16 October 2009

The Market in September

September is two weeks gone and it's 5C here in NYC. But let's look at Sept. results today. First I was challenged by Joe Mako to load up a chart with lots of data points. Here are the Sept returns for the 5000+ names in the Ford universe. Really the only thing to pull from the chart is the trend line. There was an inverse relationship between returns (PGN) and VMO (quality). Bad outperformed good as has been the case since spring (though not today so far). A diversified portfolio of low quality names would have outperformed a high quality portfolio by 1000-1200 basis points in September. How diversified? 500 by 500 names on each side. Getting systematic risk right is the ONLY way investors can outperform the market. Anyone doing portable alpha should take note. Does anyone do portable alpha? More charts later.

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