Ivy Portfolio Update

Early in 2012 Scott’s Investments added a daily Ivy Portfolio spreadsheet. This tool uses Google Documents and Yahoo Finance to track the 10 month moving average signals for two of the portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that have trading signals based on long-term moving averages.

This month’s update is a trading day early (markets will be open on the 31st) than a typical end of month update. It also comes at a time when the long-term moving average strategy has struggled and is under scrutiny. John Hussman notes that since 2009 the S&P 500 Index has actually performed better when below its 200 day moving average than when it has been above the 200 day moving average. He also notes the recent performance is contrary to the longer-term success of a moving average strategy:

“…since 2010, the S&P 500 has gained just 1.5% annually when it has been above its 200-day moving average, versus a striking 46.3% annual return when it has been below. Needless to say, this pattern is not necessarily indicative of how the S&P 500 will behave in the future, and is in fact contrary to the historical pattern”

Hussman focuses on one index, the S&P 500. With hundreds of markets to trade, some will follow the historical trend while others, like the S&P 500 may buck the trend for months, years, or perhaps forever. The key is not to focus or trade one market with one strategy – the S&P 500 is not the market but rather one index among many, and its asset class (US equities) one among many.

The Ivy Portfolio spreadsheet tracks the 5 and 10 ETF Portfolios listed in Faber’s book. When a security is trading below its 10 month simple moving average, the position is listed as “Cash”. When the security is trading above its 10 month simple moving average the positions is listed as “Invested”.

The spreadsheet’s signals update once daily (typically in the evening) using dividend/split adjusted closing price from Yahoo Finance. The 10 month simple moving average is based on the most recent 10 months including the current month’s most recent daily closing price. Even though the signals update daily, it is not an endorsement to check signals daily. It simply gives the spreadsheet more versatility for user’s to check at their leisure.

The page also displays the percentage each ETF within the Ivy 10 and Ivy 5 Portfolio is above or below the current 10 month simple moving average, using both adjusted and unadjusted data.

If an ETF has paid a dividend or split within the past 10 months, then when comparing the adjusted/unadjusted data you will see differences in the percent an ETF is above/below the 10 month SMA. This could also potentially impact whether an ETF is above or below its 10 month SMA. Regardless of whether you prefer the adjusted or unadjusted data, it is important to remain consistent in your approach.

MarketClub Holiday Special

I do not track these portfolios as hypothetical portfolios like I do with other portfolios on the site but do periodically backtest the strategy. For the most recent test results, please view last month’s update.

The current signals based on November 30th’s closing prices are below. International equities and international real estate are the strongest sector in terms of their percent above their 10 month moving average. Commodities and US REITs are the weakest sectors.

The first table is based on adjusted historical data and the second table is based on unadjusted price data:




Disclaimer: Stock Loon LLC, Scott's Investments and its author is not a financial adviser. Stock Loon LLC, Scott's Investments and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of www.scottsinvestments.com