--------- Systematic portfolio for the Mobius Investment Club Monthly report Strategy: Growth Started May 2006 Initial Investment 5000 UK Pounds Portfolio size maximum 5 stocks (initial investment of £1k/stock and £1.5k subsequently) Run 11/01/2007 @ 13:50 for January 2007 - Mourad Kara mourad@mobiusclub.co.uk --------- JANUARY 2007 --------- QUICK SYSTEMATIC PORTFOLIO REVIEW Delta - PP=125p - SP=157p - PH =161p S/L= 19p BetonSport - PP=***p - SP= ** p - PH=***p - S/L=21p Robert Walters - PP=232p - SP=355p PH=355p SP=35p Land of Leather - PP=248p - SP=325p PH=355p S/L=38p Hyder Consulting PP=332p - SP=501p PH=501p S/L=51p PP = Purchase Price; SP= Today's Share Price; PH= Price High since Purchase; S/L= Stop/Loss Delta 12 Months = 10/05/2007 BetonSport 12 Months = 14/06/2007 Land of Leather 12 Months = 10/08/2007 Hyder Consulting 12 Months = 15/09/2007 Comment on existing stocks in this month's systematic run: - Only Robert Walters passed Phase 1 filters - Delta made the initial filter from the stock screener and score of 32 but has not passed phase 1 (failed on step4) - Land of Leather made the initial filter from the stock screener and scored 24 but has not passed phase 1 (failed on step4) Sold Robert Walters @53% profit 12 Months = 10/07/2007 We have one vacancy in the portfolio --------- PORTFOLIO SUMMARY Current Portfolio: Delta; BetonSport; Land of Leather, Hyder Consulting. The portfolio has one vacancy (no stock has hit the exit criteria). The stock for selection this month is LogicaCMG LogicaCMG FTSE-250 Software & Computer Services --------- STOCK SCREENING Using Stock screener tool from Digital Look. From September 2006, we have refined and improved our use of the DigitalLook Stock screener by transferring the bulk of the data in an Excel Spreadsheet for further manipulation. The filters in our stock screening tool applies steps (1), (3a), (3b) and (5). Stock screening tools we use do not cater for decile filtering, so we download the output from the stock screening tool into an MS Excel spreadsheet template for further manipulation of all the other steps and phases. Stock screener output (number of shares): 173 Phase 1 pass: 13 shares (sorted by phase 1, step 6, and then step 7) LogicaCMG MyTravel Group 'A' Ord Robert Walters Vitec Group Laura Ashley Invensys Dimension Data Elementis Hunting John Wood Group Keller Group Lookers Prudential Comment on stock screening share output this month: - No share passed phase 1 and phase 2 filters - LogicaCMG passed phase 1 and step 7 (and scored of 30.8/44). --------- --------- A Systematic portfolio also commonly called a mechanical portfolio (but also known as programmatic or automated) relies on a specific set of criteria to select shares from a set of markets and sectors. The criteria used (also called filters) should be clear, explicit and repeatable. --------- Policy for share selection version 1.1 09/11/2006 Policy for share exit version 1.0 07/05/2006 --------- Policy for Share selection v1.1 has 2 phases and 8 steps Phase 1: Compulsory criteria: Scope: UK stock market - all sectors [FTSE-allShare] (1). market cap greater than £50 Mil (> 0.01 of FTSE allshare marketcap) (2). PSR (Price to Sales Ratio) within the lowest 3 deciles (1/3rd) (3a). Forecast 1st year normalised EPS > 0 (3b). Forecast 2nd year normalised EPS >0 (4). Forecast EPS growth over 2 years within the highest 3 deciles (top 30%) (5). PEG between 0 and 1.5 AND logical operator applied for (1)..(5) Phase 2: Optional criteria (if applicable) for final selection (6). PE within the lowest 3 deciles (1/3rd) - can be relaxed to 4 or 5th decile until we hit a stock (7). Net Gearing within the lowest 3 deciles - - can be relaxed to 4 or 5th decile until we hit a stock AND logical operator applied for (6)(7) if needed (8). Each share selected from the initial stock screener is assigned a score based on a weighted average using the following seven parameters and associated weights: EPS (trailing): 10 -- EPS (forecast): 7 -- MktCap: 2 NetGearing: 4 -- P/E: 6 -- PEG: 7 -- PSR: 8 - The maximum score is 44 and the statistical decile structure is used along with the weights of each parameter to work out the score. The score is used as an additional decision point, ensuring that the final selection is in the top decile. Note for this month only (compared to November 2006) Policy share selection update from version 1.0 to version 1.1 of the portfolio. - Step 8 has been removed from the phase 2 criteria - Replaced by a scoring scheme defined above. Step 8 has not been used in the filtering scheme and the scoring scheme is more appropriate by capturing an aggregate single value (score) for the share. --------- Policy for Share exit - A trailing S/L of 15% of purchase price converted in pence. - An investment will be sold after 12 months (unless SP passed the target price and has not dropped by trailing S/L yet). - Target price is 150% of the purchase price. --------- Tools used: Stock screener We use the stock screener from Digital Look (and ADVFN for validation). --------- About the Systematic (Mechanical) portfolio -- Proposed through Mourad Kara's document in April 2006 and presented at the May 2006 monthly meeting. -- Voted by the Mobius Club to go ahead as proposed in May 2006. -- For further details and/or contacts, email mourad@mobiusclub.co.uk --------- Acknowledgements to -- Rolling Stocks Investment club (UK) and in particular Dave Gaskell for his help in understanding mechanical portfolios. -- "What Works in Wall Street, A Guide to the Best-Performing Investment Strategies of All Time", James P O'Shaughnessy, McGraw-Hill, 3rd edition. --------- PROCESS: To complete the systematic portfolio monthly report, you need: - share prices of stock in current portfolio - run current stock screener, capture number of shares (from output) - transfer shares into MS Excel template and execution - Output all shares that passed phase 1 (that is all the compulsary steps) - Short comments on the existing shares performing in this month's filtering output - Short Comments on the new top share that is selected as part of the systematic portfolio (what filters it passed etc..) - New share price (if going to be purchased), note SP, sectors, markets (and if you can the values of the key parameters) --------- ---------