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On 2016-04-10 at 10:28 AM, explo said:

Now after exiting that old strategy at the opportunity of lucky forex gain in 2015 a 2013 repeat is no longer possible. In the chart attached below I've applied my current allocation strategy to historic data to see the monthly sampled annual (AR) and quarterly (QR) return distribution for the last 10 years.

return_distribution.PNG

As can be seen up to 100% annual return happened in rare case, but there's nothing beyond that. What's more interesting to me is the average around 30% and the minimum of -15%. The quarterly distribution is more narrow, but also can be more negative. This is because good hedge funds usually have short memory and quickly recover negative return.

BIPV, above I showed the histogram for the annual and quarterly return distributions of my whole portfolio allocation (3.45 funds plus 0.30 stocks simulated using S&P500 x 2 beta) based on past 10 years historic returns of my allocation strategy. If I just look at the 3.45 funds part the historic return distribution looks like this:

funds_return_distribution.PNG

Edited by explo

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On 2016-04-12 at 10:08 AM, explo said:

BIPV, above I showed the histogram for the annual and quarterly return distributions of my whole portfolio allocation (3.45 funds plus 0.30 stocks simulated using S&P500 x 2 beta) based on past 10 years historic returns of my allocation strategy. If I just look at the 3.45 funds part the historic return distribution looks like this:

BIPV, I want to thank you for demanding answers. It made me take a look at the portfolio allocation from a new perspective. I've now divided the portfolio into two component of incremental change from a pure 100% S&P 500 index investment benchmark to see how they contribute to the different return distribution compared to that benchmark. Here's what I did:

  1. I started with calculating past 10 years net of tax return distribution from 100% S&P 500 index investment
  2. I then looked at return distribution from an added 345% Fund + 345% interest expense (since 100% already used)
  3. I then looked at return of an adjusted S&P 500 investment with beta 2 and only 30% weight leaving 70% interest income
  4. I then looked at the combination of 2 and 3 giving 30% S&P 500 x beta 2 + 345% funds + 275% interest expense

Attached is the return distribution for the 4 cases.

My adjusted S&P 500 gives a corresponding 60% of S&P 500 due to beta 2 and an additional 70% interest income through net debt reduction from 345% to 275% and thus offers a more narrow distribution, eliminating the worst negative outcomes of 100% S&P 500. The 100% S&P 500 distribution is quite symmetric with median in the 20's but due some very negative outcomes the mean is much below the median. The funds have a lower median, but is asymmetric with a positive bias for the outliers causing a mean better than the median. Combining the funds with the adjusted S&P 500 gives a more symmetric distribution than the funds but broader and with much less negative outcomes and much higher mean than 100% S&P 500. This looks attractive to me, but, again, is based on historic returns.

SP500_return_distribution.PNG

funds_return_distribution.PNG

stocks_return_distribution.PNG

portfolio_return_distribution.PNG

Edited by explo

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I've made some changes to my portfolio disclosure process. Since the inception of the new portfolio strategy at the start of this year I've done daily updates, but now after a first quarter has been concluded with the expected portfolio risk profile confirmed I'll only do quarterly updates. This include the performance metrics (benchmarked against the TAN and S&P 500) as well as the currency exposure. The stock holdings disclosure will also have lower resolution as changes are small and the big picture seen to the left does not change much with every re-balancing trade. The holdings disclosure will only be updated when I change the target balance. Now I've grouped the stocks into categories for the %-disclosure instead of listing all stocks held and their percentages, since I hold too many stocks and not all are selectable as holdings.

As part of this I added some more info to the return performance, by breaking it down:

Portfolio / TAN / S&P 500 new performance stats, 2016-03-31

  • Inception 2016-01-01
  • Return since inception -5.61% / -26.04% / 0.77%
  • Max drawdown -10.25% / -33.86% / -10.51%
  • Volatility 21.74% / 41.96% / 18.08%
  • Portfolio return breakdown
    • Stocks + Funds + Interest + Tax = Portfolio
    • -2.29% - 0.38% - 2.37% - 0.57% = -5.61%
    • PPS + Currency + Dividends + Expenses = Portfolio
    • 0.84% - 3.57% + 0.39% - 3.27% = -5.61%
    • Commission + Forex + Interest + Tax = Expenses
    • -0.15% - 0.17% - 2.37% - 0.57% = -3.27%

16Q1_return.PNG

I also simplified the description of the result example of the Frequent Aggressive Re-balancing Strategy (FARS), that I apply for the stocks part of the portfolio, after concluding the TERP and GLBL positions.

TERP

  • Entry price: $16.19 (September 28-30, 2015)
  • Dividends earned: $0.86
  • Trade gains: $5.33
  • Net cost: $10.00
  • Exit price: $9.58 (April 8, 2016)

GLBL

  • Entry price: $6.72 (October 5-6, 2015)
  • Dividends earned: $0.44
  • Trade gains: $4.01
  • Net cost: $2.27
  • Exit price: $2.47 (April 6, 2016)

 

Edited by explo
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This week the asset allocation strategy paid off as my funds were up a lot when stocks went down a lot. The solar ETF TAN (which my stocks are correlated to) was down 4.2% for the week while the portfolio managed to gain 5.2% for the week. End of this month I'll conclude the first 6 months of the new strategy. In total the funds have delivered below expectation so far, but they need at least a full year to show their strength.

 

 

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Quarterly update:

Portfolio / TAN / S&P 500 new performance stats, 2016-06-30

  • Inception 2016-01-01
  • Return since inception -0.64% / -31.59% / 2.69%
  • Max drawdown -16.09% / -37.21% / -10.51%
  • Volatility 22.95% / 35.55% / 15.91%
  • Portfolio return breakdown
    • Stocks + Funds + Interest + Tax = Portfolio
    • -4.32% + 7.09% - 2.84% - 0.57% = -0.64%
    • PPS + Currency + Dividends + Expenses = Portfolio
    • 2.62% + 0.21% + 0.45% - 3.92% = -0.64%
    • Commission + Forex + Interest + Tax = Expenses
    • -0.22% - 0.29% - 2.84% - 0.57% = -3.92%

16H1_return.PNG

 

Comments

The portfolio improved to -0.64% for the year end of June compared to -5.61% end of March. Stocks had negative contribution in the quarter and the funds had a big positive contribution. A new max drawdown of -16.09% was hit mid quarter.

The benchmark solar ETF TAN lost further to -31.59% end of June compared to -26.04% end of March and also hit a new max drawdown of -37.21% at the end of the quarter.

The S&P 500 had another good quarter and increased its YTD gain end of June to 2.69% from 0.77% end of March and did not record any new max drawdown. It lead significantly over the portfolio for much of the quarter but the gap narrowed quickly as the portfolio funds surged during the last week of the quarter.

 

Edited by explo

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The portfolio finally turned green YTD yesterday for the first time since March 9.

 

YTD.PNG

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On 2016-07-05 at 11:04 AM, explo said:

The portfolio finally turned green YTD yesterday for the first time since March 9.

YTD.PNG

Some new milestones were hit yesterday.

After the levered portfolio turned green a week ago it now also beat the unlevered portfolio for the first time since March 9.

Further it charged on to reach 0% drawdown and thus enter growth mode again by beating the old ATH from March 7.

When drawdown is not 0% the portfolio is just recovering losses from last ATH before it can "grow" again by setting new ATHs.

The CAGR is now 7.6% which is severely below the 30% target, so I hope it can stick in growth mode for a while to hit the target.

The swift recovery the last three weeks is largely attributed to a hedge fund hero that has been soaring on the Brexit vote. The TAN correlated stocks are still in negative territory as the TAN is still down 30% for the year. The S&P 500 still has a small lead over the portfolio.

YTD.PNG

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I've done some updates to the strategy description in my profile under the "About Me" tab.

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Thank you Explo for sharing.  I think you have a winning strategy but might take a bit of work (trading frequently).  You are doing quite well.  Great job!

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1 hour ago, Jetmoney said:

Thank you Explo for sharing.  I think you have a winning strategy but might take a bit of work (trading frequently).  You are doing quite well.  Great job!

Thanks Jet. That I'm only down 3.4% YTD on my stocks vs the TAN being down 30.0% is maybe more impressive than the total portfolio being up 3.9% YTD. With 30% in stocks if I followed the TAN picks I should be down 9% on my stocks. But it's too early to conclude anything else than that the strategy hasn't failed its purpose yet.

Yes one of the main drawbacks with the risk parity strategy is that while the exposure matches the risk it doesn't match the effort. Thus all the effort put into the analysis to pick stocks for better value appreciation than the sector average and all the trading effort to utilize the volatility in the sector to lower the cost basis have quite low relative exposure in the portfolio as the stocks are less than 10% of the portfolio value.

 

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I've made a slight change to my strategic allocation. The allocation for individual stocks and stock funds have been changed from 30% and 40% to 25% and 45% respectively. All else is the same. Note that this is a (markets independent) strategic change not a (markets influenced) tactical one. My profile page has been updated to reflect the change.

 

Edited by explo

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On ‎2016‎-‎07‎-‎12 at 3:29 PM, explo said:

The CAGR is now 7.6% which is severely below the 30% target, so I hope it can stick in growth mode for a while to hit the target.

I added the 30% target to the chart. It's been below that every day except for the first two days in January. It's not unexpected that it can take more than a year before it's hit again.

YTD.png

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I added target lines for the stocks and funds components too as well as for the unlevered return. The target lines are same color thinner versions of the return lines they are targets for.

The funds hit their target line after the post Brexit surge and churned around it for a while.

Aside from that the year has largely underperformed the expected average return represented by the target lines.

It seems that negative and positive return leverage hasn't balanced well during the year as the levered return at the moment is lower than what would be expected based on the unlevered return.

The S&P 500 expected average return is similar to the unlevered return. The difference is that the S&P 500 is expected to experience occasional large drawdowns and outperform expected average return between these drawdown, while the unlevered portfolio should not experience large drawdowns thus making it more leverageable.

YTD.PNG

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Investment Strategy Update August 20, 2016

Sales

I sold RNW.TO and CSIQ this month to move to the US yieldco profiles. Logic behind sales. I see RNW continue to gain equity value, but I see similar or better yields coming out of the US companies. Also on the value of dividend payment, the US dollar is far superior and recalculation made the return much simpler.   

CSIQ as summarized on other threads, despite the recovery rally I see further pressure on the stock. I expect the company to do better than others and come up as the solid winner from this downturn. The name continues to be favored by myself. Under current scenarios, I see FLSR as expensive. The balance sheet superiority is adding to the value of equity, but I see the operational structure getting greater usage/spending of the cash, hence reducing the value of equity in a long run.

JKS, another survivor designate, is certainly well run, but I find less and less attractive to pay ADR custodian fees, and I am curious how they are going to manage the downturn in modules. They are still invisible in the global solar plant building market.

In general, all companies in this sector are going to be experiencing business pressures as we are only at the beginning of the cycle, which in my view, can extend to early 2018.

Further, the switch to yieldco is driven by potential policy changes on energy generation with the new administration. I see companies tie in with utilities to do rather well under the move to renewables, hence looking at NYLD boosting its profile, selling bonds, issuing ATMs. Canadian also looks a lot safer in comparison to other Chinese names under policy changes.

Buys

I bought PEGI and NYLD at 80/20 split. I expect around $1.45 blend yearly dividend at 6.5% currently (blend). I bought PEGI as recent equity sale has provided cash to buy Broadview (already committed) and Armow. I see PEGI grow its dividend and add equity; my target is to see that stock reaches about $35/share rounding portfolio to 3.3GW, dividend of $2 per year yielding 5.7%

NYLD connected to the regular utility, like the ability to generate EPS, huge portfolio, adding solar, which I like. I see dividend moving toward $1.1 per year by 2017 and about yielding 4.5% as much as $23 per share.

Equity gains plan 44%, Dividend 6.5% so about 50% gain, timeline 12 months.

YTD portfolio results 23% loss.

 

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I think your strategy is prudent, given current industry outlook. As I suspected, market bid up CSIQ after results because of technicals,but its been selling since. I believe the long term beneficiaries here are the utilities, who will buy cheaper and cheaper solar, but not pass along savings to customers. No wonder their stocks have done so well. The solar manufacturers on the other hand are caught in a classic commodity trap. You need to make more and more stuff at cheaper prices, just to stay in one place. 

 

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Considering the bleak outlook for the bonds market and the short-term uncertainty about the stock market after a long cheap money driven recovery cycle without a booming economy I did a general strategic risk analysis of the portfolio and concluded that I have too high exposure to high risk funds i.e. to the market correlated bond and stock funds and to the market neutral high risk hedge funds.

A suitable allocation change to improve risk-adjusted return over the long-term was found as moving 40% to low risk hedge funds with 20% taken from the bond funds, 15% from the high risk hedge funds and 5% from the stock funds. The timing also serves the short-term market uncertainties as 25% are moved from quite high flying market correlated funds to market neutral funds and further the high risk hedge funds have done very well after a big surge on the Brexit while the low risk hedge funds have had a weak performance.

Due to some funds only trading monthly and timing is important a move like this takes time. At best it is completed in one month, but might take longer to optimize timing of funds sales.

The "Allocation" section on the "About Me" page in my profile has already been updated for this allocation target change.

Edited by explo
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About half the move above was complete last month. The short-term most critical part to reduce market correlated assets was completed by cutting bond funds 20% and stock funds 8% (percent units of equity). The low risk (relative value) hedge funds also got a 20% increase. Remaining is to add back 3% to (other) stock funds, add another 20% to the relative value funds and cut 15% from the high risk (CTA) hedge funds. None of those feel very short-term critical. The CTA funds do well when markets move big, especially down. So if September sees some corrections in markets making the remaining moves end of this month might be good timing. The CTA funds trade timing is a bit tricky due to high daily volatility and only monthly trading.

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Investment Strategy Update September 21, 2016

Buys,

Used the RNW.TO and NYLD dividend to buys shares (3% equity added)

YTD portfolio results in 21% loss, a 2% gain from last update. The position is 60 days old. The average buying power against CSIQ 10% and JKS has increased by 37%

As per my article, you can tell my strategy, now is the question if I am shortening the period of concerns. JKS is certainly looking like a good objective, but if $3 per share in 2017 is not possible more analysis is required. For those who may consider the dividend payment record date for PEGI is Sept 30. Ex-dividend is Sept 28th; I may execute a switch to collect on this one.

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Quarterly update:

Portfolio / TAN / S&P 500 new performance stats, 2016-09-30

  • Inception 2016-01-01
  • Return since inception -3.80% / -33.71% / 6.08%
  • Max drawdown -18.16% / -37.21% / -10.51%
  • Volatility 24.39% / 31.37% / 14.08%
  • Portfolio return breakdown
    • Stocks + Funds + Interest + Tax = Portfolio
    • -5.28% + 7.32% - 4.82% - 1.02% = -3.80%
    • PPS + Currency + Dividends + Expenses = Portfolio
    • 1.45% + 1.42% + 0.46% - 7.13% = -3.80%
    • Commission + Forex + Interest + Tax = Expenses
    • -0.71% - 0.58% - 4.82% - 1.02% = -7.13%

16Q1-Q3_return.PNG

Comments

The portfolio fell back to -3.80% from inception (2016-01-01) to end of September compared to -0.71% end of June.

Stocks and funds had a quite neutral change and thus the fall back was mainly attributable to expenses not being covered by gains on stocks and funds. The strong finish by the funds in Q2 continued for first half of Q3 but all of those gains were given back between mid August and mid September after which a rebound in the funds have started to end Q3 neutral compared to Q2 but still significantly below the mid August peak. The stocks had a less wild quarter with initial gains and then turned to loss during same weak period as the funds and then recovering to a neutral quarter the last two weeks.

The benchmark solar ETF TAN lost further to -33.71% end of September compared to -31.59% end of June.

The S&P 500 had another good quarter and increased its YTD gain end of September to 6.08% from 2.69% end of June.

A strategic reallocation was made during the period where the stable Relative Value Hedge Funds allocation increased 40% to 180% by taking 5%, 15% and 20% from Stock Funds, CTA Hedge Funds and Bond Funds respectively. This should lower Volatility and Max DrawDown risks, while maintaining total return expectation, thus improving expected risk-adjusted return.

For now the portfolio is severely lagging its target return but so far have hit the expected risk profile. Multiple years are needed to see if the portfolio tracks the return target or not and stays within expected risk level. I'm hoping Q4 will be a good enough quarter to at least end the year positive, maybe even beating the S&P 500, even if the portfolio return will be significantly below the 30% annual return target.

Edited by explo
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On 2016-09-21 at 7:26 PM, odyd said:

Investment Strategy Update September 21, 2016

Buys,

Used the RNW.TO and NYLD dividend to buys shares (3% equity added)

YTD portfolio results in 21% loss, a 2% gain from last update. The position is 60 days old. The average buying power against CSIQ 10% and JKS has increased by 37%

As per my article, you can tell my strategy, now is the question if I am shortening the period of concerns. JKS is certainly looking like a good objective, but if $3 per share in 2017 is not possible more analysis is required. For those who may consider the dividend payment record date for PEGI is Sept 30. Ex-dividend is Sept 28th; I may execute a switch to collect on this one.

I have executed the switch which has left me with about 7.7% drop in value since Sept 23rd, averaging $23.80 ownership to current $21.95. NYLD has dropped 11.9% in the period. So from that perspective, it was a bit better after all, and I am to collect on the dividend by Oct 31.

In the same timeframe, CSIQ gained 13.4%, and JKS did 7%. So staying away from CSIQ and its lowest seems to cost me. Now in a long-term view, I still see an opportunity for low prices. We have not seen any financial impacts, but surely CSIQ is trying hard not to look bad.

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