Since last month’s update (9/27/17), we closed eight more trades in Wall Street Front Runner.

Six “core” trades from the S&P 600:

Axcelis Technologies Inc. (NASD: ACLS) … +4.8%

NMI Holdings Inc. (NASD: NMIH) … +1.5%

Pacific Premier Bancorp Inc. (NASD: PPBI) …     +0.0%

Photronics Inc. (NASD: PLAB) … -3.7%

Par Pacific Holdings Inc. (NYSE: PARR) … -5.3%

KEMET Corp. (NYSE: KEM) … +3.2%

And two “bonus” trades from the S&P 500 and S&P 400:

Norwegian Cruise Line Holdings Ltd. (NASD: NCLH) … +1.6%

Six Flags Entertainment Corp. (NYSE: SIX) … +1.6%

In our core strategy, we recorded three winning trades, two losing trades and one flat trade. Our net return was +0.6%.

Our bonus strategy went two-for-two. Our net return was +3.2%.

As you’re probably aware, equity markets have been on fire. Virtually all the major domestic stock indexes (Dow Jones Industrial Average, Dow Jones Transportation Average, S&P 500, NYSE Composite, S&P MidCap 400, Russell 2000, etc.) have closed at all-time highs recently.

The S&P 500 has generated positive returns for eight consecutive quarters — and 11 months in a row. So far, the S&P 500 is up +2% in October.

While we may have lost a little ground this month, our long-term results are holding up just fine…

Running Tally …

Here’s how our numbers stack up since this service’s inception:

Total trades … 148

Average time in trade … 2.9 days

Win rate … 53%

“Core” strategy cumulative return … +103.1%

“Bonus” strategy cumulative return … -5.7%

Through 18 months of Wall Street Front Runner, we show a +103.1% gain (core) and -5.7% loss (bonus). For comparison purposes, the S&P Composite 1500 Index (where we’re pulling all our trades from) has returned +22.9% … the S&P 500 Index has returned +22.6% … and the S&P SmallCap 600 Index (best match for core trades) has returned +28.6% since our 4/27/16 start date.

Wall Street Front Runner’s core-only return is roughly 3.5X to 4.5X higher than any of those three indexes’ returns since inception.

A good portion of our outperformance has come from this year, specifically …

No ‘Window Dressing’ Needed …

According to Investopedia:

“Window-dressing” is a strategy used by mutual fund and other portfolio managers near the year or quarter end to improve the appearance of a fund’s performance before presenting it to clients or shareholders.”

Generally, active mutual fund managers sell stocks with big losses and purchase high-flying stocks near the end of the year. These new securities are then reported as part of a fund’s holdings in year-end reports for everyone to see.

Clients and shareholders are delighted to see their fund owns some of the market’s top-performing stocks. However, they usually don’t realize that … while their fund manager appears smart … their fund hasn’t benefited because the high-fliers were only recently added to the portfolio.

This is pretty much an annual process for many actively managed equity funds …

The S&P Dow Jones Indices SPIVA U.S. Scorecard reports 82% of large-cap managers, 87% of mid-cap managers and 94% of small-cap managers lagged their respective benchmarks over the last five years. And the numbers don’t look any better when you consider a longer time horizon. Over the last 15 years, 93% of large-cap managers, 94% of mid-cap managers and 94% small-cap managers underperformed their corresponding benchmarks.

In Wall Street Front Runner, we don’t need any window-dressing. We’re handily outperforming just about every index you could imagine.

For example, leading investment research firm Morningstar tracks a broad list of 145 global indexes on a free section of its website. The three best-performing indexes this year (through 10/24/17) are the MSCI AC Far East ex-Japan Index (+34.1%), Hang Seng Hong Kong Composite Index (+31.2%) and Morningstar U.S. Technology Index (+30.7%).

Our core strategy, which is index-driven and index-like, would be the No. 1 index on this list by a country mile. It’s up +78.2% in 2017 (also, through 10/24/17).

And the outperformance doesn’t end there …

Other ‘Bonus’ Picks are Demolishing the Markets, Too …

First, there are my “Sweet 16” micro-cap stock picks from The MicroCap Conference in Philadelphia, which I attended a year ago. The performance of this handpicked group has been outstanding:

  • 11 of 16 picks (69% win-rate) have generated positive returns.
  • Biggest individual winners: +130% (22nd Century Group, XXII), +94% (Grande West Transportation Group, BUS.V), +90% (OurPet’s, OPCO), +74% (ProMIS Neurosciences, PMN.TO) and +69% (Cancer Genetics, CGIX).
  • Average return of +23.3% for all 16 picks. That beats large caps (SPY, +20%), small caps (IWM, +16.6%) and microcaps (IWC, +17.5%) over that period.

And second, there’s the index rebalance trade idea I gave you back in June. In order to play MSCI’s decision to include mainland China equities (China A-Shares) into Global Standard Indexes in 2018, I recommended the KraneShares Bosera MSCI China A ETF (KBA).

BlackRock, the world’s largest asset manager, projected that more than $400 billion of inflows could go to Chinese stocks once the full index overhaul is complete (estimated anywhere from one to five years).

KBA has shellacked U.S. and foreign markets these past few months …

Source: YCHARTS

I hope you have been able to profit from all these extra selections.

That covers it for today’s update.

Best,
Grant Wasylik