Camargo Investment Management of Cincinnati, OH began tracking one model named the MidCap Growth Price
Momentum and LargeCap Value. This strategy trades a basket of 20 to 25
individual stocks based on proprietary fundamental analysis. Theta Research has
independently verified the actual performance of this strategy back to its
inception of 01/01/2012.
Jacob Deschenes, principal of Era Capital Management, has
announced the tracking of one model named the Strategic Growth Opportunities
portfolio, which trades individual stocks based on a proprietary contrarian
strategy. Theta Research has independently verified the actual performance of
this strategy back to its inception of 10/31/2014.
Copperwynd Financial, LLC began tracking two models, both of which trade
individual stocks. The 5 Stock Momentum Strategy employs positive momentum
while the 50 Value Stock Strategy is based on proprietary value metrics. The
actual track records of these models have been verified by Theta Research back
to 7/31/2013 and 5/31/2012, respectively.
Marty Kerns and Parker Binion of Kerns Capital Management have
announced the tracking of two new models, the KCM Valarian Long/Short and KCM
Valarian Market Neutral strategies. Both models have an inception date of
12/31/2014 and trade individual stocks seeking to manage risks through the use
of proprietary stock selection and net exposure methodologies.
Roger W. (Wayne) Lord of Dexter, GA has initiated trading of one model, the
NAZ 100. This strategy is an aggressive day trading and swing trading model.
Theta Research began independent tracking at the program’s inception date of
Theta Launches New Ad Campaign
The advantages of subscribing to the Theta Research database are now being publicized via an ad campaign in the ProActive Advisor e-zine. This online publication goes out to over 100,000 Investment Advisors across the country, promoting the benefits of active investment strategies in a diversified portfolio. Click on the following link to learn more about the ProActive Advisor e-zine.
Theta Welcomes Two NEW Active Investment Managers
Potomac Advisors began tracking with one model named EVO 1. This strategy trades long, inverse and leveraged Rydex mutual funds. Theta Research has independently verified actual performance of this model back to May of 2002.
Zor Capital, LLC established tracking for one model named ZorTrades. This strategy trades individual equities based on a proprietary pattern recognition system. Theta Research has independently verified the actual performance of this strategy back to its inception of 7/31/2013.
Hepburn Capital Management began tracking with one model named Future Technologies Strategy. This strategy trades primarily equity securities in the field of emerging technologies. Theta Research has verified performance back to the inception date of 8/31/14.
Dr. Gary J. Harloff, Ph.D. began tracking of one model named Global Tactical – Rydex Aggressive Growth trading long, inverse and leveraged Rydex mutual funds. Theta Research has independently verified actual performance of this model back to 11/30/2010.
If I had a hammer, I’d hammer in the morning
I’d hammer in the evening, all over this land
I’d hammer out danger, I’d hammer out a warning
I’d hammer out love between my brothers
and my sisters all over this land.
“If I had a Hammer” - Pete Seeger and Lee Hayes, 1949.
“…if all you have is a hammer,
everything looks like a nail.”
- Abraham Maslow
I don’t know if American psychologist, Abraham Maslow, ever met Pete Seeger but they seem to agree about the use of a basic hand tool. Over the years, I have heard many variations of Maslow’s statement but the meaning
has remained the same – those good with a hammer tend to see every new challenge as a nail.
Unfortunately, many investors get caught up in Maslow’s limited tool selection by restricting their choice of investment strategies needed to reach their financial goals. In reality, investors would probably be better off if they could diversify their selection of investment strategies to add depth to their portfolios.
In today’s investment world, however, the “hammer” tends to be in the form of passive asset allocation strategies that distribute portfolios among various stock and bond asset classes. A typical allocation might be 60% stocks and 40% bonds, usually based on computerized proposals based on the concept of “Modern Portfolio Theory” developed in the 1950s by Dr. Harry Markowitz.
And what a hammer it is. Asset allocation strategies using low-cost index funds, and now ETFs, have become the 800 pound gorilla of the investment world.
Don’t get me wrong, I’m not saying that asset allocation strategies do not have a place in an investor’s portfolio. What I am saying is that asset allocation has its shortcomings and should not be the only strategy employed by investors who want to meet their financial goals. Using only asset allocation is like a toolbox containing only a hammer – useful in some applications but hardly a universal wrench.
Unfortunately, limited tool selection can affect the quality of your work. For example, risk management in a passive asset allocation portfolio is generally expected to come from low correlations among the asset classes chosen. The only problem is that actual experience during bear markets has shown that these low correlations can actually during down market cycles (remember 2008?). The result is that asset allocation’s tool to
manage risk can disappear just when you need it most.
The same goes for maximum portfolio drawdown, a statistic indicating the portfolio’s largest drop from a peak value to a subsequent valley. During the two bear markets that occurred in 2000 – 2002 and then again in 2007 – 2009, the S&P 500 Index dropped in value more than 40% and 50%, respectively. Since passive asset allocation was the only tool in many toolboxes, there was no way for portfolios to escape the carnage. What if you needed your money at the bottom of the drawdown? It would be your tough luck.
Asset allocation believers offer the standard line that the market will eventually regain its value, and for proof, they point to the fact that every drawdown has eventually been erased by the market. Well, every one except the Nasdaq Composite’s 75%+ drawdown which has still not been erased even after more than 14 years of market action. Buy-and-hold aficionados don’t talk much about that statistic.
But let’s appease the hammerheads and acknowledge that the stock market does usually regain its losses, eventually, but at what cost? Unfortunately, the price paid by many investors for following a passive investment strategy is often the most valuable commodity of all – time.
While the financial press continues to gloat about hitting new record highs, it conveniently ignores the fact that, since the year 2000, the stock market has spent much of the time either losing money or regaining lost ground. And when we talk about investors meeting their long-term financial goals, time is money.
Common sense tells us that time is an integral part of compounding’s ability to work its wonders. We’ve all seen the illustrations of how someone starting early with small contributions can end up with a larger nest egg than
someone starting later, even though the late-comer makes larger contributions. That’s why we always counsel investors to start saving as soon as they can, even if it’s not a lot of money. Yet periodic significant losses can render the time advantage impotent.
And it gets even worse: not only do losses require you to use valuable time to recoup portfolio losses after a drawdown, you have to earn a higher return to get there. As we all know, a 40% loss requires a 66% return just to get back to breakeven. That’s a double whammy if I ever saw one.
What’s needed is a way to sidestep losses during bear markets and major corrections, while remaining invested during up markets. Active investment strategies provide the potential to do just that.
The moral to this story is that investment professionals need to diversify their clients among different investment strategies, both passive and active – and not just a selection of various equity and bond holdings. Doing so could help portfolios weather the next storm (which some say is overdue) rather than getting hammered.