Sean’s Journal

[smurfki0808]

February – back to school for the kids, juggling extra curricular activities, and back to finding a new rhythm of life for 2024. In spite of those things, I did have some wins for the month. I’ve progressed in my setups for different brokers for different strategies, and am now functional for both AUS and US markets.

The other big progress was to evaluate my ASX MR#1 strategy after completing 100 round trades. Bottom line, while the backtest returns in the total market look attractive, the reality of trading it is a bit different. I’m sure someone told me that! The exposure to volatile negative price movements in the smaller part of the market associated with capital raises and result updates, killed my W/L ratio. Out of 100 trades, just 5 with an average of 40% loss each, created a ~25% drawdown. 

So, to reduce that risk, I re-evaluated trading the bigger end of the universe, the ASX300, where daily turnover is substantially greater. I increased the dial on minimum daily turnover, and have found results in live trade, thus far, encouraging. Trading over the past month with this approach, W/L = 1.4, PF = 2.8, and Win% = 69%. I’ll persist to get a bigger sample size.

Otherwise, the green is a breath of fresh air and marks the fourth positive month in a row.

ASX WTT:      +2.2%
ASX MOMO:  +10.7%
ASX XTO RTN:  +2.7%
ASX EMO: +5.6%
ASX MR#1: -0.2%
Managed Growth Fund: +1.4%

Total for month +2.6%, Total drawdown continues to shrink -22.6%. 

[smurfki0808]

Sean Murphy post=14599 userid=5450 wrote:

ASX XTO RTN:  +2.7%

 

Ooops, forgot to update my ASX XTO RTN: +13.2%. Driven in the main by NXT and REH.

[smurfki0808]

March – A short month, but a positive month. Pleasing to see the smaller section of the market moving in a positive direction, and my strategies having positions stick. Pleasingly, a position in my ASX WTT strategy, MRM.au, signaled they intend to accept a takeover bid, which sent the SP up to the takeover price c. $2.60, which for me is c 220% return. My question now is do I wait for the gyrations of the takeover to proceed which is some months away, or simply bank the profit, end the position and look for the next one. Any thought or guidance gratefully accepted.

For all of March, I continued executing signals on my ASX MR#1 strategy, which I re-evaluated back in February to trade in the ASX300 universe. The good news is execution is far more seamless in this universe. Entries get filled, SP is more resilient, and my exits do not influence the opening auction, which makes for more stable execution. The stats for March;
[list]
[*]W/L Ratio = 1.78
[*]P Factor = 12.4
[*]Win %  = 87%
[/list]
Interestingly, the manager of our growth fund, continues to have 30% of the portfolio value hedged in BBOZ, which they’ve held since Sept 2023. Their ‘logic’ is they ‘believe’ a correction will eventuate when a recession gets triggered, and that will be the time to increase positions in the market. Before going through the Mentor Program, I might have believed that ‘logic’. Now, it sounds to me like just another ‘opinion’, formed without backtesting. What is the trigger to add / remove the hedge? What if recession never comes? Time to move on.

ASX WTT:      +10.2%
ASX MOMO:  +0.4%
ASX XTO RTN:  +2.1%
ASX EMO: +14.2%
ASX MR#1: +5.6%
Managed Growth Fund: -0.6%

Total for month +2.2%, Total drawdown continues to shrink -21.3%. 

[GlenPeake]

Nice month Sean… Well done!

As for the takeover on MRM.au, in the past Nick has suggested waiting a few weeks to see if a higher bid comes along if/when holding a position that is going through the takeover process….not sure if the ‘type’ of takeover i.e. Binding or Non-Binding has an effect here or not when deciding to ‘bank’ the position etc…… But if a higher bid is in the wings, then it generally comes out sooner rather then later etc…

FWIW:
I’m still holding AZS.au which is under a Scheme of Arrangement for $3.70, with a fallback to a takeover of $3.65…. They’ve had 1 increase in the bid from $3.50 to $3.70, since the initial $3.50 was made……

My reason for holding… if the Scheme/Takeover is delayed by a few weeks, it will likely mean I’ll be holding for 12 months and therefore benefit from the 12 month tax discount…. i.e. early MAY. etc….

So my reason for holding versus the down side risk of a failed bid is validated imo, as the risk of a failed bid is pretty unlikely at this stage…. and the remote/off chance that another bidder steps up at the 11th hour….(unlikely, but who knows).

[Nick Radge]

Hi Sean,
Congrats on the month’s results.

I’m holding MRM in a few portfolios, and as Glen alluded to, our protocol is to wait 2-weeks from the offer. If no counteroffer comes, we exit and put the cash to work elsewhere. 

A 30% allocation to BBOZ is crazy and I’m amazed. That’s going to be very costly. If one were nervous about an equity decline then an allocation to either AAA.au or GOLD.au. Both are defensive and negatively correlated to equity prices. Here’s Gold vs ASX-200 during the GFC

 

[smurfki0808]

Thanks Glen, yes the takeover is a binding scheme implementation deed, so a concrete offer that the board unanimously recommends shareholders accept.

So, together with your advice, and Nick’s protocol, wait another week or so and liquidate to redeploy. The holding is >12 months old, so that’s a win too.

Thanks

[smurfki0808]

Nick,
Further to the Growth Fund story, for your info, and or disbelief, I copied a section out of the quarterly update that provides the rationale, and a comparison chart of the XJO v BBOZ since last December. Sobering.

Cheers

Sean

[Nick Radge]

Which fund is it?

[smurfki0808]

Lincoln Wholesale Australian Growth ETL0043AU

[Nick Radge]

[smurfki0808]

Thanks for the reality check Nick. A 7% CAGR for a >40% drawdown, if I saw those stats in a backtest, I would not consider trading it. I just filled out my redemption form.

Time to diversify. All-Weather ASX is the first step.

Much appreciated.

[Nick Radge]

The combined ASX and US All-Weather is hard to beat from a risk/adjusted and volatility basis. And you already have access. 

[smurfki0808]

Absolutely, thanks for your counsel Nick.

[smurfki0808]

This month, a highlight was securing a first right tail from my WTT strategy with an exit from MRM.au taking a 227% profit, equivalent to a 569% return on risk. Slowly but steadily, MRM.au plodded along since December 2022. This must be the magic I’ve heard of. May many follow in its path.

The main step forward this month was taking the move to redeem our managed fund, after Nick showed me the reality of its performance, to free up capital to allocate to more strategies. One step at a time. However, in commencing the Mentor program, one of my objectives was to move out of the managed fund, and using the skills developed in the course, to begin managing that capital. So that is a big outcome for me and a reflection of the confidence the program has instilled.

With recent movements in the markets, strategies are in ‘protect’ and exiting positions as stops get hit. Proportions in cash: ASX MOMO and XTO RTN 100%, WTT 33%, and EMO 20%.

April 2024

ASX WTT:      -2.6%
ASX MOMO:  -6.8%
ASX XTO RTN:  -6.2%
ASX EMO: -3.8%
ASX MR#1: -3.3%
Managed Growth Fund: +1.4%

Total for month -0.6%, Total drawdown bobs along -21.8%. 

[smurfki0808]

Mark May 2024 as a pivotal month in my trading journey. We liquidated our managed fund, and we are moving to self managed strategies. Is this daunting, of course, what could possible go wrong? However, following in the footsteps and standing on the shoulders of giants, gives me a calm sense of confidence. Certainly, the mentor program and training has revealed the types of approaches that suit my skill sets, tolerance, and time.  Much of this month was spent organizing, to be in a position to implement new strategies at the start of June, both in AUS and US markets.

Another month, and another right tail in my WTT strategy with CU6.au showing a 247% return.

May 2024

ASX WTT:                 +5.75%
ASX MOMO:             +0.57%
ASX XTO RTN:         +0%
ASX EMO:                +2.51%
ASX MR#1:              +1.4%
ASX Growth:            -1.04%
Managed Growth Fund: -0.5%

Total for month  +0.34%, Total drawdown slowly shrinks -18.85%. 

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