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Transcript of Visual Understanding of Sector Surfer Strategies Are classical visualization tools useful in...
Visual Understanding of Sector Surfer Strategies
Are classical visualization tools useful in understanding SS
Stephen Lundstrom
Process
• Download .csv file from SS• Perform (manual) 11 year backtest (VV)• Capture 10 equity curves from backtest• Prepare more detailed charts using TC2000:
• Vertical lines indicate trades• Equity symbols indicate what was owned during
each period• All equities owned during chart time frame shown –
provides Sector Surfer context.
VV Backtest• Settings
– Account • initial investment $100,000• No commission, no margin• No interest on cash (SS includes some interest)
– Automation• trades entered manually
– Dates + Equities from Sector Surfer .csv download– Closing prices from VectorVest
» No dividends» Trades following morning
– Test Period• 1/2/2002 to 12/31/2012
TC2000 equity comparisons
• Used SPY to show overall market behavior– Green dashed line; chart scale applies to SPY
• Can compare up to 10 equities– Chose only those equities selected by SS during the
timeframe depicted– Comparisons used to show trends, not values
• Annotations – Vertical bars depict where trades were made– Equity owned in each period shown– Primary drawdowns shown
• (in red – matches backtest annotations)– Yellow areas highlight possible better choices
Two Hall of Fame strategies selected as case studies
• #1 ETFs: SectorVarious1• 634933549324271250-3961-3-38782 • ZROZ not supported in VV
– Manually entered ZROZ gains per SS .csv file
• #1 Top Dog Stocks: Recent Yield• 634891329763437500-3017-1-32874 • Dropped some stocks (TC2000 limitations)
General Observations
• Equity selection within portfolios studied generally quite good.
• Yellow areas on CLOSER LOOK charts highlight better choices – (with perfect hindsight)
• Not all ETF equities available over entire study periods (mine or SSs)
• Use of stop losses or other techniques might be needed to reduce max. drawdowns.
Strategy: SectorVarious1
• Current top SS Hall of Fame ETF– SectorVarious1
• 634933549324271250-3961-3-38782
• ETFs: (study period 1/2/2002 – 12/31/2012)
ITB 5/23/06
EEM 4/25/03
EWW
ZROZ 2/14/11
GLD 11/24/02
PPH
REZ 1/17/08
XLE
IWM
BAL 7/31/08
QQQ
IBB 6/29/01
Stormguard ON
From From From
14 Year Chart
10 Year Chart
Summary Statistics:SectorVarious1 ETF Strategy
Sector Surfer Backtest
10 yr annualized return 42.9%10 yr CROR (w/o dividends) 33.2%10 yr Max Drawdown 25% 25.9%Sharpe Ratio 0.98Score 195Safety 41.0Alpha 39%Beta 0.81
Count of % Gains Reported(does not take holding period into account)
0123456789
10
-4.0 --7.9
-2.0 --3.9
-1.0 --1.9
+0.9 --0.9
+1.0 -+1.0
+2.0 -+3.9
+4.0 -+7.9
+8.0 -+15.9
+16.0-
+31.9
+32.0-
+63.9
>+64
47 trade pairs: 1/1/2002 – 12/31/2012% Winners 77%
%Gains
Smallest Gains: -7.2% (twice)Largest Gains: 32.6%, 76.0%
SectorVarious1 Strategy
What SS Has to Work With (only 10 of 12)
SectorVarious1 Strategy
Backtest 10 yr Equity CurveShowing VV Confirmed Calls
MaxDD-25.9%
$2M
Jan 2002 – July 2003
EWW+4.2%
$CASH
6/02 – 4/03
IBB
+28.7%
$95K
$125K
Jan 2003 – July 2004
IBB
+28.7%
$CASH
6/02 – 4/03
XLE
+7.6%
EWW
+6.0%
EEM
+10.5% EWW
-4.5%
IBB
-2.8%
$110K
$160K
Jan 2004 – July 2005
XLE
+7.6%
EWW
-4.5%
IBB
-2.8%
XLE
+7.8%
EEM
+26.7%
EWW
+6.8%
XLE
-7.2%PPH
-1.8%
$150K
$200K
Closer Look
Jan 2005 – July 2006
EWW
+6.8%
XLE
-7.2%
PPH
-1.8%
XLE
+10.1%
GLD
+5.8%EWW
+13.7%EEM
-1.8%
IWM
+0.3% GLD
-5.9%
$200K
$250K
21.7%drawdown
Closer Look
Jan 2006 – July 2007
EEM
-1.8%
IWM
+0.3%
GLD
-5.9% PPH
+9.0%
EWW
+32.6% XLE
+14.8%
$250K
$350K
Closer Look
Jan 2007 – July 2008
EWW
+32.6%
XLE
+14.8%
EEM
+16.5%
GLD
+18.2%
$CASH2/08 – 5/08
$350K
$500K
XLE
+3.2%
Closer Look
Jan 2008 – July 2009
$CASH2/08 – 5/08
XLE
+3.2%
$CASH7/08 – 6/-09
$460K
$560K
Closer Look
Jan 2009 – July 2010
$CASH7/08 – 6/-09
EWW
+10.7%
ITB+1.7%
REZ-2.1%
XLE
+2.8%
GLD
-7.2%
ITB
REZ
ITB
REZ+6.2%
REZ-4.8%
ITB+10.0%
$500K
$640K
19.5%drawdown
Closer Look
Jan 2010 – July 2011
+6.2%ITB+10.0%
ZROZ*+14.9%
BAL
+76.0%
IBB-0.7%
$600K
$1.4M
25.9%drawdown
25.9%drawdown
Closer Look
Jan 2011 – July 2012
BAL
+76.0%
IBB-0.7%
ZROZ*+6.8%
GLD
+12.3%
ZROZ*+26.0%
$CASH9/11-11/11
ZROZ*+6.9%
ITB+28.7%
25.9%drawdown
$1.0M
$2.1M
Closer Look
July 2011 – Dec 2012
ITB+28.7%
ZROZ*+0.9%ZROZ*
+6.9%ZROZ*+26.0%
GLD
+12.3%$CASH
9/11-11/11
ITB+17.0%
$1.2M
$2.2M
Closer Look
SectorVarious1 - Trades
Date Sell Buy Gain%
12/31/12 ITB 17.0%
8/31/12 ZROZ ITB 0.9%
5/31/12 ITB ZROZ 28.7%
12/30/11 ZROZ ITB 6.9%
11/07/11 $$$$ ZROZ 0.0%
9/30/11 ZROZ $$$$ 26.0%
8/31/11 GLD ZROZ 12.3%
7/29/11 ZROZ GLD 6.8%
6/30/11 IBB ZROZ -0.7%
4/29/11 BAL IBB 75.0%
9/30/10 ZROZ BAL 14.9%
5/29/10 REZ ZROZ 6.2%
3/31/10 ITB REZ 10.0%
1/29/10 REZ ITB -4.8%
12/31/09 GLD REZ -7.2%
Date Sell Buy Gain%
1/31/06 EWW EEM 13.7%
11/30/05 GLD EWW 5.8%
10/31/05 XLE GLD 10.1%
6/30/05 PPH XLE -1.8%
4/29/05 XLE PPH -7.2%
2/28/05 EWW XLE 6.8%
12/31/04 EEM EWW 26.7%
8/31/04 XLE EEM 7.8%
5/28/04 IBB XLE -2.8%
4/30/04 EWW IBB -4.5%
2/27/04 XLE EWW 7.6%
12/31/03 EWW XLE 6.0%
11/28/03 EEM EWW 10.5%
8/29/03 IBB EEM 28.7%
4/30/03 $$$$ IBB 1.2%
5/31/02 EWW $$$$ -2.7%
1/31/02 $$$$ EWW 4.2%
Date Sell Buy Gain%
11/30/09 XLE GLD 2.8%
10/30/09 REZ XLE -2.1%
9/30/09 ITB REZ 1.7%
7/31/09 EWW ITB 10.7%
6/30/09 $$$$ EWW 1.8%
6/30/08 XLE $$$$ 3.2%
5/30/08 $$$$ XLE 1.0%
1/31/08 GLD $$$$ 18.2%
11/30/07 EEM GLD 16.5%
7/31/07 XLE EEM 14.8%
3/30/07 EWW XLE 32.6%
8/31/06 PPH EWW 9.0%
6/30/06 GLD PPH -5.9%
4/28/06 IWM GLD 0.3%
3/31/06 EEM IWM -1.8%
Strategy: 9-Stock Recent Yield
• Started with current best TopDog Stocks:– Recent Yield
• Limitation on charting Tools (compare 10 stocks, equity not supported)
• Eliminate laggards on the strategy chart (APOL, NFLX)
• Eliminate equity not supported with tool (TC2000): PDC
9-Stock Recent Yield Strategy634955286436756250-3808-8-37784
• PCYC• MCHP • IIVI • AMGN • SWN • AMZN • L • GMCR• SRPT
Stormguard ONAll equities available for entire backtest 1/2/02 – 12/31/12
24 Year Chart
10 year chart
Summary Statistics:9-Stock Recent Yield Strategy
Sector Surfer Backtest
10 yr annualized return 85.6%10 yr CROR (w/o dividends) 67.3%10 yr Max Drawdown 59% 58.9%Sharpe Ratio 0.45Score 390Safety -0.5Alpha 92%Beta 2.51
Count of % Gains Reported(does not take holding period into account)
0
1
2
3
4
5
6
< (4.0) (3.9)-(2.0)
(1.9)-(1.0)
(0.9)-+0.9
+1.0 -+1.0
+2.0 -+3.9
+4.0 -+7.9
+8.0 -+15.9
+16.0-
+31.9
+32.0-
+63.9
>+64
29 trade pairs: 1/1/2002 – 12/31/2012% Winners 79%
Smallest Gains: -20.8%, -38.3%, Largest Gains: 279.5%, 457.2%
9-Stock Recent Yield Strategy
What SS Had To Work With
SPY
GMCR PCYC
SRPT
IIVI
MCHP
L
SWN
AMZN
AMGN
9-Stock Recent Yield Strategy
Backtest 10 yr Equity CurveShowing VV Confirmed Calls
Jan 2002 – July 2003
$170K
6/02 – 4/03
SRPT-20.8%
AMZN+29.3%
$CASH
AMZN+25.1%
Jan 2003 – July 2004
$300K
$CASH
AMZN+25.1% SRPT
+1.5% (?)
AMZN+13.6%
PCYC+13.1%
$150K
Jan 2004 – July 2005
$300K
$350K
$200K
PCYC+13.1%
SWN+89.5%
SRPT-10.4%
46.4% drawdown
Closer Look
Jan 2005 – Aug 2006
$300K
$500K
$1.1M
$600KSRPT-10.4%
SWN+53.0%
SRPT+8.7%
41.1% drawdown
Closer Look
Jan 2006 – July 2007
$600K
$1.1M
$1.0M
SRPT+8.7%
41.1% drawdown
IIVI+64.2%
GMCR+14.4%
Closer Look
Jan 2007 – July 2008
$900K
$1.3M
$1.1M
2/08 – 5/08
GMCR+14.4%
GMCR+3.3%
AMZN+28.9%
$CASH+1.0% (?)
SWN+7.4%
Closer Look
Jan 2008 – Aug 2009
2/08 – 5/08
$1.30M
$1.35M
$1.50M
7/08 – 6/09
SWN+7.4%
$CASH+1.0% (?)
$CASH+1.8% (?)
GMCR+19.1%
Closer Look
Jan 2009 – July 2010
7/08 – 6/09
$1.50M
$1.0M
$3.50MGMCR+19.1%
SRPT-38.3%
45.7% drawdown
PCYC
+279.5%
Closer Look
Jan 2010 – Aug 2011
$2.0M
$3.50M
$4.50M
PCYC
+279.5%
SRPT
-12.0%
AMZN-1.2%
IIVI-2.8%
GMCR
+62.1%
Closer Look
Jan 2011 – Aug 2012
$5.0M
$10.0M
$15.0M
$20.0M
GMCR
+62.1%
IIVI-2.8%
PCYC+2.7%
$CASH0%
PCYC+457.2%
Closer Look
July 2011 – Dec 2012
$5.0M
$10.0M
$20.0M
$30.0M
$35.0M
PCYC+457.2%
SRPT+78.8%PCYC
+2.7%
$CASH0%
GMCR
+62.1%
Closer Look
9-Stock Recent Yield Strategy - Trades
DATE SELL BUY GAIN
31-Dec-12 (SRPT) 78.80%
31-Aug-12 PCYC SRPT 457.20%
18-Nov-11 $CASH PCYC 0.00%
30-Sep-11 PCYC $CASH 2.70%
31-Aug-11 GMCR PCYC 62.10%
31-Mar-11 IIVI GMCR -2.80%
28-Feb-11 AMZN IIVI -1.20%
30-Nov-10 SRPT AMZN -12.00%
31-Aug-10 PCYC SRPT 279.50%
30-Nov-09 SRPT PCYC -38.30%
31-Jul-09 GMCR SRPT 19.10%
30-Jun-09 $CASH GMCR 1.80%
30-Jun-08 SWN $CASH 7.40%
30-May-08 $CASH SWN 1.00%
DATE SELL BUY GAIN
31-Jan-08 GMCR $CASH 3.30%
31-Oct-07 AMZN GMCR 28.90%
31-May-07 GMCR AMZN 14.40%
31-Jan-07 IIVI GMCR 64.20%
30-Jun-06 SRPT IIVI 8.70%
30-Dec-05 SWN SRPT 53.00%
30-Jun-05 SRPT SWN -10.40%
28-Feb-05 SWN SRPT 89.50%
30-Jul-04 PCYC SWN 13.10%
31-Dec-03 AMZN PCYC 13.60%
29-Aug-03 SRPT AMZN 1.50%
30-May-03 AMZN SRPT 25.10%
30-Apr-03 $CASH AMZN 1.20%
31-May-02 AMZN $CASH 29.30%
28-Feb-02 SRPT AMZN -20.80%
31-Jan-02 $CASH SRPT