Bulletproof Investing Performance Update: Week 97

This article was originally published on this site

Safety First: Sprint Racer McKenna Haase and her helmet (via Racing News)

Bulletproof Investing: Week 97 Performance

Each week, since the beginning of June 2017, I have presented at least two hedged portfolios created by Portfolio Armor to my Bulletproof Investing subscribers. This is an “investing with a helmet on” approach, and these portfolios are designed to last six months at most. As with any investment method, the returns with this approach will vary. But in the interests of transparency and accountability, I have promised to publicly share the final performance of everything I present, regardless of how it does.

Here, I update the final performance of the five hedged portfolios and the top 10 names (unhedged) that I presented in the 97th week I offered my service. Let’s look at what I presented in week 97 and how it did. I close by again referring to recent changes we’ve made that should improve accuracy and increase performance in the future.

Portfolio 1

This was the $30,000 portfolio. The primary security here was The New York Times (NYT). It was selected because it had the highest potential return estimate, net of hedging cost when hedging against a >13% decline, and had a share price low enough that you could buy a round lot of it for less than $10,000. Twilio (TWLO) was added in a fine-tuning step to absorb leftover cash from rounding down to round lots of the first name.

The image above was generated by Portfolio Armor on April 4 and presented in this Marketplace post at the time.

The worst-case scenario for this portfolio was a decline of 9.67% (the “max drawdown”), and the best-case scenario was a gain of 10.96% (the “Net Potential Return” or aggregate potential return net of hedging cost). The “Expected Return” of 6.26% was a ballpark estimate, taking into account the backtested relationship between actual returns and my site’s potential return estimates (for portfolios created after July 26th of this year, we have modified our method of estimating expected returns – more on this below).

Portfolio 1 Performance

Here’s how the portfolio did, net of hedging and trading costs.

This portfolio was down 4.61%, underperforming its expected return, of course, and underperforming the SPDR S&P 500 Trust ETF (SPY).

So far, we have six-month performance data for 45 portfolios I’ve presented that were hedged against >13% declines. Here’s how all of them have done.

Table via Portfolio Armor

Portfolio 2

This was the $100k portfolio. This one included American Tower (AMT), NYT, VMware (VMW), Xilinx (XLNX), as primary securities. Micron (MU) was added in the fine-tuning step again to absorb cash left over from the process of rounding down to round lots of the primary securities.


The image above was generated by Portfolio Armor on April 4 and presented in this Marketplace post at the time.

The worst-case scenario for this one was a decline of 13.45%, the best-case scenario was a gain of 17.82%, and the ballpark estimate of an expected return was 7.12%.

Portfolio 2 Performance

Here’s how the portfolio did, net of hedging and trading costs.

This one was down 1.42%. So far, we have six-month performance data for 48 portfolios I’ve presented hedged against >14% declines. Here’s how all of them have done.

Table via Portfolio Armor.

Portfolio 3

This was the $1 million portfolio. AMT, Chipotle (CMG), MarketAxess (MKTX), NYT, Ulta Beauty (ULTA), VMW, and XLNX as primary securities. Twilio was added in the fine-tuning step to absorb cash left over from the process of rounding down to round lots of the primary securities.

The image above was generated by Portfolio Armor on April 4 and presented in this Marketplace post at the time.

The worst-case scenario here was a drawdown of 14.42%, the best-case scenario was a gain of 19.39% (the net potential return), and the expected return was 7.64%.

Portfolio 3 Performance

Here’s how the portfolio did, net of hedging and trading costs.

This one was flat, up 0%. So far, we have six-month performance data for 69 portfolios I’ve presented hedged against >15% declines. Here’s how all of them have done.

Table via Portfolio Armor

Portfolio 4

This was the $2 million aggressive portfolio. This one included AMT, CMG, MKTX, NYT, ULTA, VMW, and XLNX as primary securities. MU was added to absorb leftover cash in the fine-tuning step.

The image above was generated by Portfolio Armor on April 4 and presented in this Marketplace post at the time.

The worst-case scenario here was the max drawdown of 19.52%, the best-case scenario was the net potential return of 21.01% and the expected return was 8.14%.

Portfolio 4 Performance

Here’s how the portfolio did, net of hedging and trading costs.

This one was up 1.67%. So far, we have six-month performance data for 77 portfolios I’ve presented hedged against >20% declines. Here’s how all of them have done.

Table via Portfolio Armor

Portfolio 5

This was the $2 million top names portfolio. Names that appeared in this portfolio but not in the previous April 4 portfolios were AutoZone (AZO) and Five Below (FIVE).

The image above was generated by Portfolio Armor on April 4 and presented in this Marketplace post at the time.

The worst-case scenario was a drawdown of 8.52%, the best-case scenario was a gain of 17.02%, and the expected return was 6.01%.

Portfolio 5 Performance

Here’s how the portfolio did, net of hedging and trading costs.

This portfolio was up 4.27%, underperforming its expected return, but outperforming SPY. So far, we have a full six-month performance for 95 portfolios I’ve presented hedged against >9% declines. Here’s how each of them did.

Table via Portfolio Armor

Top Names

These were Portfolio Armor’s top 10 names as of April 4. Names that didn’t appear in the portfolios above were Lithia Motors (LAD), Keysight Technologies (KEYS), Starbucks (SBUX), SBA Communications (SBAC).

The image above was generated by Portfolio Armor on April 4 and was included in the same Marketplace post as the top names portfolio above.

For this cohort, as of April 4:

  • Average 36M Beta = 0.76
  • Average 20% threshold optimal put hedging cost: 2.29%

Top Names Performance

Here’s how the top names did:

The top names (unhedged) were up 6.96% on average vs. up 3.47% for SPY. So far, 53 top name cohorts have beaten SPY, one has tied SPY, and 42 have underperformed SPY over the next six months. You can see the performance for all of the top name cohorts I’ve presented so far in the table below.

Table via Portfolio Armor

So, Portfolio Armor’s top ten names averaged 7.20% over the average of these 96 6-month periods, versus SPY’s average of 5.57%, an average outperformance of 1.63% over 6 months, or 3.26% annualized.

Top Names Time-Stamped

For a few months, in addition to posting those top names in my Seeking Alpha Marketplace service, I also time-stamped them on Twitter. If you click on the tweet shown below and scroll down, it will take you to a thread showing those time-stamped posts as well as charts of their subsequent performance.

Week 97 Assessment

The top names nearly doubled the performance of SPY, but this wasn’t a good week for the hedged portfolios: none outperformed its expected return, two posted single-digit negative returns, one was flat, and two posted positive single-digit returns, with one outperforming SPY. Note that we’ve incorporated data from these 97 weeks of performance updates into recent algorithm changes that should boost performance and increase accuracy for cohorts created after July 26, 2019. I described those changes here: When Strategy Meets Reality.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.