Despite a strong start in January and February, the screens have not performed well in the last 3 months thereby offsetting the earlier gains and then some. The buy list comprised of the 4th Quartiles for VR and E/M is off 6.5% relative to the S&P 500 while its opposite is up 7.3%. The broader lists which are referred to as long and short Porfolios are -2.0% and +5.1%.
To put this in perspective....
We are in a period where value is being created. There has been a negative correlation between Valuation Return/Risk and Relative Strength. The annualized spread since September 2004 has declined to +9.9% pa, or +6.5% & -3.4% It should be noted that the unweighted index of our universe in this period is +2.6% pa
The 'portfolio' screens have a spread of +7.3% pa comprising of +5.5 and -1.8%.
Sector Analysis
A look at the Sector breakdown of the screens since inception allows us to see where the contribution to performance (or deduction) has been coming from. For example, Technology stocks contribute an average annualized return of +15.7% to the Undervalued short list. On the other hand, Consumer-Cyclicals is -11.3% and Financial stocks are -5.1%.For the Overvalued, the Energy sector presents a major annualized offset to its negative performance: +24.0% on the short list and +14.0% to the larger portfolio list. Likewise, Technology produced a positive return of +7.2% and +4.1% respectively. The Financial Sector contributed the largest negative return of -15.9 and 7.4%
The relative contributions are shown below along with the Sectors rank.
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