The Sector Rotation Alpha strategy identifies high probability, bullish directional trades on stocks that reside in 60 major industry sectors. The strategy’s foundation is based on the fact that institutional money continuously rotates from sector to sector. Our algorithms continuously monitor and rank the 60 industry sectors, and then “follows the money” by identifying the strongest stocks within the strongest sectors.

As an example, after Donald Trump was elected president in November 2016 investors started to rotate cash into aerospace and defense stocks & ETFs on the presumption that Mr. Trump was going to increase spending on the military.  As cash flowed into this sector it drove up the prices of many of the stocks in the sector, and especially the stocks with the strongest fundamentals.

Approximately four percent of the portfolio is allocated to each position.

Summary of Benefits

Dynamic allocation of trades that “follow the money” as large institutions rotate cash across 60 industry sectors

• Diversified across approximately 27 stocks when fully allocated to reduce single stock and single sector risk
• Follows well defined exit rules to close positions when triggered, which increases the probability of preserving capital and a high percentage of the gains during periods of high volatility.

Sophisticated analysis comprising technical, fundamental and factor-based quantitative analysis

• Identify stocks that have moved into high probability technical setups, including:
  • Accumulation and distribution
  • Relative strength
  • Momentum
  • Candlesticks
  • Support & Resistance
• Identify stocks that have strong fundamentals, typically within the top 20 percentile
  • Sales growth
  • Earnings growth
  • Pre-tax profit
  • Return on equity
• Perform factor-based quantitative screen to identify stocks that:
  • Have high probability of making a move up or down
  • Have high probability that the magnitude of the move will be significant

To view the fact sheet for this strategy please go here.
To view the performance for this strategy please go here.