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WiserTrader Industries Monthly |
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__________________________________________________________________________
January 2008 Prescott, Arizona Contact Editor __________________________________________________________________________
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Published the 3rd Tuesday of the month Subscription to Weekly Newsletter
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Table 1A
Top-Down Portfolio Performance
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Top-Down Trading in 2008 ($7809.07 Initial Capital) |
% Initial Capital |
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Closed trades in 2008 = |
3 |
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Average Trade Size = |
$1,000.00 |
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Total Closed Position Share costs = |
$3,000.00 |
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Gross Profit on Closed Positions = |
$285.37 |
3.7% * |
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Number of Open Positions = |
3 |
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Cost of Open Positions = |
$3,000.00 |
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Gross Profit on Open Positions in 2008 = |
-$59.18 |
-0.8% |
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Total Gross Profit = |
$226.20 |
2.90% |
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Broker Commission ($9.99/trade) = |
-$29.97 |
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Subscription Cost to date = |
$0.00 |
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Net 2008 Profit After Expenses = |
$196.23 |
2.5% |
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Cash = |
$4,918.70 |
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Current Capital = |
$7,328.81 |
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* includes stocks bought in 2007 and sold in 2008
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Stocks that survived the recent down trend are listed in Table 1B. Recent additions CNX and BBY were stopped out the first week of the new year. PBR was stopped out just recently. SRP was moved to a hold. Refer to Section 2 for current trailing stop settings.
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Table 1B
Top-Down Portfolio
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Top - Down Portfolio |
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Stock |
Open Date |
Open Price |
Last Date |
Last Price |
Gross P/L (%) |
Status |
Sell stop |
Metrics |
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CNX |
12/18/07 |
67.25 |
1/4/08 |
65.48 |
-2.6% |
closed |
66.22 |
Growth |
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BBY |
12/18/07 |
51.62 |
1/4/08 |
47.61 |
-7.8% |
closed |
48.04 |
Growth |
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PBR |
9/18/07 |
70.60 |
1/16/08 |
98.09 |
38.9% |
closed |
98.53 |
Growth |
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SRP |
11/20/07 |
17.52 |
1/16/08 |
16.28 |
-7.1% |
Hold |
15.98 |
Defensive |
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TIP |
11/20/07 |
105.45 |
1/16/08 |
107.62 |
2.1% |
Buy |
97.43 |
Defensive |
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FXE |
11/20/07 |
148.14 |
1/16/08 |
146.81 |
-0.9% |
Buy |
134.13 |
Defensive |
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As of market close on |
1/16/08 |
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Sell Stop Settings are |
Bearish |
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Net capital for 2008 = |
-6.2% |
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f = |
25.0% |
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SRP is a US stock, TIP is an inflation-protected US Treasury ETF and FXE is a currency ETF for the Euro.
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 monthly gain of their industries are listed in Table 1C.
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Table 1C
Sector Rank
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Rank |
Sector |
Average 4-Week % Change |
Average Industry Rank |
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1 |
Healthcare |
1.3% |
28 |
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2 |
Basic Materials |
-1.5% |
84 |
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3 |
Consumer Noncyclical |
-2.4% |
56 |
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4 |
Utilities |
-3.3% |
61 |
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5 |
Energy |
-3.8% |
69 |
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6 |
Conglomerates |
-5.8% |
85 |
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7 |
Financial |
-6.1% |
96 |
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8 |
Transportation |
-7.5% |
111 |
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9 |
Services |
-8.5% |
128 |
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10 |
Consumer Cyclical |
-9.2% |
134 |
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11 |
Technology |
-9.3% |
133 |
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12 |
Industrial Goods |
-9.7% |
138 |
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With the market in a continuing decline, any new selection for this month is clearly going to be defensive. From Table 1C, the leading sector over the past month has been healthcare. The leading industry in the healthcare sector over the past month was generic drugs whose stocks are listed in Table 1D, except for a couple of over the counter stocks.
HLCS is in an exponential run. HITK, MYL, PRX and WPI are losing market share. BRL, the only company that is significantly gaining market share is doing so at the expense of sales and earnings.
Caraco Pharmaceutical Labs L (AMEX: CPD) with a market cap of $500 million is ranked number 4 for the month. While it has a market share of only 2%, its sales and earnings growth are impressive. CPD is the defensive stock selection for January.
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Table 1D
Generic Drugs
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% Chg |
% Chg |
% Chg |
Rank |
Market Share |
Market Share |
Sales Growth |
EPS Growth |
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Symbol |
Avg. Vol. |
Price |
Last |
1 wk |
1 mo |
1 mo |
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Gain |
1Y |
1Y |
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HLCS |
53,895 |
$17.44 |
0.29% |
40.2% |
74.4% |
1 |
0.0% |
0.0% |
n/a |
-88.7% |
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HITK |
52,561 |
$11.05 |
16.02% |
11.6% |
17.4% |
2 |
0.8% |
-0.4% |
-24.5% |
-117.7% |
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MYL |
8,972,950 |
$15.35 |
2.61% |
3.4% |
14.0% |
3 |
24.5% |
-2.5% |
28.2% |
26.3% |
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CPD |
59,883 |
$17.00 |
0.77% |
5.3% |
13.5% |
4 |
2.1% |
0.0% |
41.3% |
361.5% |
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BRL |
732,378 |
$55.83 |
0.52% |
4.0% |
7.0% |
5 |
30.9% |
6.5% |
-30.3% |
-199.4% |
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PRX |
647,008 |
$21.66 |
0.79% |
-0.7% |
4.0% |
6 |
10.9% |
-1.9% |
67.8% |
144.4% |
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WPI |
832,989 |
$27.78 |
0.87% |
2.2% |
-0.1% |
7 |
30.6% |
-1.8% |
20.2% |
-431.1% |
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CPRX |
23,119 |
$3.11 |
0.65% |
-1.3% |
-1.6% |
8 |
n/a |
n/a |
n/a |
-20.7% |
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PRW |
99,570 |
$0.45 |
-8.16% |
-11.8% |
-31.8% |
9 |
n/a |
n/a |
n/a |
56.0% |
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ILE |
296,992 |
$0.69 |
-14.81% |
-21.6% |
-73.8% |
10 |
0.0% |
0.0% |
-30.7% |
0.0% |
2.0 Portfolio Sell Stop Settings
The trailing stop percentage TSP for portfolios has been adjusted for accuracy and flexibility in keeping with the original intent. When stocks are bought in a bullish market, an initial trailing stop percentage TSPI = -20% is just about right. However, the market can change. A -20% trailing stop is too wide when the market turns bearish and a -10% trailing stop is too narrow when the market is bullish. Also, there is the feeling that when profits grow beyond 40% (and we have seen several of these), a stock should have a progressively wider trailing stop. So a 40% profit acts as a kind of transition point. Each of these considerations is described graphically in Figure 2A where the solid lines indicate the TSP for bullish, cautious and bearish market conditions.
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FIGURE 2A
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1. When the maximum stock price remains within 40% of the buy price, the initial trailing stop percentage TSPI ranges from -10% to -20%, depending on market conditions.
· Bullish, TSPI = -20%, as when the S&P 500 is above its SMA 30 · Cautious, TSPI = -15%, as when the S&P 500 is below its SMA 30 · Bearish, TSPI = -10%, as when the S&P 500 SMA 30 slope is negative
2. When the maximum stock price rises to 40% or more greater than the buy price, · TSP is the wider of TSPI or
o f is the fraction of gains placed at risk, § Bullish, f = 0.5, as when the S&P 500 is above its SMA 30 § Cautious, f = 0.375, as when the S&P 500 is below its SMA 30 § Bearish, f = 0.25, as when the S&P 500 SMA 30 slope is 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 a 40% or greater maximum gain. At the same time the stock price is given room to vary. Deviations from these settings for individual stocks are possible when their industry undergoes unusual activity.
If you follow these portfolios, keep in mind that they are only benchmarks which can not be matched exactly because of the round numbers used. Entry prices are taken from the previous close and exit prices are taken from the close on the day that trailing stops are triggered. You can either sell as soon as a trailing stop is triggered or wait until after the close and try to get better prices over the next few days. Once out of a position, a stock is set aside for a period of about two months.
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Table 3A
Leading Industries
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Rank [R] |
Rank of Change [C] |
(R+C)/2 |
Industries |
Companies |
Last Gain |
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