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Visual Understanding of Sector Surfer Strategies
Are classical visualization tools useful in understanding SS
Stephen Lundstrom
Process
• Download .csv file from SS• Perform (manual) 11 year backtest (VV)• Capture 10 equity curves from backtest• Prepare more detailed charts using TC2000:
• Vertical lines indicate trades• Equity symbols indicate what was owned during
each period• All equities owned during chart time frame shown –
provides Sector Surfer context.
VV Backtest• Settings
– Account • initial investment $100,000• No commission, no margin• No interest on cash (SS includes some interest)
– Automation• trades entered manually
– Dates + Equities from Sector Surfer .csv download– Closing prices from VectorVest
» No dividends» Trades following morning
– Test Period• 1/2/2002 to 12/31/2012
TC2000 equity comparisons
• Used SPY to show overall market behavior– Green dashed line; chart scale applies to SPY
• Can compare up to 10 equities– Chose only those equities selected by SS during the
timeframe depicted– Comparisons used to show trends, not values
• Annotations – Vertical bars depict where trades were made– Equity owned in each period shown– Primary drawdowns shown
• (in red – matches backtest annotations)– Yellow areas highlight possible better choices
Two Hall of Fame strategies selected as case studies
• #1 ETFs: SectorVarious1• 634933549324271250-3961-3-38782 • ZROZ not supported in VV
– Manually entered ZROZ gains per SS .csv file
• #1 Top Dog Stocks: Recent Yield• 634891329763437500-3017-1-32874 • Dropped some stocks (TC2000 limitations)
General Observations
• Equity selection within portfolios studied generally quite good.
• Yellow areas on CLOSER LOOK charts highlight better choices – (with perfect hindsight)
• Not all ETF equities available over entire study periods (mine or SSs)
• Use of stop losses or other techniques might be needed to reduce max. drawdowns.
Strategy: SectorVarious1
• Current top SS Hall of Fame ETF– SectorVarious1
• 634933549324271250-3961-3-38782
• ETFs: (study period 1/2/2002 – 12/31/2012)
ITB 5/23/06
EEM 4/25/03
EWW
ZROZ 2/14/11
GLD 11/24/02
PPH
REZ 1/17/08
XLE
IWM
BAL 7/31/08
QQQ
IBB 6/29/01
Stormguard ON
From From From
14 Year Chart
10 Year Chart
Summary Statistics:SectorVarious1 ETF Strategy
Sector Surfer Backtest
10 yr annualized return 42.9%10 yr CROR (w/o dividends) 33.2%10 yr Max Drawdown 25% 25.9%Sharpe Ratio 0.98Score 195Safety 41.0Alpha 39%Beta 0.81
Count of % Gains Reported(does not take holding period into account)
0123456789
10
-4.0 --7.9
-2.0 --3.9
-1.0 --1.9
+0.9 --0.9
+1.0 -+1.0
+2.0 -+3.9
+4.0 -+7.9
+8.0 -+15.9
+16.0-
+31.9
+32.0-
+63.9
>+64
47 trade pairs: 1/1/2002 – 12/31/2012% Winners 77%
%Gains
Smallest Gains: -7.2% (twice)Largest Gains: 32.6%, 76.0%
SectorVarious1 Strategy
What SS Has to Work With (only 10 of 12)
SectorVarious1 Strategy
Backtest 10 yr Equity CurveShowing VV Confirmed Calls
MaxDD-25.9%
$2M
Jan 2002 – July 2003
EWW+4.2%
$CASH
6/02 – 4/03
IBB
+28.7%
$95K
$125K
Jan 2003 – July 2004
IBB
+28.7%
$CASH
6/02 – 4/03
XLE
+7.6%
EWW
+6.0%
EEM
+10.5% EWW
-4.5%
IBB
-2.8%
$110K
$160K
Jan 2004 – July 2005
XLE
+7.6%
EWW
-4.5%
IBB
-2.8%
XLE
+7.8%
EEM
+26.7%
EWW
+6.8%
XLE
-7.2%PPH
-1.8%
$150K
$200K
Closer Look
Jan 2005 – July 2006
EWW
+6.8%
XLE
-7.2%
PPH
-1.8%
XLE
+10.1%
GLD
+5.8%EWW
+13.7%EEM
-1.8%
IWM
+0.3% GLD
-5.9%
$200K
$250K
21.7%drawdown
Closer Look
Jan 2006 – July 2007
EEM
-1.8%
IWM
+0.3%
GLD
-5.9% PPH
+9.0%
EWW
+32.6% XLE
+14.8%
$250K
$350K
Closer Look
Jan 2007 – July 2008
EWW
+32.6%
XLE
+14.8%
EEM
+16.5%
GLD
+18.2%
$CASH2/08 – 5/08
$350K
$500K
XLE
+3.2%
Closer Look
Jan 2008 – July 2009
$CASH2/08 – 5/08
XLE
+3.2%
$CASH7/08 – 6/-09
$460K
$560K
Closer Look
Jan 2009 – July 2010
$CASH7/08 – 6/-09
EWW
+10.7%
ITB+1.7%
REZ-2.1%
XLE
+2.8%
GLD
-7.2%
ITB
REZ
ITB
REZ+6.2%
REZ-4.8%
ITB+10.0%
$500K
$640K
19.5%drawdown
Closer Look
Jan 2010 – July 2011
+6.2%ITB+10.0%
ZROZ*+14.9%
BAL
+76.0%
IBB-0.7%
$600K
$1.4M
25.9%drawdown
25.9%drawdown
Closer Look
Jan 2011 – July 2012
BAL
+76.0%
IBB-0.7%
ZROZ*+6.8%
GLD
+12.3%
ZROZ*+26.0%
$CASH9/11-11/11
ZROZ*+6.9%
ITB+28.7%
25.9%drawdown
$1.0M
$2.1M
Closer Look
July 2011 – Dec 2012
ITB+28.7%
ZROZ*+0.9%ZROZ*
+6.9%ZROZ*+26.0%
GLD
+12.3%$CASH
9/11-11/11
ITB+17.0%
$1.2M
$2.2M
Closer Look
SectorVarious1 - Trades
Date Sell Buy Gain%
12/31/12 ITB 17.0%
8/31/12 ZROZ ITB 0.9%
5/31/12 ITB ZROZ 28.7%
12/30/11 ZROZ ITB 6.9%
11/07/11 $$$$ ZROZ 0.0%
9/30/11 ZROZ $$$$ 26.0%
8/31/11 GLD ZROZ 12.3%
7/29/11 ZROZ GLD 6.8%
6/30/11 IBB ZROZ -0.7%
4/29/11 BAL IBB 75.0%
9/30/10 ZROZ BAL 14.9%
5/29/10 REZ ZROZ 6.2%
3/31/10 ITB REZ 10.0%
1/29/10 REZ ITB -4.8%
12/31/09 GLD REZ -7.2%
Date Sell Buy Gain%
1/31/06 EWW EEM 13.7%
11/30/05 GLD EWW 5.8%
10/31/05 XLE GLD 10.1%
6/30/05 PPH XLE -1.8%
4/29/05 XLE PPH -7.2%
2/28/05 EWW XLE 6.8%
12/31/04 EEM EWW 26.7%
8/31/04 XLE EEM 7.8%
5/28/04 IBB XLE -2.8%
4/30/04 EWW IBB -4.5%
2/27/04 XLE EWW 7.6%
12/31/03 EWW XLE 6.0%
11/28/03 EEM EWW 10.5%
8/29/03 IBB EEM 28.7%
4/30/03 $$$$ IBB 1.2%
5/31/02 EWW $$$$ -2.7%
1/31/02 $$$$ EWW 4.2%
Date Sell Buy Gain%
11/30/09 XLE GLD 2.8%
10/30/09 REZ XLE -2.1%
9/30/09 ITB REZ 1.7%
7/31/09 EWW ITB 10.7%
6/30/09 $$$$ EWW 1.8%
6/30/08 XLE $$$$ 3.2%
5/30/08 $$$$ XLE 1.0%
1/31/08 GLD $$$$ 18.2%
11/30/07 EEM GLD 16.5%
7/31/07 XLE EEM 14.8%
3/30/07 EWW XLE 32.6%
8/31/06 PPH EWW 9.0%
6/30/06 GLD PPH -5.9%
4/28/06 IWM GLD 0.3%
3/31/06 EEM IWM -1.8%
Strategy: 9-Stock Recent Yield
• Started with current best TopDog Stocks:– Recent Yield
• Limitation on charting Tools (compare 10 stocks, equity not supported)
• Eliminate laggards on the strategy chart (APOL, NFLX)
• Eliminate equity not supported with tool (TC2000): PDC
9-Stock Recent Yield Strategy634955286436756250-3808-8-37784
• PCYC• MCHP • IIVI • AMGN • SWN • AMZN • L • GMCR• SRPT
Stormguard ONAll equities available for entire backtest 1/2/02 – 12/31/12
24 Year Chart
10 year chart
Summary Statistics:9-Stock Recent Yield Strategy
Sector Surfer Backtest
10 yr annualized return 85.6%10 yr CROR (w/o dividends) 67.3%10 yr Max Drawdown 59% 58.9%Sharpe Ratio 0.45Score 390Safety -0.5Alpha 92%Beta 2.51
Count of % Gains Reported(does not take holding period into account)
0
1
2
3
4
5
6
< (4.0) (3.9)-(2.0)
(1.9)-(1.0)
(0.9)-+0.9
+1.0 -+1.0
+2.0 -+3.9
+4.0 -+7.9
+8.0 -+15.9
+16.0-
+31.9
+32.0-
+63.9
>+64
29 trade pairs: 1/1/2002 – 12/31/2012% Winners 79%
Smallest Gains: -20.8%, -38.3%, Largest Gains: 279.5%, 457.2%
9-Stock Recent Yield Strategy
What SS Had To Work With
SPY
GMCR PCYC
SRPT
IIVI
MCHP
L
SWN
AMZN
AMGN
9-Stock Recent Yield Strategy
Backtest 10 yr Equity CurveShowing VV Confirmed Calls
Jan 2002 – July 2003
$170K
6/02 – 4/03
SRPT-20.8%
AMZN+29.3%
$CASH
AMZN+25.1%
Jan 2003 – July 2004
$300K
$CASH
AMZN+25.1% SRPT
+1.5% (?)
AMZN+13.6%
PCYC+13.1%
$150K
Jan 2004 – July 2005
$300K
$350K
$200K
PCYC+13.1%
SWN+89.5%
SRPT-10.4%
46.4% drawdown
Closer Look
Jan 2005 – Aug 2006
$300K
$500K
$1.1M
$600KSRPT-10.4%
SWN+53.0%
SRPT+8.7%
41.1% drawdown
Closer Look
Jan 2006 – July 2007
$600K
$1.1M
$1.0M
SRPT+8.7%
41.1% drawdown
IIVI+64.2%
GMCR+14.4%
Closer Look
Jan 2007 – July 2008
$900K
$1.3M
$1.1M
2/08 – 5/08
GMCR+14.4%
GMCR+3.3%
AMZN+28.9%
$CASH+1.0% (?)
SWN+7.4%
Closer Look
Jan 2008 – Aug 2009
2/08 – 5/08
$1.30M
$1.35M
$1.50M
7/08 – 6/09
SWN+7.4%
$CASH+1.0% (?)
$CASH+1.8% (?)
GMCR+19.1%
Closer Look
Jan 2009 – July 2010
7/08 – 6/09
$1.50M
$1.0M
$3.50MGMCR+19.1%
SRPT-38.3%
45.7% drawdown
PCYC
+279.5%
Closer Look
Jan 2010 – Aug 2011
$2.0M
$3.50M
$4.50M
PCYC
+279.5%
SRPT
-12.0%
AMZN-1.2%
IIVI-2.8%
GMCR
+62.1%
Closer Look
Jan 2011 – Aug 2012
$5.0M
$10.0M
$15.0M
$20.0M
GMCR
+62.1%
IIVI-2.8%
PCYC+2.7%
$CASH0%
PCYC+457.2%
Closer Look
July 2011 – Dec 2012
$5.0M
$10.0M
$20.0M
$30.0M
$35.0M
PCYC+457.2%
SRPT+78.8%PCYC
+2.7%
$CASH0%
GMCR
+62.1%
Closer Look
9-Stock Recent Yield Strategy - Trades
DATE SELL BUY GAIN
31-Dec-12 (SRPT) 78.80%
31-Aug-12 PCYC SRPT 457.20%
18-Nov-11 $CASH PCYC 0.00%
30-Sep-11 PCYC $CASH 2.70%
31-Aug-11 GMCR PCYC 62.10%
31-Mar-11 IIVI GMCR -2.80%
28-Feb-11 AMZN IIVI -1.20%
30-Nov-10 SRPT AMZN -12.00%
31-Aug-10 PCYC SRPT 279.50%
30-Nov-09 SRPT PCYC -38.30%
31-Jul-09 GMCR SRPT 19.10%
30-Jun-09 $CASH GMCR 1.80%
30-Jun-08 SWN $CASH 7.40%
30-May-08 $CASH SWN 1.00%
DATE SELL BUY GAIN
31-Jan-08 GMCR $CASH 3.30%
31-Oct-07 AMZN GMCR 28.90%
31-May-07 GMCR AMZN 14.40%
31-Jan-07 IIVI GMCR 64.20%
30-Jun-06 SRPT IIVI 8.70%
30-Dec-05 SWN SRPT 53.00%
30-Jun-05 SRPT SWN -10.40%
28-Feb-05 SWN SRPT 89.50%
30-Jul-04 PCYC SWN 13.10%
31-Dec-03 AMZN PCYC 13.60%
29-Aug-03 SRPT AMZN 1.50%
30-May-03 AMZN SRPT 25.10%
30-Apr-03 $CASH AMZN 1.20%
31-May-02 AMZN $CASH 29.30%
28-Feb-02 SRPT AMZN -20.80%
31-Jan-02 $CASH SRPT
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