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Attain's Hidden Gems:
November 6, 2006
While a lot of investors tend to follow the crowds, by investing in tech stocks at the top of the bubble in 2000, or rotating out of Dow stocks into Gold & Copper stocks or mutual funds in the middle of this year — that strategy can look pretty bad at times (times like the two examples mentioned above).
So where does one look if they are trying to zig when everyone else is zagging? How do you go about looking for solid investments others have overlooked. Entire libraries have been written about just this, but the answer usually revolves around not going with the next hot thing, and avoiding the crowds to invest in something that has been overlooked.
Attain's specialty is trading systems and managed futures, so we're not going to tell you about a hidden gem investing in Tilapia farms in Africa. But we are going to tell you about 8 different trading systems that have been overlooked by investors so far in 2006. For whatever reason - perhaps system developers spending more time researching and developing their systems rather than marketing them - there are eight systems available which have been performing in real time, but are not to the best of our knowledge, widely followed by investors.
We like to call these types of investments Hidden Gems. Some of these systems are from well respected developers like John Ehlers, Trading Motion, and Trade Maid Systems, while others are from newer developers like Andrew Gibbs.
In compiling our list of "Hidden
Gems", we used the following requirements: First, the system
had to be released at least one year ago,as we didn't want to
just throw brand new, right out of the box hypothetical testing
at you. How the system had performed POST RELEASE was very important.
Second, we wanted to make sure we had some real time trading
experience with these systems, trading them for actual clients
accounts. This requirement did not require that they were still
traded, only that they were at one time. Systems like AG Mechwarrior
were traded on and off by clients over the past year, but haven't
been traded at all in the last few months, despite good performance.
And finally, we required the systems in our Hidden Gems list
to have been profitable over last 12 months. We weren't after
a "Dogs of the Dow" approach, where you trade the
worst performers hoping they'll bounce back in the next year
(although that may be a future newsletter). The Hidden Gems
needed to be working in the current market environment.
Where did we have to go to find these hidden gems? Nowhere. They are all traded right here at Attain. They have just been "hidden" from most people by more popular systems which seem to make it to the front page a lot more. They are "hidden" in that they are generally ignored for whatever reason by the investors, and we know they are "hidden" because less than three clients trades each of them. Less than three out of hundreds of clients makes it sure seem like these are being ignored, when they deserve much more attention.
Without further ado - here are the "Hidden Gems" at Attain, sorted by our favorite risk adjusted ratio - the Sterling Ratio (average annual returns/average annual drawdown):
|System Name||Ytd||Avg. Ann. Ror||Max DD||Sharpe Ratio||Sterling Ratio||Initial Capital (000's)||Style|
|Bounce Index Portfolio||68.50%||44.90%||-23.80%||1.29||2.37||$25||S|
|AG Mechwarrior ES||16.00%||37.60%||-20.80%||1.66||1.64||$20||S|
|Omega3 v1 DAX||7.00%||41.00%||-27.50%||1.31||1.58||$19||D|
|Rho 12/12 DAX||12.90%||23.00%||-27.10%||0.92||0.94||$12||D|
By this point I'm sure you are asking why these strategies have been ignored by our investors. Who could possibly ignore a system that makes money? It is hard to say for sure as we don't quite know why these strategies overlooked ourselves. Perhaps the system was brand new and nobody wanted to stick their toe in the water. Or maybe the strategy just looked to darn risky. Or maybe other brokers and firms aren't telling clients about some of the strategies like Bounce and Seasonal - because they trade only a handful of times per year.
Most likely these systems where just not the flavor of the month and got lost in the shuffle of our comprehensive website. Nonetheless no matter why these particular strategies were ignored in the past, they have performed well over the past year, and should be considered for your portfolio in our opinion.
Please call or email us at firstname.lastname@example.org for more information on any of the above systems:
- John Cummings
IMPORTANT RISK DISCLOSURE
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The US Stock market continues to be very choppy as it trades at near record prices. It is hard for many traders to justify getting long at these record setting levels however it is also tough to sell with excellent economic numbers and third quarter earnings continuing to pour in. Therefore, the stock market is stuck, trading higher one day, and down the next. Overall, the down days outnumbered the positive days last week and the major stock indexes closed into the red. SP futures finished the week down -1.18% while NASDAQ futures were down -1.03%. Smallcaps were also heavy with Russell 2000 futures falling -1.91% and SP Midap futures moving -1.40% lower.
All of the stock selling came in despite another week of lower energy prices. Warm temperatures and good supply numbers continue to put pressure on the market with Crude Oil futures losing -2.65%, Heating Oil was down -3.51%, and RBOB Gas and Natural Gas also lower.
Metals had a HUGE up week led by Platinum futures which rallied +12.01% and Palladium (platinum’s sister metal) rallied +3.75%. Gold and Silver both rallied as well with Gold futures rallying +4.69% and Silver futures moving +4.59% higher. High Grade Copper was the only metal market in the red moving -2.42% lower for the week.
Elsewhere in the commodity markets grains ended the week mixed with Soybeans +2.12% and Corn +2.93% rallying higher while Wheat futures fell -3.15%. In the meats live cattle fell -3.78% and lean hogs were down -0.65% for the week. Bonds and currencies ended the week nearly unchanged across the board.
New to our weekly newsletter, we will be reporting on some of the Managed Futures programs (CTAs) we track at Attain, showing week to week activity and results. CTA investments, while transparent to the actual investor, are more obscure to the prospective investor in that results are reported monthly instead of on a daily basis and that actual trade by trade records are not readily available
Last week was an exciting start to the month as it brought much needed relief to several short option sellers who had been focusing on the “call” side of the market. The most highly touted gain for the week came from Argus Capital which started the new month out +9.8% after ending October down aprox 11% - in a few short days (Wed – Friday) the strategy made back nearly all of the prior month’s losses. World Capital added aprox +5.25% to start the month as several November Calls quickly lost value.
Another program that started the month off well was Phoenix Energy which was ahead about 1% as of Friday. The strategy closed out a short Heating Oil trade and came into the day today holding long Crude
Following tomorrow’s election and heading into next Friday’s option expiration we can expect to see a lot of market activity in both the stock indices and commodities…stay tuned!!
***Day & Swing Trading***
Stocks retreated from the recent highs last week with a sharp decline on Wednesday helping out day traders, only to bounce back on Friday to finish the week nearly unchanged. Hopefully the increased volatility is a sign of good things to come in the last two months of the year.
Top honors for day trading systems last week goes to Impetus eRL (+$520) and Epsilon 12/12 Bund (+$496.96). Systems trading the Dax did not perform optimally, particularly on Wednesday when the Employment Report initially sent stocks higher and then sold off sharply - which spilled over into foreign stocks after most Dax trading systems had entered long on the early strength.
In swing trading, forex systems were able to close out profitable long trades before the sharp reversal following the Employment Report on Wednesday. SC Forex GBPUSD closed out its long trade for total profits of +$2,590. The system entered long two units of British Pound two weeks ago and reached its profit objective on Monday. Delphi EURUSD closed out a long trade as well on Tuesday for a gain of +$1,415 on a trade it entered the week prior.
Elsewhere, Mesa Notes made a nice recovery on its short trade after the Ten Year Note fell just under a basis point on unemployment Wednesday. At one point in this trade, the system was losing roughly $1K in open trade equity so this was a big turnaround for the program. Tzar eRL reversed short and racked up open trade profits of just over $1K by the end of the week. Several other programs continue to hold long including Tzar ES, Tzar NQ, Spartan ES and Seasonal ST ES/eRL and were pleased to see the rally on Friday.
Despite the big declines Friday in bond prices due to the monthly jobs report, long term systems continue to have a bias to the long side in bonds at this time. Some systems with long positions are Andromeda +$1168.75 (open trade) and Vivaldi +$325.00 (open trade) in USZ. Aberration is long TUZ with open trade equity of -$425.00 (open trade).
The major currencies ended the week posting losses on renewed enthusiasm of a growing U.S. economy based on the newly released jobs data. Systems with short positions in SFZ and JYZ include Andromeda making +$1437.50 per contract (open trade) and +$2406.25 per contract (open trade), Pegasus making +$1275.00 per contract (open trade) and +$1581.25 per contract (open trade). Aberration is short SFZ with an open trade loss of -$1025.00 and Axiom LT exited short SFZ making +$162.50 per contract.
The energy sector edged lower again last week. Systems with short Crude oil positions include Pegasus which is making $+16,000.00 per contract (open trade), Trend Simplicity which is making +$14,410.00 (open trade), Aberration +$6305 (open trade) in a mini and Vivaldi +$1105.00 open trade in a mini.
Grains and Oilseeds were a mixed bag last week with corn and soybeans bouncing back to end the week with decent gains. But Wheat continued in the correction mode on ideas that prices have appreciated enough to satisfy crop concerns in Australia until harvest number start coming in. Cotton remained under heavy downtrend pressure from oversupply and lagging export business. Systems with long corn positions include Aberration making +$2675.00 (open trade), Andromeda +$2000.00 (open trade), Axiom LT +$3625.00 (open trade), and Trend Simplicity +$1875.00 (open trade). Systems with short cotton positions are Andromeda +$1250.00 (open trade), Axiom LT +$6310.00 (open trade), Trend Simplicity +$1345.00 (open trade), and Vivaldi +$3400.00 (open trade).
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IMPORTANT RISK DISCLOSURE
Futures based investments are often complex and can carry the risk of substantial losses. They are intended for sophisticated investors and are not suitable for everyone. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns.
Past performance is not necessarily indicative of future results. The performance data for the various Commodity Trading Advisor ("CTA") and Managed Forex programs listed above are compiled from various sources, including Barclay Hedge, Attain Capital Management, LLC's ("Attain") own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
The dollar based performance data for the various trading systems listed above represent the actual profits and losses achieved on a single contract basis in client accounts, and are inclusive of a $50 per round turn commission ($30 per e-mini contracts). Except where noted, the gains/losses are for closed out trades. The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor's participation (whether or not all signals are taken) in the specified system and money management techniques. Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this website.
Please read carefully the CFTC required disclaimer regarding hypothetical results below.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.