Benzinga - by David Pinsen, Benzinga Contributor.
Another One Laps The Market In a post last week ("From The Viewpoint Of Calamity"), we mentioned that one of our hedged portfolios from mid-November more than doubled the performance of the SPDR S&P 500 Trust ETF (ARCA:SPY) over the next six months.
In that post, we joked that despite those extraordinary returns, many readers would be indifferent.
We may have spoken too soon. Since then, we've seen a spike in interest, particularly after the following week's portfolio (the one from Thanksgiving week last year) also more than doubled the performance of the market. We've also gotten some specific questions about why this is happening, which we'll attempt to answer here. First let's look at that Thanksgiving Week portfolio.
Our Thanksgiving Week Portfolio The underlying securities in this portfolio were the names our system estimated had the highest potential returns, net of hedging costs, over the next six months: Affirm Holdings, Inc. (NASDAQ: AFRM), Coinbase Global, Inc. (NASDAQ: COIN), Fabrinet (NYSE: FN), MicroStrategy, Inc. (NASDAQ: MSTR), Super Micro Computer, Inc. (NASDAQ: SMCI), Splunk, Inc. [which was later acquired by Cisco Systems, Inc. (NASDAQ: CSCO)], and Williams Sonoma, Inc. (NYSE: WSM).
How That Portfolio Did Over the next six months, our hedged portfolio returned +41.53%, net of hedging and trading costs, versus +16.06% for SPY.
You can find an interactive version of the chart above here.
What's Behind This Outperformance This outperformance appears to be the result of two specific elements of our system. The first is a new factor we added to our security selection method about two years ago, described in this Twitter thread at the time.
@dpinsen Hi, here is your unroll: https://t.co/K69WyaOlOt Share this if you think it's interesting.