#2 Nasdaq 2x QLD +248%

#3 Retail XRT +252%

#4 Builders ITB +221%

#5 ARK Innno ARKK +201%


SP500 +89% QQQ +93% IWM Russell +124%


Worst: Bonds -16%, Dollar -13%, Defense -8%








TOP 3 SECTOR PORTFOLIO UPDATE


As of 5/10/21, the Top 3 Sector Portfolio is up 182% from the 3/23/20 March low.

The SP500 is up 89% same time frame, beating the benchmark by 93%.

The Portfolio is up 220% past 2 yrs, and +251% for 4 yrs.



Note: Please keep our Buy/Sell Stop level information confidential.

We have had issues in the recent past with investors taking advantage

of that knowledge. We provide it exclusively to the followers of the

Top 3 Sector Portfolio.



New Buys:

B. OIH @ 197.68 on 5/5/21

B. QID @ 23.15 on 4/14/21

B. TWM (2x Short Russell) on 4/30/21 @ 13.87

B. XLE (Energy) @ 49.88 on 5/3/21


New Sells

See below in "Sell Stops"



Buy Stops


Sell Stops


QLD - S. 1/4 @ 119.08

ARKK - S. 1/3 @ 102.25

IGV - S. 1/3 @ 331.85

SOCL - S. 1/3 @ 61.89


QID - S. 1/2 @ 23.43

TWM - S. 1/2 @ 13.87


SOCL - S. 1/3 @ 64.55 Triggered @ 64.55 on 5/10/21 (Gain: +155%)




Measuring Performance:

We are now tracking the Top 3 Sector Portfolio performance from the 3/23/20 March low, in order to show the most recent activity in the last 12 months.


TOP 3 SECTOR PORTFOLIO

Gain from 3/23/20 low to 5/10/21


Asset Allocation: Since the March lows of 2020, our Top 3 performing ETFs are:

QLD +242%, ARKK +205% and SOCL Soc Media +155% in the past year.


We allocate more resources to the top 3 ETFs as you will see in the portfolio below, where #1 QLD has an allocation of 18% of the portfolio, #2 SOCL has 12%,

#3 ARKK has 8%, for a total for top 3 allocations of 38%.




Total Return Top 3 Sector Portf +182% SP500 +89%

Beating SP500 benchmark by 93% from 3/23/20 low.


TOP 7 STOCK PORTFOLIO

From 3/23/20 low as of 5/10/21 (Past 12 months)


Best Stocks:


#1 BLK +168% past 12 months

#2 AAPL 124%

#3 SBUX 104%



Total Return Top 7 Stock Portf +113% SP500 +89%

Beating SP500 by 24% from 3/23/20 low




TOP 7 STOCK PORTFOLIO UPDATE



New Buys


Buy Stops

SLB - B. 1/2 position @ 33.73

Sell Stops






Best Stocks In 2021*


#1 M 57%

#2 WFC 52%

#3 TOL 52%

#4 AMAT 54%

#5 KBH 47%


Laggards: DDOG -22%, AMD -14%, NOW -11%


SPY +13% QQQ +7%





BEST DIVIDEND ETFs - 1 YEAR PERFORMANCE


The #1 best performing dividend ETF was Schwab High Dividend SCHD, now

up 90% in the past 12 months, with a 2.8% dividend. This ETF is highly concentrated

(the secret of its outperformance) with the Top 10 representing 46% of the entire ETF.


We also like the SDIV - Super Div Stock etf, up 71% with a 6.8% dividend.


Table below shows just how big the divergence between Bonds and Dividend stocks

has been. The SCHD is up 90% past 12 months with a 2.8% dividend. The TLT

20 yr bond is down -16% with a 1.5% yield. That means TLT underperformed SCHD

by 106%, with double the dividend in the past year. Bonds? Who needs them?

And dividends are taxed at a much lower rate than bond interest.



Dividend ETF performance past 12 months:







KEY STOCK INDEXES SP500, Nasdaq, Russell 2000



SP500 - SPY Chart:


Up 89% from 3/23/20 low. Watch the blue horizontal lines for support.

Not a bad return for past 12 months. Just buy this one, forget the stocks (kidding). Is your portfolio beating the SP500?







NASDAQ 100 - QQQ Chart:


Rising 103% since March lows, pulls back to 50 DMA (orange line) and bounces:






RUSSELL 2000 SMALL CAP INDEX - IWM


Rising 132% from the March low, pulls back to 50 DMA AT 223:












CNBC Fast Money's Josh Brown:

The Power of Compounded Interest


How many years will it take to double your money? Rule of 72:


Take the annual rate of return and divide it by 72, which gives you how many years

It will take to double your money:


5% return (72/5) = 14 yrs

7% return = 10.3 years

9% return = 8 yrs

11% return = 6.5 yrs


13% return = 5.5 yrs

15% return = 4.8 yrs

17% return = 4.2 yrs

25% return = 3 yrs


So by increasing your return from 7% a year to 11%, the 'years till double'

falls from 10.3 years to 6.5 years.


With a 14% yearly average return, you would double your money in 5 years, and 35% a year doubles it in only 2 years.


Note: The "Rule of 72" only works up to a 99% return. Any return

above 100% will result in an error reading.




Rate of Return for Stocks (SP500)


Annualized 50 year average (1971 – 2021) 11% return per year

Last 30 years 10.7%

Last 10 years 14%


So just by being in the SPY for the last 10 years, you would have doubled your money every 5 years at an 14% return.



TOP 3 SECTOR PORTFOLIO -

HISTORIC PERFORMANCE

Updated 4/30/21


Let's look at 3 time periods for performance of our Top 3 Sector Portfolio.

Each period begins with a significant low in the market, so that it's a level playing field. The first is short term - 12 months since 3/23/20 pandemic low. Second is the past 2 years, 3rd time period is the previous 4 years.


Note how ARKK, QLD, IGV, SOCL, FDN and XBI stayed consistently in the Top 6-7 for

every time period.



Short Term - Last 12 months - 3/23/20 to 4/30/21

Total Return: +202%

# 1 QLD +262% SP500 +87%





Last 2 Years


Total Return: +228%

#1 QLD +349% SP500 +74%






Last 4 Years


Total Return: +244%

#1 ARKK +511% SP500 +97%








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 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 low, tend to outperform for longer time frames in the future.

After a flush out low, the best ETFs will continue to outperform 3, 6 and 12 months later. ​Here's an example of this effect:​


The first time period is from the 12/24/18 Christmas Eve market bottom to 4/16/21, a

little more than 2 years. The 2nd period is the last 12 months from the Covid 3/23/20 low to today, 4/16/21. The 3rd period is the last 4 years.


Table 1


Past 2 .2 years (12/24/18 to 4/23/21):




Table 2


Past 12 months (3/23/20 to 4/23/21):






Table 3


Past 4 years (Jan 2017 - 4/23/21)






Let's look at the first Table 1 - Past 2 years


Best 3 ETFs past 2 years:


#1 QLD (2x QQQ) +361%

#2 ARKK Ark Innov +252%

#3 SOCL Social Media +162%



then look at Table 2 - Past 1 year

Best 3 ETFs past year:

#1 QLD +272%

#2 ARKK +257%

#3 SOCL +177%



Table 3- the last 4 years, it's the same 2: QLD and ARKK, although

SOCL drops to #5, but still a very strong +225% gain:


Best 5 ETFs past 4 years (Jan 2017 - 4/23/21)


#1 ARKK +517%

#2 QLD +476%

#3 SMH +248%


#4 IGV +238%

#5 SOCL +225%




Note the QLD, ARKK and SOCL are in the Top 3 for two of the three time zones.

Point being, that the Top 3 that emerged from the 12/24/18 low continued that out- performance in the shorter, most recent time frame (past 12 months).


Another secret to our success, is allocating more capital to the Top 3 ETFs - concentrating resources in the best performing assets which greatly improves our returns. Currently the Top 3 ETFs get 40% of the portfolio. This is an important aspect of our 'Top 3' strategy.​ Many managers believe that asset allocation is the single most important factor in being a successful trader.


The top 3-6 ETFs will vary a bit, but the first ones off that flush-out low, tend to be the ones still on top 6 months later, 12 months later, 2 years, etc.


We have observed this effect over the course of nearly 23 years of trading, giving more credence to the power of the "Top 3 Sector Strategy."


This 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:


https://alphaarchitect.com/2016/10/14/how-to-measure-momentum/

https://seekingalpha.com/article/4240540-optimal-lookback-period-for-momentum-strategies

https://www.anderson.ucla.edu/faculty-and-research/anderson-review/momentum



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.


SECTORS OUTPERFORM

Since Sectors always outperform indexes, we have a larger portfolio allocation to this area (63%).

For instance, as seen above in Table 2 (from the 3/23/20 low), ARKK is up 255%,

SOCL Soc Media is up 178%, while the SP500 is up 87%.


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,but when appropriate, we use IEMG & EZU)

As of 8/24/20, our portfolio allocation is:

Index: 32%

Sector: 63%

Dividend Stock: 5% ​

International: 0%​

This portfolio strategy is aggressive, and is recommended for experienced investors, especially since we employ the 2x ETFs, as well as Inverse ETFs. We are not invested in any bond funds currently due to rising interest rates. The TLT is down 17% in the past 12 months as of 4/9/21.

THE POWER OF DIVIDENDS

Dividend Yield ETFs are critical to outperforming the benchmarks. Investors today are desperate for yield.


Currently we have VIG for our Dividend Yield allocation. VIG - Dividend Appreciation etf is up 71% the past 12 months, with a dividend of 1.6%.


Dividends are taxed at only 15%, (for those with incomes less than $250,000/year). Interest income would be taxed at 22% to 24% in the same earning bracket.

The power of re-invested dividends for total return is simply amazing.

In the last 12 years, from April 16, 2009 to April 16, 2021, the

SP500 is up 380%. Pretty good return. Annualized gain: 14%


But wait, add in dividends reinvested, and that SP500 return rises to +507%! Annualized gain: 16.5%


At a 16.5% annual return, you double your money in only 4 years!

Dividends should ALWAYS be reinvested. Always.


Here's a list of Dividend Stock ETFs, as well as some Domestic and International Bond fund performance from the 3/23/20 low to 4/23/21 - about one year.


#1 in our list is Schwab Dividend Equity etf SCHD up 90% with a 2.8% dividend.

A good Dividend ETF to add to anyone's portfolio with excellent price appreciation

potential.





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NUALOLO VALLEY, KAUAI




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