--------- Systematic portfolio for the Mobius Investment Club Monthly report Strategy: Growth Started May 2006 Initial Investment 5000 UK Pounds Portfolio size maximum 5 stocks (initial investment of £1k/stock and £1.5k subsequently) Run 11/12/2006 @ 13:50 for December 2006 - Mourad Kara mourad@mobiusclub.co.uk --------- DECEMBER 2006 --------- QUICK SYSTEMATIC PORTFOLIO REVIEW Delta - PP=125p - SP=159p - PH =159p S/L= 19p BetonSport - PP=***p - SP= ** p - PH=***p - S/L=21p Robert Walters - PP=232p - SP=299p PH=299p SP=35p Land of Leather - PP=248p - SP=302p PH=302p S/L=38p Hyder Consulting PP=332p - SP=426p PH=426p S/L=51p PP = Purchase Price; SP= Today's Share Price; PH= Price High since Purchase; S/L= Stop/Loss Delta 12 Months = 10/05/2007 BetonSport 12 Months = 14/06/2007 Robert Walters 12 Months = 10/07/2007 Land of Leather 12 Months = 10/08/2007 Hyder Consulting 12 Months = 15/09/2007 Comment on existing stocks in this month's systematic run: - Land of Leather passed all filters (phase 1&2) - Robert Walters has passed Phase 1 and step 7. No sale or purchase this month: We have five stocks (full portfolio). --------- PORTFOLIO SUMMARY Current Portfolio: Delta; BetonSport; Robert Walters; Land of Leather, Hyder Consulting. The portfolio is now full (no vacancy). and no stock has hit the exit criteria The stock for selection this month is British Energy Group (if we had a vacant slot in our portfolio) [details of British Energy stock if purchased here - SP, sectors, markets (and if you can the values of the key parameters] --------- STOCK SCREENING 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 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): 150 Phase 1 pass: 12 shares (sorted by phase 1, step 6, and then step 7) Land of Leather British Energy Group Invensys Robert Walters LogicaCMG Severfield-Rowen Laura Ashley Vitec Group Morgan Crucible Elementis Prudential Hunting Comment on stock screening share output this month: - Only one share passed all the filters (Land of Leather) - British Energy group passed Phase 1 and step 6 (and has highest score of 36.7/ 44) - Invensys would have been the third choice after British Energy and Land of Leather (if British Energy were bought) --------- --------- 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 share selection version 1.1 09/11/2006 Policy for share exit version 1.0 07/05/2006 --------- 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) (7). Net Gearing within the lowest 3 deciles AND logical operator applied for (6)(7). (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. Note for this month only (compared to November 2006) Policy share selection update from version 1.0 to version 1.1 of the portfolio. - Step 8 has been removed from the phase 2 criteria - Replaced by a scoring scheme defined above. Step 8 has not been used in the filtering scheme and the scoring scheme is more appropriate by capturing an aggregate single value (score) for the share. --------- 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. -- For further details and/or contacts, email mourad@mobiusclub.co.uk --------- Acknowledgements to -- 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 compulsary 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) --------- ---------