An Example using the FastTrack Value Model

Value Trading Made Easy

Value investing with FastTrack means selling the winners and buying the losers. The red line shows the the 35% annualized return of trading 5 members of the Dow 30 every week.

Sell 25% of assets from the winners of the week and put it into the losers.

Warning

1. Do not pick from stocks randomly. Use only BIG stocks that trade in substantial volume to ensure liquidity.
2. Do not allow stocks that have shaky fundamentals into your model. Even a hint of problem is too much.
3. Choose stocks that are not in the same industry.
4. Do not let and one component become more than 30% of the portfolio.

Note: These charts do not enforce the 4 warning rules and the return suffers for the rule violations in every case. It is the responsibility of the user to do the fundamental analysis.

The trading strategy relies of short-term variations in stocks with timely trading. The members of the Dow 30 can be usually be traded after hours every Friday at the week's closing prices. Trades which are not made Friday after hours can usually be made Monday at the open at the previous closing price.

The red line does well considering the AT&T component. Of course, AT&T have been known to have fundamental problems for many years, and should have been eliminated by (Warning #2) above for most of the period.

Also SBC is a communication company. It should not have been chosen in a list that contained AT&T (Warning #3).

Boeing and Caterpillar have both had fundamental problems and they are both in the class of long term cyclical industries. Once again, violations of rules #2 and #3.

Nonetheless, the red line achieves 32% annualized.

Note that these issues have a lot of correlation especially during the 2001-2002 bear market.

However, the red line's 22% annualized return is outstanding and the draw down in the bear market, although painful, is much less than for any single issue.

Note that the red line did not fall apart until the portfolio got seriously overweight Hewlett Packard . . . a violation of rule #4.

Full Disclosure:

The Dow 30 list today is not the same list as it was in 1993. Losers have been removed and winners added. Thus, random selection has a much better chance of producing good long term results. It is our belief, however, that Dow components rarely take overnight plunges in stock price. Bad news is generally well known, but the time that price erosion is serious. No strategy works well all the time. There are risks to the Value approach especially when NOT combined with fundamental research.