It Doesn’t Have to be Rocket Science – The Retail Edition

  • SumoMe

I am as guilty as anyone of overanalyzing the markets on a regular basis. Luckily there is a tiny corner of my brain that constantly reminds me that it doesn’t necessarily have to be that way.

This article will illustrate this point by expanding on something I wrote about regarding retailing stocks in this article.

The Retailing Annual System (RAS)

For our test we will use the following:

*Ticker FSRPX (Fidelity Select Retailing Sector fund)

*1-3 Year Treasury Index (Bloomberg Barclays Treasury 1-3 Yr. Index)

*We will hold FSRPX during the months of February March, April, May, November and December

*During all other months we will hold short-term treasuries

Figure 1 displays the growth of $1,000 for the “system” above (blue line) versus buying and holding FSRPX (red line) since April 1986.1Figure 1 – Growth of $1,000 invested using Jay’s RAS (blue) versus buying and holding FSRPX (red); 4/1986 through 12/2017

For the record:

*The average 12-month % gain was +17.2%

*The median 12-month % gain was +14.0%

*The largest 12-month decline was -13.0%

*The largest drawdown was -15.3%

*The System has had 30 Up Calendar Years

*The System has had 2 Down Calendar Years (-3.9% in 1994 and -0.2% in 2008)

Figure 2 displays the calendar years performance year-by-year.

Year RAS % +(-)
1986 33.3
1987 20.6
1988 17.8
1989 23.6
1990 57.0
1991 54.0
1992 11.5
1993 8.2
1994 (3.9)
1995 7.4
1996 31.7
1997 22.7
1998 53.3
1999 6.3
2000 5.6
2001 19.4
2002 3.7
2003 18.7
2004 13.0
2005 10.5
2006 2.8
2007 0.8
2008 (0.2)
2009 45.7
2010 27.1
2011 5.4
2012 11.1
2013 17.0
2014 11.9
2015 6.9
2016 10.3
2017 18.9

Figure 2 – Year-by-Year Results for Jay’s RAS

Summary

Does investing in just one sector for six months out of every calendar year (and holding short-term treasuries the rest of the time) really qualify as a “System”?  Does it really matter?  The numbers are what they are. One investor may consider this a viable approach to investing and another may not.

The point remains….when it comes to investing in the financial markets, it doesn’t necessarily have to be complicated in order to work.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

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