Sys report 07/07
Here is an example of a monthly report (July 2007, Victec Group), sent to all members as part of the Systematic investment method
This is a supporting document that is shown here by way of example and needs to be read with the Systematic investment method
Systematic approach for the Mobius Investment Club
Started May 2006
QUICK SYSTEMATIC PORTFOLIO REVIEW
Nord Anglia Education 12 months = 10/02/2008
Chime Comms 12 months = 10/04/2008
Senior 12 months = 10/05/2008
Delta 12 months = 10/06/2008
Comment on existing stocks in this month's systematic run:
- Nord Anglia Education passed phase 1 filters, scored 28.4/44
- Chime Comms marginally failed Phase 1: It failed on the forecast EPS test (step 4) but passed on Step 2,6,7. scored 26.1/44
- Senior passed phase 1 filters, scored 23.2/44.
- Delta passed both mandatory and optional phases (phase 1 & 2) and tops the score list
- max score this month 38.2/44 (Delta)
- Lavendon Group hit its exit S/L this month (3 months after purchase @42%).
Sold Lavendon Group @42% profit 12 Months = 10/03/2008 Exit: S/L 15% off peak.
Sold LogicaCMG @18% loss 12 Months = 10/01/2008 Exit: S/L 15% off peak.
Sold Robert Walters @53% profit 12 Months = 10/07/2007 Exit: 50% (not in policy)
Sold Delta @8% profit 12 Months = 10/05/2007 Exit: S/L 15% off peak.
Sold LandofLeather @15%profit 12 Months = 10/08/2007 Exit: S/L 15% off peak.
Sold Hyder Consulting @31%profit 12 Months = 10/09/2007 Exit: S/L 15% off peak.
Sold BetonSPort @100% loss 12 Months = 10/06/2007 Exit: LSE termination (liquidation).
We have two vacancies in the portfolio
Current Portfolio: Nord Anglia Ed, Chime Comms, Senior, Delta
The portfolio has two vacancies
The stock for selection this month is Vitec Group
Sector : Industrial Engineering
SP (purchase) 598.45p
Using Stock screener tool from Digital Look.
From September 2006, we have refined and improved our use of the DigitalLook Stock screener by
transferring the bulk of the data in an MS Excel Spreadsheet for further manipulation.
The filters in our stock screening tool applies steps (1), (3a), (3b) and (5).
Stock screening tools we use do not cater for decile filtering, so we download the output from the stock screening tool
into an MS Excel spreadsheet template for further manipulation of all the other steps and phases.
Stock screener output (number of shares): 188
Phase 1 pass: 22 shares (sorted by phase 1, step 6, and then step 7)
London Scottish Bank
Ashley (Laura) Holding
Morrison (Wm) Supermarkets
Styles & Wood
Babcock International Group
John Wood Group
Nord Anglia Education
Comment on stock screening share output this month:
- Two shares passed all filters (mandatory and optional) - i.e phase 1 and 2: Delta and Vitec Group
- Delta scored 35.5 (10th decile) and Vitec Group score 31.3/44 (9th decile)
A Systematic portfolio also commonly called a mechanical portfolio (but also known as programmatic or
automated) relies on a specific set of criteria to select shares from a set of markets and sectors. The criteria
used (also called filters) should be clear, explicit and repeatable.
Policy for portfolio profile version 1.1 27/06/2007
Policy for share selection version 1.1 09/11/2006
Policy for share exit version 1.0 07/05/2006
Policy for portfolio profile version 1.1
Potfolio size is 6 stocks
monthtly purchase only
Investment of £2k per stock
** Policy change this month voted at the June 2007 monthly meeting
Policy for Share selection v1.1 has 2 phases and 8 steps
Phase 1: Compulsory criteria:
Scope: UK stock market - all sectors [FTSE-allShare]
(1). market cap greater than £50 Mil (> 0.01 of FTSE allshare marketcap)
(2). PSR (Price to Sales Ratio) within the lowest 3 deciles (1/3rd)
(3a). Forecast 1st year normalised EPS > 0
(3b). Forecast 2nd year normalised EPS >0
(4). Forecast EPS growth over 2 years within the highest 3 deciles (top 30%)
(5). PEG between 0 and 1.5
AND logical operator applied for (1)..(5)
Phase 2: Optional criteria (if applicable) for final selection
(6). PE within the lowest 3 deciles (1/3rd) - can be relaxed to 4 or 5th decile until we hit a stock
(7). Net Gearing within the lowest 3 deciles - - can be relaxed to 4 or 5th decile until we hit a stock
AND logical operator applied for (6)(7) if needed
(8). Each share selected from the initial stock screener is assigned a score based on a weighted average using
the following seven parameters and associated weights:
EPS (trailing): 10 -- EPS (forecast): 7 -- MktCap: 2
NetGearing: 4 -- P/E: 6 -- PEG: 7 -- PSR: 8
- The maximum score is 44 and the statistical decile structure is used along with the weights of each parameter to work
out the score. The score is used as an additional decision point, ensuring that the final selection is in the top decile.
Policy for Share exit
- A trailing S/L of 15% of purchase price converted in pence.
- An investment will be sold after 12 months (unless SP passed the target price and has not dropped by trailing S/L yet).
- Target price is 150% of the purchase price.
Tools used: Stock screener
We use the stock screener from Digital Look (and ADVFN for validation).
About the Systematic (Mechanical) portfolio
-- Proposed through Mourad Kara's document in April 2006 and presented at the May 2006 monthly meeting.
-- Voted by the Mobius Club to go ahead as proposed in May 2006.
-- Rolling Stocks Investment club (UK) and in particular Dave Gaskell for his help in understanding mechanical portfolios.
-- "What Works in Wall Street, A Guide to the Best-Performing Investment Strategies of All Time",
James P O'Shaughnessy, McGraw-Hill, 3rd edition.
PROCESS: To complete the systematic portfolio monthly report, you need:
- share prices of stock in current portfolio
- run current stock screener, capture number of shares (from output)
- transfer shares into MS Excel template and execution
- Output all shares that passed phase 1 (that is all the compulsory steps)
- Short comments on the existing shares performing in this month's filtering output
- Short Comments on the new top share that is selected as part of the systematic portfolio (what filters it passed etc..)
- New share price (if going to be purchased), note SP, sectors, markets (and if you can the values of the key parameters)