Filtering For ETFs That Outperformed Blended FANMAG Stocks

Summary

  • Relative momentum filtering can sometimes identify overlooked niche securities lost in the enthusiasm for the giant winners.
  • Other than precious metals securities, healthcare/life science and internet related securities tend to come out on top.
  • Short-term relative momentum needs to be cross checked with trend and multi-year total return to find signs of persistence.

In a market populated mostly with mediocre opportunities and led by a small number of high performers, we use extensive filtering to attempt to identify lesser-known or lesser-followed securities that also stand out from the crowd.

Every week we review every ETF, every other security on the New York Stock Exchange and NASDAQ, and every mutual fund through a simple, short-term, two-factor relative performance filter supplemented by some trend and technical data.

The basic filter asks whether the security has price performance superior to Treasury Bills over one month, three months, six months, and 12 months. For those that have done better than essentially cash, we ask have they done better on a price performance basis than our risk asset benchmark over one month, three months, six months, and 12 months.

Normally for equity securities, we use SPY (Standard & Poor's 500) as the risk benchmark, and for debt securities, we use BND (US Aggregate Bonds).

We further ask whether the 200-day moving average now is higher than it was a month ago, whether the one-year linear regression slope of the 200-day moving average is positive or negative, and whether the price is above or below the 200-day moving average (expressed as Z-values, which are simply the number of standard deviations above or below trend line). We also ask if the 50-day moving average is above the 200-day moving average, and whether the price is above or below the 50-day moving average, and also how far the prices from its one-year high and where it is in the range from the one-year high to the one-year low.

Additionally, we measure the percentage size of the maximum drawdown from the highest price anytime during the past 12 months.

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Disclosure: QVM has positions in some of the securities identified in this article as of the publication date. We certify that except as cited herein, this is our work product. We received no ...

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