I’m gearing up for the next change in my portfolio, but unlike prior reshapings, I am putting out my industry ranks first. As I have mentioned before, the rankings can be used in value mode (green) or momentum mode (red). That reflects two different philosophies on investment turnover and time horizons.
I am still negative on the banks, and think the present relative strength will reverse. The same for housing-related industries… there is more weakness to come.
For those playing momentum, with a few exceptions, the industries in the red zone are industries with stable cash flows. That is another sign of risk aversion in the present environment.
I will be putting out my replacement candidates later this week; at present, I’m not sure what way my portfolio will move. These are unusual times, and I am focused on survivability, and after that, cheapness. Safe and cheap, with the accent on safe.
David,
I’m sorry but I don’t understand. Is Life Insurance the best and Tobacco the worst or vice versa? Also, what does your “Dig Through” list signify?
Thanks,
Jeff
Jeff,
Momentum investors interested in the short run should look at stocks in the red zone because momentum persists in the short run.
Value investors should look at the green zone for strong companies in industries that are out of favor. As a means of avoiding “value traps,” I ignore certain industries that I think the model is too early on. Those not eliminated are the industries that I “dig through” to find buy candidates.
That help?
David,
Yes. Thank you. Since I’m a value-oriented investor, I’m looking at your ‘dig’ list. Trying to see sector themes, but it’s a pretty diverse list so any broad themes perspective is eluding me so far. So I’m looking forward to seeing your stock selection and portfolio replacement ideas in the near future.
Regards and keep up the good work on your blog,
Jeff