It’s amazing how two or three big winners can transform your portfolio. It can turn an average year into a good year. A good year into an exceptional year. This truism was never more evident than when studying the portfolio results of our Midas Touch Challenge contest winners.
Our $2,500 Grand Prize Winner was announced during Friday’s Strategy of the Week presentation. Lester G. delivered a stunning 284% annualized return during the two-year test period. Yet Lester G. achieved this amazing result with a win rate of only 46.58. How did he do that?
A few huge winners made all the difference: Ovascience (OVAS) up 216.58% from 9/8/14 to 9/15/15 Agios Pharm (AGIO) up 176.90% from 9/23/14 to 9/15/15 Acadia Pharma (ACAD) up 327.80% from 1/3/13 to 8/28/13 SinoCoking (SCOK) up 213.90% from 8/14/14 to 9/16/14 Aegerion Pharm (AEGR) up 200.32% from 1/3/13 to 9/25/13. He used the Midas Touch WatchList to find high RT, high momentum stocks, regardless of fundamentals.
In fact, these were not the most fundamentally sound stocks in the Midas Touch WatchList at the time of purchase. Far from it. Lester G.’s search didn’t necessarily eliminate fundamentally strong stocks, but it did allow some of the weakest. Perhaps his YSG ASC sort did bring fundamentally weaker stocks to the top because the ‘S’ or DIVIDEND SAFETY indicator in YSG is highly correlated to RS (Relative Safety). However, when you study the graphs of Lester’s big winners with RS, RV and EPS on the sub-graph, you see that in almost every case EPS and RS were starting to improve at the time of purchase. And of course, price had broken out and was in a strong uptrend. Without that, they would not make the Midas Touch list.
Tomorrow’s Webinar: We will analyze Lester G.’s winning Midas Touch search and trading system during our regular weekly SOTW Q&A tomorrow, Monday, Mar 9 at 12:30 p.m. EST. We’ll also study what caused Friday’s sell-off and analyze current market conditions. To register for the live event or receive access to the recording, please click on the following link: http://news.vectorvest.com/CA_SOTW_QA_030915_registration.html
So what about our 2nd and 3rd place winners? Did they have any big winners? Well, Ken R. bought Alpha Pro Tech (APT) for a 182% gain in just six trading days from 10/7/14 to 10/15/14. Ed S. had a 319% gain with ACAD, but he also had Albany Molecular (AMRI), a 295% gain 1/3/13 to 7/3/14 and China Sunergy (CSUN), a 293% gain in about 12 weeks from 7/8/13 to 10/23/13.
Todd Shaffer, our Director of Research at VectorVest, pointed out in Friday’s SOTW that all three of our contest winners appeared to do a fair bit of ‘curve fitting’ and ‘over-optimization’ in order to achieve the best contest results. They may or may not be practical trading systems for real life. True enough. But the contest was valuable for everyone who participated. We learned to use our backtesting tools including UniSearch and the Backtester, and we learned different ways to select high momentum stocks from the Midas Touch WatchList and hold them for big winners.
DOES MIDAS TOUCH WORK IN CANADA? Strategies that work well in the US don’t always work in Canada. In my limited testing, that seems to be the case with our US Midas Touch Contest Winners. So while several Canadian subscribers dug in and tested their ideas on the US market, many of you have been wondering, Is there a Midas Touch Search and Trading System that performs well in Canada?
The answer is an emphatic, Yes! Presented here today are two high-scoring strategies created by Canadian subscribers Tom Mitchell and Leslie Jedrychowski who decided on their own to do some testing using the CA Midas Touch WatchList during the contest period of Jan 2, 2013 to Jan 15, 2015. The systems they created are quite different, and that’s part of the attraction. Regardless of the overall return, one or the other may better suit your trading style and temperament. If it doesn’t, perhaps you can modify it so that it will!
ATTACHED BELOW: With the permission of Tom and Leslie I have attached a PDF document that sets out the SEARCHES and the BACKTESTING RULES for both trading plans. (Click on ‘Pop Out’ icon in the upper right hand corner for larger view)
Tom used a 5-stock portfolio and achieved a 45% ARR with a high win rate, 80% compared to Leslie 65% using a 10-stock portfolio. Tom used VST<1.2, a’ la Jake’s Patent Winners, as his stop while Leslie used a wide stop (150% Gain/50% Loss) similar to two of our US Challenge winners. That helped Leslie achieve a much higher overall score with an ARR of 158% compared to Tom’s 45% and a lower drawdown, 7.89 to Tom’s 17.11. Tom’s biggest winners: ACQ – 180% and LNR – 162%. Leslie’s biggest winners: BioSyent (RX) – 201% and Tamarack Valley (TVE) – 151%. I also ran Tom’s backtest using a 10 stock portfolio. His score improved to 108.33 from 81.25 thanks mainly to a better max drawdown, 10.15 compared to 17.11, and a slightly higher win rate of 85.71 to 80. The ARR was lower but still a highly respectable 38%.
I don’t think anyone would be unhappy with either of those two CA results. However, the real benefit of the Midas Touch Challenge is that it brought out a lot of creativity and learning by doing.
ARE YOU UP TO THE MIDAS TOUCH CA BLOG CHALLENGE? I think there’s still room for improvement for a trading system that takes full advantage of these high momentum Midas Touch stocks in Canada. So, we’re announcing the very unofficial Canada Investment BLOG Midas Touch Challenge. We want to see if you can beat either of the two scores achieved by Tom and Leslie, buying and selling our Canadian stocks.
WINNERS: 1st Prize: Everyone who beats Tom or Leslie’s score will be entered into a draw for a $50 VectorVest gift certificate.
2nd Prize: The trading system deemed by me as the ‘most likely to be used’ will also win a $50 VectorVest gift certificate. I may do a poll in an upcoming webinar or I may arbitrarily choose the winner. Either way, you can expect it to be a totally subjective and arbitrary decision!
Special Prize: Any USER GROUP that submits an entry from results achieved using ‘group studies’ at a regular meeting or special meeting will also receive a special prize. Actually, it will be a very small prize. Really, no prize at all. Just the fun of doing and learning together.
NOTE: Our only contest criteria: You must use the Midas Touch WatchList as a filter in your Search. In your backtest you must use a $100,000 portfolio and at least maintaining 5 stocks, investing the average value of your portfolio. That’s it. Everything else is wide open.
You must post your results as a Comment on our Blog in order to be eligible for prizes. Just post the following information from your backtest: 1. %Winners 2. ARR 3. CROR 4. Max DD. I’ll calculate your Score using VectorVest’s unique Trading System Score. If you want to check your score before posting, you can still get the Trading System Score spreadsheet by clicking on the link in the 1/23/15 Views (US Strategy Section).
NOTE: To encourage the best results, you can submit multiple entries as long as you post them on the BLOG as soon as you have them. It’s a learning exercise. Don’t save them up until the last day! Entry Deadline: Friday, April 17, 2015. Prize winners will be asked to send me their Search and Backtest criteria so that I can verify their results for accuracy and official posting on our Blog. The contest is offered for fun, participation and learning. All decisions of our judge (ME) will be final. Thank you!
Here are the results and equity curves of our two Canadian Midas Touch contest submissions:
View the PDF