, Educational

TradeStops Pure Quant Outperformed the DJIA by more than 17%

January 1, 2018 / by TradeSmith Education

The Dow Jones Industrial Average (DJIA) has had a huge run in the last quarter of this year. Heading into the last day, it’s up 10.95% in the last 3 months.

And TradeStops beat it!

On September 29th, the last day of the Stansberry Conference in Las Vegas this year, I got a call at 6:30 in the morning from Richard. He was supposed to be doing an early-morning presentation that day, but he had been called even earlier that morning and asked to prepare a talk for the entire conference later that same morning. He asked me to fill in for him.

Fortunately, it wasn’t difficult to make that morning presentation. The purpose of the talk was to show the TradeStops tools and how our members attending the conference could use them more effectively. It’s always a pleasure to do that.

Midway through the presentation, the topic of the Pure Quant Portfolio Builder tool came up. The Pure Quant tool uses a simple set of rules that are built into the TradeStops site to construct portfolios from various sources; including newsletter recommendations, the TradeStops Billionaires, or any watch list that you have set up.

The rules are very simple and easy to follow.

Stay out of the SSI Red Zone
Invest in stocks that have most recently entered the SSI Green Zone
Keep average VQ below 40%
Only buy if trade is positive at time of entry
Maximum number of positions is 25
Minimum number of positions is 10
Keep portfolio risk-balanced at each step
Replace stopped-out position with next buy

The Pure Quant idea was first introduced in September 2016 at the Stansberry Conference. We showed the results of applying the rules to all the Stansberry Alliance stock picks – and the outperformance was incredible.

At this year’s Conference, we showed the results of following the strategy for the previous year. Again, the strategy of following the Pure Quant rules significantly outperformed the market.

Using Pure Quant rules, Stansberry Alliance outperforms S&P 500

One of the attendees asked to see a real-life example of how to use the Pure Quant tool on TradeStops to build a portfolio. That was easy. I have a watch portfolio that contains all 30 stocks in the DJIA, so I used that as the starting point.

Here was the input into the Pure Quant tool. We wanted the best 12 stocks of the DJIA for our portfolio, and we were going to invest $50,000 in the new portfolio.

And here are the stocks that the tool chose.

Best 12 stocks of the DJIA, chosen by TradeStops’ tool

The Takeaway

And where does the portfolio stand today? With the DJIA up an incredible 10.95%, the Pure Quant portfolio is up an even more incredible 12.85%. That beats the DJIA by more than 17%!

And the best performing stock over that period? Wal-Mart (WMT). Would anyone have guessed that the total return on WMT would be more than 26% in just 3 months’ time?

So far in the three months that this portfolio has been in existence, there have been no stop outs and no new trades. At some point in time, a stock will hit its Stock State Indicator (SSI) Stop signal. Then, we’ll sell the stock, rerun the Pure Quant tool again, find the best replacement stock, and rebalance the entire portfolio. It’s that easy.

The Pure Quant tool continues to give us great opportunities to construct intelligent portfolios. Using this tool to help you with your investments would make a great New Year’s resolution.