Category Archives: Charles

Using MFO’s Bear Market Rating To Help Contain Portfolio Drawdown

By Charles Boccadoro

“Never risk what you have and need

for what we don’t have and don’t need.”

Warren Buffett

December reminded us of how quickly the music can stop. The SP500 fell 9% turning a modest annual gain into a loss. Those hugging the S&P were the lucky ones.

Touchstone Small Company (SAGWX) was off 13.4%. Invesco S&P SmallCap Health Care ETF (PSCH) was off 16.1%. Both are dual MFO Great Owl and Honor Roll funds, which means they have a track record of top quintile risk adjusted and absolute return versus peers.

Other notables: Parnassus Endeavor (PARWX) off 13.8%, Hotchkis & Wiley Mid-Cap Value (HWMIX) off 15.2%, and Miller Opportunity (LMOPX) off Continue reading →

MFO Premium Webinar

By Charles Boccadoro

On Tuesday January 15th, we will host a webinar discussing latest features of the MFO Premium search tool site. This time we are fortunate to be joined by Brad Ferguson of Halter Ferguson Financial, a fee-only independent financial advisor based in Indianapolis. Brad will highlight the Ferguson analysis tool, one of the site’s newest features, which helps investors identify funds with equity-like returns but tempered volatility.

Other topics covered on the call will be Continue reading →

Rolling Out The New Data

By Charles Boccadoro

“The only thing that makes life possible is permanent,

intolerable uncertainty; not knowing what comes next.”

Ursula K. Le Guin

Our big MFO Premium upgrade, as described in last month’s commentary, went live on 9 November. Most obvious are the expanded evaluation periods, which include year-to-date (YTD) and latest month performance metrics. In the days ahead, subscribers will see many new parameters from our expanded database, as was evidenced today with the rolled-out of an Interval Funds screening flag in the MultiSearch tool.

The folks at Gaia Capital requested we add the screen for this new type of mutual fund. Per Lipper, Interval Funds are a hybrid mutual fund structure that falls Continue reading →

Largest Upgrade Yet To MFO Premium

By Charles Boccadoro

“In God we trust,

all others bring data.”

William Edwards Deming

Beginning with our October monthly data update to MFO Premium, we will incorporate one of largest improvements to the site since launching our beta version in November 2015, three years ago.

The improvements began, like most of the features on the site, by user requests … this time, for more evaluation periods. All risk and performance metrics will now be provided for Continue reading →

#MFTF

By Charles Boccadoro

“But we in it shall be remembered —

We few, we happy few, we band of brothers …”

                                                  Shakespeare

Nearly 400 civilians and military participated on September 29th in the 7th annual March for the Fallen event at Fort Indiantown Gap’s army training campus. The march honors fallen soldiers that have “given the ultimate sacrifice,” so that “we can watch the sun come up like we see on this beautiful fall morning over a free country,” stated Major General Anthony Carrelli at the 6am welcome ceremony.

More than 110 of the Continue reading →

Launch Alert – Litman Gregory Masters High Income Alternatives Fund (MAHIX, MAHNX)

By Charles Boccadoro

The folks at Litman Gregory Fund Advisors, LLC, of Walnut Creek, California are excited to launch their High Income Alternatives Fund, which “seeks to generate a high level of current income from diverse sources, consistent with the goal of capital preservation over time.”

After months of advisor selection and due diligence, the fund will launch September 28, 2018. Here are links to recently published fund commentary/fact sheet and webinar registration. The webinar will occur Continue reading →

Trend

By Charles Boccadoro

We’ve added Trend Metrics to the MultiSearch tool on MFO’s Premium site.

Trend Metrics signal when funds are performing above or below their 3- and 10-month simple moving averages (SMAs). If the Trend Metric is positive, the strategy suggests staying invested. If negative, exiting the position. The strategy has proved effective at mitigating severe drawdown, especially during periods of longer term trends, like experienced Continue reading →

Introducing Ferguson Metrics

By Charles Boccadoro

Ferguson Metrics help identify funds with equity-like returns but volatility that makes them “easier for investors to own through turbulent times,” describes Brad Ferguson of Halter Ferguson Financial, a fee-only independent financial advisor based in Indianapolis. They serve as a starting point for delving deeper, but also as litmus test when salespeople offer him funds to include in the firm’s portfolios.

There are three main metrics in Brad’s Continue reading →

Zeo Short Duration Income (ZEOIX), July 2018

By Charles Boccadoro

“Perhaps time’s definition of coal is the diamond.”

Kahlil Gibran

Objective and Strategy

The Zeo Short Duration Income Fund (ZEOIX), previously known as the Zeo Strategic Income Fund, is a non-diversified, actively managed, total return, fixed-income fund that seeks …

  • “ … to deliver low volatility, risk-managed solutions for the prudent investor.”
  • “ … low volatility and absolute returns consisting of income and moderate capital appreciation.”
  • “ … long-term capital preservation, income and moderate capital appreciation across market environments.”
  • “ … low volatility, absolute returns in a long-only fixed income portfolio.”
  • “ … to deliver a consistent, low-volatility risk profile suitable for both short and long time horizons.”
  • “ … to deliver low volatility.”

Clearly, ZEOIX’s focus is Continue reading →

Update on MFO Premium

By David Snowball

Charles sends his regrets for being unable to join us this issue, but he’s retreated deep underground to the MFO Premium command center.

At Charles’s request, the good folks at Thomson Reuters have substantially (vastly, enormously) expanded the amount of data they provide each month. The new datafeed will not only allow MFO Premium users to access a new level of detail about the composition and performance of mutual funds and ETFs, but it will also allow us to expand our coverage to closed-end funds and insurance products. Continue reading →

Premium Site Update – Much Expanded Data Feed

By Charles Boccadoro

“I’ve come loaded with statistics, for I’ve noticed that a man can’t prove anything without statistics.”

                                                                                              Mark Twain

We launched our premium site in November 2015. Its origin stems from our desire to identify funds that minimized downside performance across full market cycles, using metrics and evaluation periods not readily available on other sites at that time. Parameters of interest included maximum Continue reading →

Democratizing Quant: An Update on Alpha Architect

By Charles Boccadoro

“In investing, what is comfortable is rarely profitable.”

        Robert Arnott

“An investment in knowledge pays the best interest.”

        Benjamin Franklin

MFO profiled Alpha Architect’s US Quantitative Value ETF  (QVAL) in December 2014, shortly after the fund’s launch and after our colleague, Sam Lee, praised QVAL’s strategy in a Morningstar piece, entitled “A Deep Value Quantitative Hedge Fund Strategy.” The firm’s CEO Wes Gray first impressed us during his presentation “Beware of Geeks Bearing Formula” at Morningstar’s ETF Conference in Chicago earlier that same year.

I had a chance to visit Wes, his partner and CIO/CFO Jack Vogel, and the rest of his team recently at the Alpha Architect office in Broomall, Pennsylvania. The picturesque town is nearby Bryn Mawr, Haverford, and Swarthmore Colleges; Villanova and Drexel Universities; and The Wharton School of University of Pennsylvania. Wes earned his PhD from University of Chicago, with Nobel Prize Continue reading →

AlphaCentric Income Opportunities Fund (IOFIX), February 2018

By Charles Boccadoro

“Timing, perseverance, and ten years of trying

will eventually make you look like an overnight success.”

        Biz Stone

Objective and Strategy

The AlphaCentric Income Opportunities Fund seeks to provide current income. Presently, it invests in often overlooked (some call “pejorative”) segments of non‐agency (private label) residential mortgage-backed securities (RMBS), specifically in seasoned (2007 or earlier) subprime mortgages with floating rate coupons.

The irony is that 10 years after the housing collapse these bonds, once highly discounted if not feared worthless, represent one of the more sought after asset classes, as described nicely in Claire Boston’s Bloomberg Continue reading →

Morningstar ETF Conference – Chicago 2017

By Charles Boccadoro

“If someone invented levitation tomorrow, it would still take five years to catch on.”

             Alan H. Epstein

The last panel, entitled “Meet the Pundits,” enjoyed a winner’s circle atmosphere this year. It included Barron’s Crystal Kim, Morningstar’s Ben Johnson, Matt Hougan of Inside ETFs , Tom Lydon of ETF Trends , and Continue reading →

Rolling Averages, Finally!

By Charles Boccadoro

“Maybe the mind’s best trick of all was to lead its owner to a feeling of certainty about inherently uncertain things.”

        Michael Lewis’ The Undoing Project

Took a while, but we’ve finally added rolling average analysis to the MFO Premium site.

The new Rolling Averages tool provides insight into how returns vary for selected rolling periods of interest. Each period overlaps the next, separated by one month, across the life of the fund. This insight is especially important when establishing expectations based on an investor’s risk tolerance and time-line, as it reveals Continue reading →

Historically Low Volatility

By Charles Boccadoro

“Experts often possess more data than judgment.”

Colin Powell

The S&P 500 closed August yesterday with an annualized standard deviation below 6%. Typically, since about 1940, which marked the end of The Great Depression, annualized standard deviation runs between 13 and 14%. It was the second consecutive month to break the 6% threshold; in fact, only five times has volatility remained this low for consecutive months: 1964, 1993, 1995, 2006 and 2017.

Continue reading →

Inside Smart Beta Conference – New York 2017

By Charles Boccadoro

Matt Hougan of Inside ETFs and Dave Nadig of ETF.com hosted an Inside Smart Beta Conference this past month in New York City. Their career paths overlapped at ETF.com, which promotes itself, arguably so, as the “world’s leading authority on exchange-traded funds.” I find both Matt and Dave articulate thought leaders on ETFs and investing generally. They co-authored CFA’s A Comprehensive Guide to ETFs. Continue reading →

How Bad Can It Get?

By Charles Boccadoro

In last month’s commentary, David challenged readers to review their portfolios and be sure they understand how bad it could get when markets head south. “There’s a break in the rain. Get up on the roof!” he’ll often advise. He shared his own portfolio, which maintains a modest 50/50 stock/bond allocation. He estimated his drawdown to be 30% for perhaps three to five years, using the bear market of 2008 as guide. A look back at US market volatility since 1926 helps provide further insight into the question of just “How Bad Can It Get?”

The results presented below use the monthly database maintained by Amit Goyal, the same database referenced in Timing Method Performance Over Ten Decades, but updated as appropriate from January 1960 through April 2017 with our Lipper Data Feed Service. The three principal indicies modeled are S&P 500 Monthly Reinvested Index, Bloomberg Barclays US Treasury Long Total Return Index, and US 3-Month Treasury Bill Total Return Index. Continue reading →

Observations from Morningstar Conference – Chicago 2017

By Charles Boccadoro

Morningstar held its annual investment conference in its headquartered city of Chicago last week. That’s a couple months earlier than typical, perhaps to give it some distance from September’s ETF conference. Pink and purple tulips lined Michigan Avenue and Millennial Park. April showers abounded. The Intelligentsia coffee bar at 53 West Jackson Blvd each morning never smelled better. Continue reading →