WHAT ARE WE LOOKING FOR? We end the series today with a look at stocks on the S&P 100 that Ron Meisels, the technical analyst for Phases and Cycles Inc., thinks it is best to avoid - critical for overall performance.
Mr. Meisels creates a portfolio of favoured stocks from the S&P 100 and calls it his TOP100 (Technically Organized Portfolio). He uses technical, cyclical and sentimental indicators to sift through the index members.
The overweight stocks in the TOP100 portfolio during the past three years (the first three-year period in which the fund has been in operation) have outperformed, providing an annual compound rate of return of 13.2 per cent. During the same period, the stocks to avoid have underperformed, declining at an annual rate of 17.1 per cent.
Overweight stocks in the TOP100 have a greater weight than in the S&P 100, while the underweight category in the portfolio have a lower weighting than in the S&P 100 or are not included in the portfolio at all.
During the past year the overweight group have increased 40.7 per cent, while the underweight group rose 3.4 per cent.
MORE ABOUT THE TOP100
The main tool he uses to make both his top-down (sector weights) and bottom-up picks (individual companies) is the relative performance index. This index compares each sector's price performance against the S&P 100 or it compares each security against its own sector index for outperformance (a rising index) or underperformance (a declining index).
Phases and Cycles analysts look at the portfolio twice a month and publish monthly, unless something drastic happens, Mr. Meisels said.
During the past three years the TOP100 has generated an annual compound return of 4.4 per cent, compared with an average annual decline of 7.3 per cent for the S&P 100.