Summary
- Current market conditions show extreme growth stock valuations, record-high cash at Berkshire Hathaway, and sector rotations, making timing and model selection critical.
- Many financial approaches offer strong systematic ways to beat the markets, but awareness of sector and market conditions can further enhance your returns.
- I leverage ten proprietary portfolio models—momentum, value, forensic, and growth—that have consistently outperformed the S&P 500 in live forward testing.
- Combining market, sector, and MDA signals enables optimal portfolio construction, capturing both short-term breakouts and stable, high-dividend returns.
- My MDA Breakout Model targets stocks with 10%+ gains in under a week, while long-term value portfolios like Piotroski-Graham have not posted a negative year since 2018.
Introduction
As “bandwagon” investors join any party, they create their own truth — for a while. ~ Warren Buffett
Timing matters, and it matters greatly. I have spent the last 35 years trading, researching, and constructing algorithms to identify and leverage the value across fundamental, technical, and behavioral finance models. Of the ten portfolio models designed for optimal portfolio mixes for members to beat the market at Value & Momentum Breakouts, eight come from enhancing well-tested anomaly research in published financial journals. All of the models continue to outperform the S&P 500 in live forward testing here on Seeking Alpha, and again this year.
Rotations and Bubbles
Weird things can happen without bubbles, but bubbles cannot happen without weird things.” ~ Owen Lamont, Acadian Asset Management
As I discussed in my recent podcast with Rena Sherbill,
This article will share some of the models from published financial literature that I have found to consistently outperform in good and bad seasons. I am a strong advocate for leveraging the strengths of different fields of financial analysis from fundamental, to technical, to a wide variety of behavioral variables. These approaches each can deliver successful model portfolios as documented through our live trading on Seeking Alpha the last 9 years.
The thing to consider is that we rarely ever see market leaders from the prior year be market leaders for the coming year. ~ JD Henning, January Podcast
Somewhere over the past decades of trading and researching the markets, I discarded the notion of being a pure buy-and-hold investor. People may do well in buy-and-hold approaches, but they invariably have to ride through some major downturns to arrive with good results in the end. Back in the days when I relied on well-known investment firms for advice, I often received more coaching about my patience than any valuable insight about market behavior. Like many of you, my cynicism and curiosity about the financial markets led me to test, experiment, and run studies across thousands of different trading approaches, algorithms, and models. Here’s a 10-minute view of some excellent ways to beat the market across a wide variety of top performing models available live in our Seeking Alpha Investment Group.
The Source of Bubble Talk
Let’s start with a consideration of the market values and where the “bubble talk” is coming from. According to the Buffett Indicator the markets are at the highest valuation levels in at least 75 years. This may be the main reason that Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) has been increasing cash positions for 12 consecutive quarters to the highest levels of cash in the company’s history.
Related to this we are seeing the highest skew into S&P 500 growth stocks that we have seen in many years. The Magnificent 7 stocks lead this segment of growth with high valuations and extremely strong price gains this year. (GOOGL) is up +67% YTD and (NVDA) up over +30% YTD greatly outpacing the overall S&P 500 index +17.1% YTD even while contributing to the index gains.
