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How Our Tracking Portfolios Did In March

By Kurt Osterberg · On April 8, 2018

Investing is for the long term. Wealth is built not from short-term trades, but from following sound strategies and keeping costs low over a lifetime of investing.

That said, it is important that we keep score. It is also interesting to see what short-term trends are developing in the market, and how both our mechanical and business ratings are performing against the S&P 500 (the SPY ETF, for our purposes).

With March 2018 now at a close, let’s take a look at how our tracking portfolios performed for the month.

Tracking Portfolio Movement In March

Here are how all of the mechanical strategies did last month:

Portfolio Monthly 
Gain/Loss Monthly 
vs. SPY blue wandMagic Recipe -1.69% +1.96% purple wandDeep Value -1.67% +1.98% orange wandQuality Growth +2.21% +5.86% green wandGreen Team +0.65% +3.44%

And a breakdown of how the stocks underlying the different business model diligence categories did:

Rating Monthly 
Gain/Loss Monthly 
vs. SPY red dot Red -1.40% +2.54% yellow dot Yellow -1.53% +1.59% green dot Green -1.76% +1.99%
 

Thoughts and Conclusions

Three brief thoughts about March’s performance:

  • Broad losses in March. After over a year of straight monthly advances for the stock market, February and March have both been down months. We saw broad declines in the market last month, with all 3 business diligence categories declining, and 2 of the 4 real-money spells. As far as we can tell, the market declines were largely influenced by macro factors, including fears of higher interest rates, a trade war with China, and just a general pullback from what has been a hot market.
  • “Quality” continues to outperform “Value”. We’ve only been tracking monthly performance since November, but in that time both the Quality Growth and Green Team spells have far outperformed the Magic Recipe and Deep Value spells. Since inception, both of the latter spells are under-performing the market, while Quality Growth is outperforming by 27.6% and Green Team is outperforming by 13.2% (in a shorter time period).
  • Valuations are improving… but still not “cheap”. It is true, the S&P 500 is now trading at a loss for 2018, down about 1.1% as of the end of March. The valuations on some of the “green dot” and “yellow dot” names are improving. I wouldn’t call the market “cheap” yet, though. At a P/E ratio of 24.3, it still trades well above its long-term mean of about 16, but closer to its 20-year mean. Put simply, it looks neither cheap, nor excessively expensive given the longer-term trend towards higher valuations. I believe a long-term higher valuation is justifiable given the increased accessibility and liquidity added to the stock market over the last 40+ years.
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    Kurt Osterberg

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