Well it’s not the most obvious pairing in the world. Nor would I make any claim that it is the greatest pairing in the world. But under the category of “Is this any way to invest?”, the answer is “Well, it’s one way.”
The Test
We will make this as simple as possible:
*If the current month is January, February or December hold Utilities
*If the current month is March or April hold natural gas
*For all other months hold a money-market fund
Not exactly exciting to say the least.
The Funds
*For utilities we will use ticker FSUTX
*For natural gas we will FSNGX
*For money market we will use ticker VMMXX
Figure 1 – “System” Calendar
The Results
Figure 2 displays the growth of $1,000 invested using the rules above (utilities held Dec through Feb, natural gas held March and April, money-market held May through November) versus buying and holding the S&P 500 Index starting in Jan 1993.
Figure 2 – Growth of $1,000 invested using our Utility/Natural Gas strategy
Figure 3 displays some comparative numbers.
Figure 3 – Comparative Results
Summary
So, is this really a viable “system?” That’s not for me to say. The “system” has certain favorable qualities (simple, beat the S&P over time, much less volatile and with lower drawdowns than the overall market) but also certain negatives (out of the market 7 months a year, can get left behind in a strong bull market, 100% focused in one sector 5 months a year).
Still, the results do generate some interesting food for thought. Something to chew on anyway…
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.
