Depressed Blue Chips
During times of crisis, buy into blue chip stocks (within the S&P) that have a strong chance of rebounding stronger than the S&P as a whole. The blue chip stocks are based on value and sentiment factors.
Fund
55.79%
vs
Benchmark
59.76%
* 1-year, 5-year, and 10-year performance shown below is a rolling measure, dynamically updated weekly. For example, 1-year performance reflects returns over the last 365 days, measured from the right-most datapoint in graph. Since inception reflects returns from left-most datapoint on graph.
** Performance data is calculated using the average returns of all accounts with more than $100 invested in this strategy.
** Performance data is calculated using the average returns of all accounts with more than $100 invested in this strategy.
When this fund underperforms
When this fund outperforms
Fund Holdings
Fund details
Stats
Max draw down (of range)
Daily Sharpe (of range)
Daily Volatility (of range)
Monthly Volatility (of range)
92.00%
Correlation to SPY (total)
11.34%
1-year performance
N/A
5-year performance
N/A
10-year performance
55.79%
Inception performance
Description
This factor-based portfolio focuses on only the universe of stocks within the S&P 500. It invests in 20 stocks on an equal-weighted basis, checking weekly whether they still meet all prerequisite inclusion conditions (and rebalancing if not). Stocks are ranked based on quality (margins, turnover, and returns on capital), value (earnings, price/book), growth (EPS, sales), and momentum. Resulting stocks are then screened for the top 20 value and sentiment (EPS surprise, analyst recommendations) factors. This fund uses the high-yield spread signal to detect a crisis - historically, a crisis can be predicted when the difference in interest rates between low-quality (high yield) bonds and the US Treasury rate is above 6.5%. On the first day of the month after a “crisis month” (where the average spread is above 6.5%), this fund invests in blue chip distressed stocks. In non-crisis times, this fund is invested in the S&P.
Key Considerations
This fund uses factors, which are a method to rank stocks based on a certain condition. When we use the value factor, we are ranking all stocks in our investable universe (the S&P stocks in this case) based on how well they match the criteria of that factor, and invest in the ones that match it best.
Investing in blue chip stocks is safer than investing in small or mid-cap stocks, especially in a bear market. While not necessarily as safe as investing in the entire S&P, the majority of studies show that investing in 20 stocks showcases 95 percent of the diversification of the entire index, with less turnover
This strategy relies on the theory that certain factors do better than others, rather than investing in a broad basket of the market as a whole during crises. It also relies on a signal to predict the start of a bear market correctly, two strong assumptions. This strategy invests in fractional shares when available. When not available, it will invest in the nearest (lower) whole number of shares. Please note that this number may be 0 if your investment in this strategy is sufficiently low, meaning our investment strategy advertised returns will be different from your returns.