The Globe and Mail

WHAT ARE WE LOOKING FOR?

Let's examine the top picks of Ron Meisels, the technical analyst for Phases and Cycles Inc. Mr. Meisels writes a technical analysis feature for Saturday's Report on Business and is also the analyst behind the stocks in the recently-launched Horizons AlphaPro Managed S&P/TSX 60 exchange traded fund. This ETF is based on his TOP60 portfolio.

MORE ABOUT THE TOP60

Mr. Meisels uses technical, cyclical and sentiment indicators to pick stocks in the S&P/TSX 60 index that he thinks will outperform. First, he uses a top-down methodology to pick sectors he believes will outperform, then he uses a bottom-up methodology to picks stocks in the favoured sectors.

The main tool he uses to make both his top-down and bottom-up picks is the relative performance index. This index compares each sector's price performance against the S&P/TSX 60, or compares each security against its sector index. When the relative performance index is rising it shows that the sector or security is outperforming the base. When the index is declining, it suggests the sector or security is underperforming the base, he said.

“We look at multimonth data for short-term analysis and multiyear data for long-term analysis,” Mr. Meisels said. “This index does not give buy/sell signals, but it helps to determine out performance.”

HOW HAS THE TOP60 PERFORMED?

The TOP60 has outperformed over most periods. For instance, the TOP60 was down 33 per cent over the past year to the beginning of March, versus 37 per cent for the S&P/TSX 60. Over the past 10 years, the TOP60 is up 7.2 per cent, versus just 2.6 per cent for the S&P/TSX 60.

WHAT'S IN THE PORTFOLIO NOW?

Mr. Meisels is sitting on more than 40 per cent cash because he is drastically underweight the financial, industrial and telecom sectors. “We will probably reduce the cash position at the next revision,” he said.

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