Category Archives: Blog

Dual Momentum June Update

Scott’s Investments provides a free “Dual ETF Momentum” spreadsheet which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum.  Antonacci’s book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk, also details Dual Momentum as a total portfolio strategy.

My Dual ETF Momentum spreadsheet is available here and the objective is to track four pairs of ETFs and provide an “Invested” signal for the ETF in each pair with the highest relative momentum. Invested signals also require positive absolute momentum, hence the term “Dual Momentum”.

Allocate Smartly Today

Relative momentum is gauged by the 12 month total returns of each ETF. The 12 month total returns of each ETF is also compared to a short-term Treasury ETF (a “cash” filter) in the form of iShares Barclays 1-3 Treasury Bond ETF (SHY). In order to have an “Invested” signal the ETF with the highest relative strength must also have 12-month total returns greater than the 12-month total returns of SHY. This is the absolute momentum filter which is detailed in depth by Antonacci, and has historically helped increase risk-adjusted returns.

An “average” return signal for each ETF is also available on the spreadsheet. The concept is the same as the 12-month relative momentum. However, the “average” return signal uses the average of the past 3, 6, and 12 (“3/6/12″) month total returns for each ETF. The “invested” signal is based on the ETF with the highest relative momentum for the past 3, 6 and 12 months. The ETF with the highest average relative strength must also have an average 3/6/12 total returns greater than the 3/6/12 total returns of the cash ETF.

Portfolio123 was used to test a similar strategy using the same portfolios and combined momentum score (“3/6/12″).  The test results were posted here.

I also posted an updated test last month using Allocate Smartly here.

Below are the four portfolios along with current signals:

Return Data Provided by Quandl

Dividend Champion Portfolio June Update

The High Yield Dividend Champion Portfolio is a publicly tracked stock portfolio on Scott’s Investments.  Its goal is to capture quality high yield stocks with a history of raising dividends.

The screening process for this portfolio starts with the “Dividend Champions” as compiled by DRIP Investing. The list is comprised of stocks that have increased their dividend payout for at least 25 consecutive years.  Stocks are then ranked on yield, P/E and 3 year dividend growth rate and assigned an overall rank.

Stocks are sold on the re-balance date (generally around the 5th of the month) when they drop out of the top 15 (to limit turnover) and are replaced with the next highest rated stock.

The top 25 stocks are below and displayed in order of their overall ranking (figures are from the end of May):

Name Symbol Yield P/E 3-yr
Target Corp. TGT 4.35 11.49 13.7
T. Rowe Price Group TROW 3.24 13.76 12.4
Altria Group Inc. MO 3.23 10.19 8.6
Helmerich & Payne Inc. HP 5.32 999 28.8
Archer Daniels Midland ADM 3.08 17.54 16.4
AT&T Inc. T 5.09 18.8 2.2
VF Corp. VFC 3.12 19.93 18.7
Old Republic International ORI 3.84 12.76 1.4
Weyco Group Inc. WEYS 3.22 17.98 5.8
People’s United Financial PBCT 4.16 17.82 1.5
W.W. Grainger Inc. GWW 2.97 17.62 10.4
Consolidated Edison ED 3.33 19.08 2.9
Sonoco Products Co. SON 3.08 18.37 5.9
ExxonMobil Corp. XOM 3.83 33.68 6.6
Emerson Electric EMR 3.25 23 4.7
Coca-Cola Company KO 3.25 31.8 7.7
National Retail Properties NNN 4.74 33.96 3.6
United Bankshares Inc. UBSI 3.45 19.42 1.8
Community Trust Banc. CTBI 3.08 15.54 2.8
Universal Health Realty Trust UHT 3.65 21.94 1.6
Federal Realty Inv. Trust FRT 3.19 39.72 8.6
Chevron Corp. CVX 4.17 67.63 3.2
Genuine Parts Co. GPC 2.92 20.05 6.4
Kimberly-Clark Corp. KMB 2.99 21.41 6.2
Cincinnati Financial CINF 2.85 19.31 5

There is turnover in one position this month. Coca-Cola will be sold for a capital gain of 11.36% and original purchase date of 12/7/2016.  The proceeds will be used to purchase Archer-Daniels Midland (ADM).

The current portfolio is below:

Position Shares Average Purchase Price Initial Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
VFC 470 57.39 12/7/2016 $26,973.30 $25,248.40 -6.39%
ED 390 70.41 12/7/2016 $27,459.90 $32,331.00 17.74%
ORI 1145 16.22 4/4/2014 $18,571.90 $22,258.80 19.85%
ADM 762 41.95 6/6/2017 $31,965.90 $31,965.90 0.00%
TGT 391 68.65 6/3/2016 $26,842.15 $21,340.78 -20.50%
MO 400 58.14 1/7/2016 $23,256.00 $30,108.00 29.46%
TROW 300 71.35 7/5/2016 $21,405.00 $21,318.00 -0.41%
HP 341 80.9 10/6/2014 $27,586.90 $18,175.30 -34.12%
WEYS 1088 27.81 3/7/2017 $30,257.28 $29,648.00 -2.01%
T 650 38.13 3/7/2016 $24,784.50 $25,174.50 1.57%

Momentum Portfolio June Update

In 2011 Scott’s Investments began tracking a momentum portfolio which ranks a basket of ETFs based on price momentum and volatility.  In 2014 I also introduced a pure momentum system, which ranked the same basket of ETFs based solely on price momentum.  Both strategies have undergone minor revisions over the years but the key elements remain.

Allocate Smartly Today

The strategies in their current form begin by screening a  basket of these 10 ETFs:

RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond
EFA iShares MSCI EAFE
EEM iShares MSCI Emerging Markets
VNQ Vanguard MSCI U.S. REIT
TIP iShares Barclays TIPS
VTI Vanguard MSCI Total U.S. Stock Market
GLD SPDR Gold Shares
TLT iShares Barclays Long-Term Trsry
SHY iShares Barclays 1-3 Year Treasry Bnd Fd

 

The ETFs in the “Conservative Momentum” system are still ranked by 6 month total returns (weighted 34%), 3 month total returns (weighted 33%), and 3 month price volatility (weighted 33%). The top 3 are purchased  at the beginning of each month and if a holding drops out of the top 3 at the next month’s rebalance it is replaced.

Pure Momentum System

The pure momentum system previously ranked  ETFs based solely on 6 month price momentum.  The strategy now ranks ETFs based on 5 month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover.  The portfolio and rankings are posted on the same spreadsheet as the Conservative Momentum strategy.

A free option for backtesting these strategies is available at Portfolio Visualizer.

After holding many of the same positions for much of the year the portfolios are diverging.  The Conservative Momentum portfolio has turnover in two positions.  EEM and VTI will be sold for gains of 7.7% and 9.86% , respectively, and replaced with RWX and PCY.

The Pure Momentum portfolio has turnover in one position.  VTI will be sold for a gain of 9.86% and replaced with GLD.

The current portfolios are below:

Conservative Momentum

Position Shares Avg Purchase Price Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
RWX 115 39.49 6/1/2017 $4,541.35 $4,541.35 0.00%
EFA 70 58.09 1/3/2017 $4,066.30 $4,654.30 14.46%
PCY 153 29.62 6/1/2017 $4,531.86 $4,531.86 0.00%

 

Pure Momentum

Position Shares Purchase Price Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
EFA 53 56.79 11/30/2016 $3,009.87 $3,523.97 17.08%
EEM 93 37.36 2/1/2017 $3,474.48 $3,864.15 11.22%
GLD 28 120.72 6/1/2017 $3,380.16 $3,380.16 0.00%

Ivy Portfolio June Update

The Ivy Portfolio spreadsheet track the 10 month moving average signals for two portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that have trading signals based on long-term moving averages.

The Ivy Portfolio spreadsheet on Scott’s Investments tracks both the 5 and 10 ETF Portfolios listed in Faber’s book. When a security is trading below its 10 month simple moving average, the position is listed as “Cash”. When the security is trading above its 10 month simple moving average the positions is listed as “Invested”.

Allocate Smartly Today

The spreadsheet signals update once daily (typically in the late evening) using dividend/split adjusted closing price from Quandl, which is a change from previous posts when I relied on Yahoo.

The “current” 10 month simple moving average is based on the most recent 10 months including the current month’s most recent daily closing price (columns C and D). This methodology may differ slightly from other sites or monthly moving average signals – every day during the current month is treated as if  it is that months closing price. This provides continuous updates throughout the month but even though the signals update daily, it is not an endorsement to check signals daily or trade based on daily updates. It simply gives the spreadsheet more versatility for users to check at his or her convenience.

I have also added a column (E) to display a cash or invested signal based on the most recent full month’s closing price.  This signal will not update throughout the month as it is based on last month’s closing price and the 10 month moving average at the end of last month. This is useful for users who want to view the signal from just the end of the month. The date on the spreadsheet below is 4/30/17, which will update to 5/31/17 once there is trading activity for June. 

The current signals based on May’s adjusted closing prices are below.    At the end of May GSG, DBC, and VNQ were below their  10 month moving averages.

The spreadsheet also provides quarterly, half year, and yearly return data courtesy of Quandl.  I made the switch to Quandl in an attempt to stabilize the portfolio; however, Finviz is still an excellent data source. The return data is useful for those interested in overlaying a momentum strategy with the 10 month SMA strategy:

 

I also provide a “Commission-Free” Ivy Portfolio spreadsheet as an added bonus. This document tracks the 10 month moving averages for four different portfolios designed for TD Ameritrade, Fidelity, Charles Schwab, and Vanguard commission-free ETF offers.

Not all ETFs in each portfolio are commission free, as each broker limits the selection of commission-free ETFs and viable ETFs may not exist in each asset class. Other restrictions and limitations may apply depending on each broker.

Below are the 10 month moving average signals (using adjusted price data) for the commission-free portfolios:

Testing Dual Momentum with AllocateSmartly

I am frequently asked about performance and backtest results for my Dual Momentum portfolio, which is inspired by Gary Antonnaci at Optimal Momentum.

I recently began using AllocateSmartly to test some of my favorite tactical strategies, including Dual Momentum.  AllocateSmartly tracks some of the most popular tactical asset allocation strategies, with thorough, up-to-date backtests, and users can combine the strategies to create and test their own custom model portfolio.

The first Dual Momentum strategy is very similar to the strategy I update monthly on Scott’s Investments.

The strategy divides the portfolio into four “modules”, each targeted to a different component of financial markets: equities, credit risk, real estate, and stress. From each module, the strategy selects either one of two related asset classes, or cash. The four modules and their associated assets are as follows:

  • Equities: US equities (SPY) or international equities (EFA)
  • Credit risk: US corporate bonds (LQD) or US high yield bonds (HYG)
  • Real estate: equity REITs (VNQ) or mortgage REITs (REM)
  • Economic stress: gold (GLD) or long-term US Treasuries (TLT)

The test below trades on the last trading day of each month.  You will note the backtest extends further than the launch date for any of the ETFs. In order to extend the backtests as far into the past as possible, AllocateSmartly  often makes use of simulated data from an alternative sources. For example, an alternative data source for SPY could be the Vanguard S&P 500 mutual fund (VFINX).

 

The second dual momentum strategy is the GEM strategy from Antonacci’s book Dual Momentum Investing.

The strategy rules tested are below:

  • At the close on the last trading day of the month, measure the 12-month return of SPY, EFA (international equities) and BIL (short-term Treasuries).
  • If the return of SPY is greater than BIL (absolute momentum), go 100% long either SPY or EFA, depending on which has the highest return (relative momentum).
  • If the return of SPY is less than BIL, go 100% long  AGG (US aggregate bonds).
  • Positions are held until the last trading day of the following month.

The time frame for this test is much longer than the first test, 1971 – present:

 

Backtest data courtesy of AllocateSmartly – if you are interested in receiving monthly updates for this strategy or many other tactical strategies give them a try!

Dual Momentum May Update

Stay tuned for an updated Dual Momentum backtest using Allocate Smartly 

Scott’s Investments provides a free “Dual ETF Momentum” spreadsheet which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum.  Antonacci’s book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk, also details Dual Momentum as a total portfolio strategy.

My Dual ETF Momentum spreadsheet is available here and the objective is to track four pairs of ETFs and provide an “Invested” signal for the ETF in each pair with the highest relative momentum. Invested signals also require positive absolute momentum, hence the term “Dual Momentum”.

Relative momentum is gauged by the 12 month total returns of each ETF. The 12 month total returns of each ETF is also compared to a short-term Treasury ETF (a “cash” filter) in the form of iShares Barclays 1-3 Treasury Bond ETF (SHY). In order to have an “Invested” signal the ETF with the highest relative strength must also have 12-month total returns greater than the 12-month total returns of SHY. This is the absolute momentum filter which is detailed in depth by Antonacci, and has historically helped increase risk-adjusted returns.

An “average” return signal for each ETF is also available on the spreadsheet. The concept is the same as the 12-month relative momentum. However, the “average” return signal uses the average of the past 3, 6, and 12 (“3/6/12″) month total returns for each ETF. The “invested” signal is based on the ETF with the highest relative momentum for the past 3, 6 and 12 months. The ETF with the highest average relative strength must also have an average 3/6/12 total returns greater than the 3/6/12 total returns of the cash ETF.

Portfolio123 was used to test a similar strategy using the same portfolios and combined momentum score (“3/6/12″).  The test results were posted here.

Below are the four portfolios along with current signals:

Return Data Provided by Quandl

The Dual ETF Momentum spreadsheet also has four additional sheets using a dual momentum strategy with broker specific commission-free ETFs for TD Ameritrade, Charles Schwab, Fidelity, and Vanguard. It is important to note that each broker may have additional trade restrictions and the terms of their commission-free ETFs could change in the future.

Dividend Champion Portfolio May Update

The High Yield Dividend Champion Portfolio is a publicly tracked stock portfolio on Scott’s Investments.  Its goal is to capture quality high yield stocks with a history of raising dividends.

The screening process for this portfolio starts with the “Dividend Champions” as compiled by DRIP Investing. The list is comprised of stocks that have increased their dividend payout for at least 25 consecutive years.  Stocks are then ranked on yield, P/E and 3 year dividend growth rate and assigned an overall rank.

Stocks are sold on the re-balance date (generally around the 5th of the month) when they drop out of the top 15 (to limit turnover) and are replaced with the next highest rated stock.

The top 25 stocks are below and displayed in order of their overall ranking (figures are from the end of April):

Name Symbol Yield P/E 3-yr
Target Corp. TGT 4.3 12.14 13.7
Altria Group Inc. MO 3.4 9.83 8.6
T. Rowe Price Group TROW 3.22 14.86 12.4
VF Corp. VFC 3.08 19.58 18.7
Helmerich & Payne Inc. HP 4.62 999 28.8
AT&T Inc. T 4.95 18.87 2.2
Weyco Group Inc. WEYS 3 17.81 5.8
Consolidated Edison ED 3.48 19.24 2.9
Old Republic International ORI 3.68 12.93 1.4
People’s United Financial PBCT 3.95 18.99 1.5
Sonoco Products Co. SON 2.98 18.55 5.9
Coca-Cola Company KO 3.43 28.96 7.7
ExxonMobil Corp. XOM 3.77 43.43 6.6
Kimberly-Clark Corp. KMB 2.99 21.66 6.2
Genuine Parts Co. GPC 2.93 19.92 6.4
National Retail Properties NNN 4.31 35.48 3.6
Emerson Electric EMR 3.19 23.55 4.7
United Bankshares Inc. UBSI 3.31 20.05 1.8
Archer Daniels Midland ADM 2.8 21.08 16.4
Eagle Financial Services EFSI 2.98 14.97 2.6
Federal Realty Inv. Trust FRT 2.99 43.06 8.6
Procter & Gamble Co. PG 3.16 25.24 4.1
W.W. Grainger Inc. GWW 2.66 19.7 10.4
Chevron Corp. CVX 4.05 999 3.2
Community Trust Banc. CTBI 2.85 16.84 2.8

There is no turnover in positions this month.

The current portfolio is below:

Position Shares Average Purchase Price Initial Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
VFC 470 57.39 12/7/2016 $26,973.30 $25,600.90 -5.09%
ED 390 70.41 12/7/2016 $27,459.90 $31,125.90 13.35%
ORI 1145 16.22 4/4/2014 $18,571.90 $23,197.70 24.91%
KO 653 41.29 12/7/2016 $26,962.37 $28,529.57 5.81%
TGT 391 68.65 6/3/2016 $26,842.15 $22,412.12 -16.50%
MO 400 58.14 1/7/2016 $23,256.00 $28,368.00 21.98%
TROW 300 71.35 7/5/2016 $21,405.00 $21,570.00 0.77%
HP 341 80.9 10/6/2014 $27,586.90 $20,333.83 -26.29%
WEYS 1088 27.81 3/7/2017 $30,257.28 $30,246.40 -0.04%
T 650 38.13 3/7/2016 $24,784.50 $25,064.00 1.13%

Ivy Portfolio May Update

Note: Due to current technical issues with Google Sheets, the Ivy Portfolio spreadsheet may be unstable. Since the site relies on free data resources/tools and my free time to implement them there is no time frame for a resolution.

The Ivy Portfolio spreadsheet track the 10 month moving average signals for two portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that have trading signals based on long-term moving averages.

The Ivy Portfolio spreadsheet on Scott’s Investments tracks both the 5 and 10 ETF Portfolios listed in Faber’s book. When a security is trading below its 10 month simple moving average, the position is listed as “Cash”. When the security is trading above its 10 month simple moving average the positions is listed as “Invested”.

Allocate Smartly Today

The spreadsheet signals update once daily (typically in the late evening) using dividend/split adjusted closing price from Quandl, which is a change from previous posts when I relied on Yahoo.

The “current” 10 month simple moving average is based on the most recent 10 months including the current month’s most recent daily closing price (columns C and D). This methodology may differ slightly from other sites or monthly moving average signals – every day during the current month is treated as if  it is that months closing price. This provides continuous updates throughout the month but even though the signals update daily, it is not an endorsement to check signals daily or trade based on daily updates. It simply gives the spreadsheet more versatility for users to check at his or her convenience.

I have also added a column (E) to display a cash or invested signal based on the most recent full month’s closing price.  This signal will not update throughout the month as it is based on last month’s closing price and the 10 month moving average at the end of last month.

The current signals based on April’s adjusted closing prices are below.    At the end of April  GSG, DBC, and VNQ were below their  10 month moving averages.  Since the screen capture below was after May 1st’s close, there are some differences in the signal based on April’s close and the “current” SMA which includes May 1st.

The spreadsheet also provides quarterly, half year, and yearly return data courtesy of Quandl.  I made the switch to Quandl in an attempt to stabilize the portfolio; however, Finviz is still an excellent data source. The return data is useful for those interested in overlaying a momentum strategy with the 10 month SMA strategy:

Momentum Portfolio May Update

In 2011 Scott’s Investments began tracking a momentum portfolio which ranks a basket of ETFs based on price momentum and volatility.  In 2014 I also introduced a pure momentum system, which ranked the same basket of ETFs based solely on price momentum.  Both strategies have undergone minor revisions over the years but the key elements remain.

Allocate Smartly Today

The strategies in their current form begin by screening a  basket of these 10 ETFs:

RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond
EFA iShares MSCI EAFE
EEM iShares MSCI Emerging Markets
VNQ Vanguard MSCI U.S. REIT
TIP iShares Barclays TIPS
VTI Vanguard MSCI Total U.S. Stock Market
GLD SPDR Gold Shares
TLT iShares Barclays Long-Term Trsry
SHY iShares Barclays 1-3 Year Treasry Bnd Fd

 

The ETFs in the “Conservative Momentum” system are still ranked by 6 month total returns (weighted 34%), 3 month total returns (weighted 33%), and 3 month price volatility (weighted 33%). The top 3 are purchased  at the beginning of each month and if a holding drops out of the top 3 at the next month’s rebalance it is replaced.

Pure Momentum System

The pure momentum system previously ranked  ETFs based solely on 6 month price momentum.  The strategy now ranks ETFs based on 5 month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover.  The portfolio and rankings are posted on the same spreadsheet as the Conservative Momentum strategy.

A free option for backtesting these strategies is available at Portfolio Visualizer.

The current top 3 ETFs are listed below, and for this month there is no turnover:

Conservative Momentum
VTI Vanguard MSCI Total U.S. Stock Market
EEM iShares MSCI Emerging Markets
EFA iShares MSCI EAFE
Pure Momentum
EEM iShares MSCI Emerging Markets
EFA iShares MSCI EAFE
VTI Vanguard MSCI Total U.S. Stock Market

 

The current portfolios are below:

Conservative Momentum

Position Shares Avg Purchase Price Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
VTI 36 113.78 11/30/2016 $4,096.08 $4,413.96 7.76%
EFA 70 58.09 1/3/2017 $4,066.30 $4,466.00 9.83%
EEM 110 38.58 3/1/2017 $4,243.80 $4,406.60 3.84%

 

Pure Momentum

Position Shares Purchase Price Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
EFA 53 56.79 11/30/2016 $3,009.87 $3,381.40 12.34%
EEM 93 37.36 2/1/2017 $3,474.48 $3,725.58 7.23%
VTI 27 113.78 11/30/2016 $3,072.06 $3,310.47 7.76%

Dual Momentum April Update

Scott’s Investments provides a free “Dual ETF Momentum” spreadsheet which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum.  Antonacci’s book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk, also details Dual Momentum as a total portfolio strategy.

My Dual ETF Momentum spreadsheet is available here and the objective is to track four pairs of ETFs and provide an “Invested” signal for the ETF in each pair with the highest relative momentum. Invested signals also require positive absolute momentum, hence the term “Dual Momentum”.

Relative momentum is gauged by the 12 month total returns of each ETF. The 12 month total returns of each ETF is also compared to a short-term Treasury ETF (a “cash” filter) in the form of iShares Barclays 1-3 Treasury Bond ETF (SHY). In order to have an “Invested” signal the ETF with the highest relative strength must also have 12-month total returns greater than the 12-month total returns of SHY. This is the absolute momentum filter which is detailed in depth by Antonacci, and has historically helped increase risk-adjusted returns.

An “average” return signal for each ETF is also available on the spreadsheet. The concept is the same as the 12-month relative momentum. However, the “average” return signal uses the average of the past 3, 6, and 12 (“3/6/12″) month total returns for each ETF. The “invested” signal is based on the ETF with the highest relative momentum for the past 3, 6 and 12 months. The ETF with the highest average relative strength must also have an average 3/6/12 total returns greater than the 3/6/12 total returns of the cash ETF.

Portfolio123 was used to test a similar strategy using the same portfolios and combined momentum score (“3/6/12″).  The test results were posted here.

Below are the four portfolios along with current signals:

Return Data Provided by Finviz

The Dual ETF Momentum spreadsheet also has four additional sheets using a dual momentum strategy with broker specific commission-free ETFs for TD Ameritrade, Charles Schwab, Fidelity, and Vanguard. It is important to note that each broker may have additional trade restrictions and the terms of their commission-free ETFs could change in the future.