Trade Alert: New Smart Money Trades for October

“How much did you say?” I was somewhat surprised … and flattered.

“A million even,” the man said. He was an attendee at our recent Total Wealth Symposium.

I wondered how many more millions he had allocated to other Banyan Hill trading systems.

“It’s really performing well for me this year. Just make sure you keep the model running, OK?”

The “model” in question was the Smart Money system. The gentleman had been following it since January. By my back-of-the-envelope calculations, he’d made a little over $175,000 from it since then.

No wonder he wanted me to keep the model going.

Have no fear, I assured him — it’s going, and going strong. After all, adding Smart Moneyto The Bauman Letter didn’t mean we didn’t have faith in the system.

Quite the opposite. Smart Money has a lot going for it. It’s one of the few places where you can get guided exposure to non-U.S. exchange-traded funds (ETFs) using the same algorithmic models we use for U.S. equities in my Alpha Stock Alert. And those international funds have proved to be consistent winners.

Let’s have a look at developments in the Smart Money universe this month.

The Big Picture

The Smart Money system continued its winning ways this month, registering a 1.19% gain for the month of September.  Additionally, the Smart Money system is up 17.9% since the beginning of the year versus 14% for the S&P 500, our benchmark.

Nevertheless, the S&P 500 did beat us this month, with an overall gain of 2.01%. That is entirely due to our hedging bet on precious metals, in the form of PowerShares DB Precious Metals (NYSE: DBP).

As you know, markets have been oscillating since early August, when the S&P 500 dropped sharply. At that point, precious metals began a steady rise, gaining more than 7% whilst the S&P dawdled. DBP remained above its 50- and 200-day simple moving averages (SMA) for almost the entire period, despite gains in the S&P 500.

Late last week DBP dropped below its 50-day SMA. Given the reversal, we are exiting our position in DBP and replacing it with the PowerShares DB Energy ETF (NYSE: DBE).

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As you know, the Smart Money system incorporates a rotational strategy, so that we always move out of one of our positions in either U.S. or global ETFs each month. This month we are rotating the iShares MSCI Chile Fund (NYSE: ECH) out of the portfolio and replacing it with the iShares MSCI Thailand Capped ETF (NYSE: THD).

The Thai stock market has been on a bit of a tear this year, especially since mid-August. THD is up almost 17% since January 1, driven principally by robust growth in manufacturing output and a decline in political uncertainty. Over the past year, THD has sharply outperformed the equivalent Indonesia, Philippines and Vietnam ETFs, all markets that are frequently measured against each other and Thailand.

In late August, THD pulled convincingly away from its 50-day SMA, a signal to the Smart Money system that it had moved into a top position among international ETFs.

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Closing Positions

Action to take: Sell your position in PowerShares DB Precious Metals (NYSE: DBP).

Action to take: Sell your position in iShares MSCI Chile Fund (NYSE: ECH).

New Positions

Action to take: Buy the PowerShares DB Energy ETF (NYSE: DBE).

Action to take: Buy the iShares MSCI Thailand Capped ETF (NYSE: THD).

Held Positions

Action to take: Hold the iShares North American Tech ETF (NYSE: IGM).

Action to take: Hold the PowerShares Aerospace & Defense Portfolio (NYSE: PPA).

Action to take: Hold the iShares MSCI All Peru Capped ETF (NYSE: EPU).

Summary

Your Smart Money portfolio should now look like this, with each position at 20% of the total portfolio:

Position Ticker Entry Date Entry Price Price at
Time of Alert
Total Return
iShares North American Tech ETF IGM 5/01/2017 $143.37 $155.61 8.54%
PowerShares Aerospace & Defense ETF PPA 8/01/2017 $48.02 $51.89 8.06%
iShares MSCI All Peru Capped EPU 9/01/2017 $37.44 $39.37 5.15%
PowerShares DB Energy ETF DBE 10/02/2017 $12.69 $12.69
iShares MSCI Thailand Capped ETF THD 10/02/2017 $86.69 $86.69

If you have any questions about these changes or the portfolio as a whole, please don’t hesitate to contact me at baumanletter@banyanhill.com.

Kind regards,

Ted Bauman
Editor, The Bauman Letter