WiserTrader Industries Monthly

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November 2007                          Prescott, Arizona                     Contact Editor

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Contents

 

 

 

Published the 3rd Tuesday of the month        Subscription

 

 

 

 

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   Top-down stock selections are based on finding leading industries in leading sectors with stocks that show growth in market share, earnings and sales.  In this issue the focus continues on diversification in the face of a 10% market correction and a declining US dollar.

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1.0 Top-Down Portfolio

 

     Currently held positions have an average profit of 5.9%.  The gross profit, including closed positions, is 12.95%.  After broker fees, the net profit is 10.8%, as summarized in Table 1A.

 

 

Table 1A

Top-Down Portfolio Performance

November 20, 2007

Top-Down Trading in 2007 ($7000 Initial Capital)

% Initial Capital

Closed trades in 2007 =

6

 

Average Trade Size =

$1,000.00

 

Total Closed Position Share costs =

$6,000.00

 

Gross Profit on Closed Positions =

$495.56

7.1%

Number of Open Positions =

3

 

Cost of Open Positions =

$3,000.00

 

Gross Profit on Open Positions in 2007 =

$411.26

5.9%

Total Gross Profit =

$906.82

12.95%

Broker Commission ($9.99/trade) =

-$149.85

 

Subscription Cost to date =

$0.00

 

Net 2007 Profit After Expenses =

$756.97

10.8%

Cash =

$4,274.91

 

Current Capital =

$7,756.97

 

 

 

     Stocks that survived the down trend and high volatility from October through November are listed in Table 1B.  VDSI closed below its trailing stop on 10/19/07 for a loss of 12.5%.  SNP closed below its trailing stop on 10/19/07 for a profit of 42.4%.  FCX closed below its trailing stop on 11/19/07 for a loss of 10.2%.  The remaining stocks in the table are moved to a hold because their prices declined by more than half the trailing stop percentage.  Refer to Section 2 for current trailing stop settings.

 

 

Table 1B

Top-Down Portfolio

November 20, 2007

Stock

Open Date

2007 Open Price

Last Date

Last Price

2007 Gross P/L (%)

Status

Sell stop

BHP

9/18/07

68.57

11/20/07

72.71

6.0%

Hold

69.86

PBR

9/18/07

70.60

11/20/07

105.00

48.7%

Hold

93.42

BRCD

10/16/07

9.02

11/20/07

7.79

-13.6%

Hold

7.63

 

 

 

     Our last attempt to balance the portfolio involved adding some US stocks in order to equal the number of foreign stocks.  Currently BRCD is the only remaining US stock.  BHP is Australian and PBR is Brazilian.  From Table 3A, the leading sector over the past month has been utilities.  Diversified Utilities is ranked 10th out of 215 industries in Table 3B.  Of these, Sierra Pacific Resources (SRP) is ranked 2nd in terms of monthly price increase.  However, its sales growth outpaces other leading companies in its industry.  Therefore SRP is being added to the portfolio.  Details are listed in Table 1C.

 

 

Table 1C

Stock Addition

Company

1 wk

% Chg

1 mo

% Chg

Price

Mkt. Share

Increase

Sales

Growth

Earnings

Growth

Sierra Pacific Resources (SRP)

2.3%

15.2%

$17.52

0.2%

10.8%

202%

 

 

     Bonds, although not as exciting as stocks, offer a measure of safety in a market down turn.  Of the three types, high yield bonds offer the greatest return which in some years rivals the return of the major averages.  With this higher yield comes a slightly greater risk.  Investment grade bonds probably offer the next highest rate of return followed by US Treasuries which are the safest.  If inflation picks up, investors typically exit bonds, unless they are inflation indexed.

 

     The iShares Lehman TIPS Bond Fund (TIP) is an ETF whose results correspond generally to the price and yield performance of the inflation-protected sector of the United States Treasury market as defined by the Lehman Brothers U.S. TIPS index.  While the yield is only about 3%, one must keep in mind its AAA credit rating.  Year to date the return has been 6.2%.  The expense ratio is 0.2%.  Refer to Table 1D.

 

     One other area of note is the declining US dollar, particularly compared with the Euro.  Rydex Global Advisors sponsors an ETF called the Currency Shares Euro Trust (FXE).  This ETF effectively allows you to hold Euro dollars and collect a dividend while the US dollar declines.  The expense ratio is 0.4%.  Details are shown in Table 1D. 

 

 

Table 1D

ETF Additions

ETF

1 wk

% Chg

1 mo

% Chg

Average Volume

Yield (%)

Price

Net Asset Value

iShares Lehman TIPS Bond Fund (TIP)

1.1%

2.9%

197,500

3.6%

$105.98

$105.75

Currency Shares Euro Trust (FXE)

1.6%

2.6%

200,500

5.3%

$148.55

$147.82

 

 

 

 

 

2.0 Portfolio Sell Stop Settings

 

     When a stock’s price declines from its highest price by half the trailing stop percentage, its status is moved to a hold.  Hold status means continue to hold it but don’t add to the position.

 

     Trailing stop percentage (Tsp) for WiserTrader portfolios 

 

     1. When the stock price remains within 20% of the buy price,

·        Tsp = -20%.

 

     2. When the stock price is greater than 20% of the buy price,

·        Tsp is the wider of  -20% or

 

                 , a negative percentage.

 

o       f is the fraction of gains given back,

§         Bullish, f = 0.5 as when S&P 500 is above its SMA 30

§         Cautious, f = 0.333 as when S&P 500 is below its SMA 30

§         Bearish, f = 0.25 as when S&P 500 SMA 30 slope turns negative

o       PBUY is the buy price and

o       PMAX is the maximum price reached.

 

 3. The sell stop price PSELL is,

 

              

 

Current Status:  Bearish,  f = 0.25

The S&P 500 is currently below its SMA 30. 

The S&P 500 SMA 30 slope is currently negative. 

     

    These settings are designed at worst to, (1) take a 20% loss, (2) break even when there is a 20% maximum gain and (3) walk away with at least half of the gain greater than 20%.  At the same time the stock price is given room to vary.  Deviations from these settings are possible.

 

 

 

3.0 Leading Sectors and Industries for November

 

     Sector and industry rankings are determined by the percent increase in industry composite index values over the previous 4 weeks.  Industry rank ranges from a high of 1 to a low of 215 based on a list of 215 industries in the Yahoo Finance industry classification system.  Sectors rankings based on the average of their industry rankings are listed in Table 3A.  The best performing sectors this month are those that have declined the least. 

 

 

Table 3A

Sector Rank

Rank

Sector

Average 4-Week

% Change

Average Industry Rank

1

Utilities

-0.1%

34

2

Consumer Noncyclical

-1.2%

51

3

Energy

-3.3%

74

4

Basic Materials

-4.6%

92

5

Healthcare

-4.8%

81

6

Consumer Cyclical

-5.4%

95

7

Conglomerates

-5.9%

89

8

Technology

-7.3%

114

9

Services

-7.6%

117

10

Industrial Goods

-8.1%

120

11

Financial

-10.2%

133

12

Transportation

-12.4%

167

 

 

     The leading industries for the past month are ranked in Table 3B.  The leftmost column is the rank based on the previous 4-week percentage change.  The second column from the left is ranked by the number of positions an industry is above or below its 4-week average rank.  The third column from the left is the average of the first two columns.  Clicking on the industry name takes you to an industry summary page.  The “C’s” will display the companies in the industry.  The last three columns on the right are the percentage gains for the previous trading day, the previous week and the previous four weeks.

 

 

 Table 3B

Leading Industries

November 20, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

1

106

54

Silver

C's

4.3%

-1.0%

8.6%

2

95

49

Oil & Gas Refining & Marketing

C's

3.3%

-0.3%

6.7%

3

86

45

Tobacco Products, Other

C's

3.2%

4.1%

4.7%

4

72

38

Dairy Products

C's

1.6%

-1.4%

4.4%

5

33

19

Processed & Packaged Goods

C's

0.2%

1.3%

4.3%

6

66

36

Accident & Health Insurance

C's

0.3%

0.3%

4.1%

7

102

55

Application Software

C's

1.2%

0.2%

3.9%

8

44

26

Internet Service Providers

C's

-0.5%

-5.8%

3.9%

9

109

59

Gold

C's

5.4%

-1.1%

3.7%

10

49

30

Diversified Utilities

C's

1.2%

1.6%

3.6%

11

50

31

Drug Stores

C's

0.0%

-1.0%

3.4%

12

39

26

Cleaning Products

C's

1.4%

-0.8%

3.2%

13

28

21

Personal Products

C's

0.6%

1.7%

3.1%

14

26

20

Food - Major Diversified

C's

1.5%

-0.1%

2.5%

15

82

49

Grocery Stores

C's

0.3%

0.2%

2.5%

16

88

52

Cigarettes

C's

0.5%

1.7%

2.2%

17

16

17

Electronic Equipment

C's

1.0%

-1.3%

2.1%

18

114

66