--------- Systematic portfolio for the Mobius Investment Club Strategy: Growth Started May 2006 Initial Investment 5000 UK Pounds for total portfolio Portfolio size maximum 5 stocks Run 10/07/2006 @ 12:30pm for July 2006 - Mourad Kara --------- 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 1.0 07/05/2006 Policy for share exit version 1.0 07/05/2006 --------- Policy for Share selection v1.0 has 2 phases and 8 steps Phase 1: Compulsory criteria: Scope: UK stock market - all sectors (1). market cap greater than £50 Mil (> 0.01 of 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) (7). Net Gearing within the lowest 3 deciles AND logical operator applied for (6)(7). (8). Additional criteria to select one company (if applicable, i.e. If there is still more than one company): MIN ["(RSI) AND (% off of 52 week low)"]. We pick the company with the lowest value. --------- 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 DigitaLook (and ADVFN for validation). --------- --------- JULY 2006 --------- Current Portfolio: Delta; BetonSport This month's selection: Robert Walters --------- Stock filters applied on the 10/07/2006 ~ 12:30pm Phase 1 provided the following 11 stocks -BetonSport -Delta -Dimension Data -Elementis -Invensys -Land of Leather -Logica CMG -M&C Saatchi -Morgan Crucible -Robert Walters -Sainsbury Note that once we have at least one share successfully passing the mandatory filters, then the systematic portfolio can make a purchase (provided we don't already own the share): The subsequent optional steps select the best among these. The first optional filters are to select top 1/3rd stocks from the selection above by PE and then separately by net Gearing: The outcome was only two stocks Delta and BetonSport which we already own. Relaxing the filter to top half (as opposed to 1/3rd) adds one company "Robert Walters". The selected July 2006 share for the systematic portfolio is "Robert Walters". Robert Walters: Support services Sector; FTSE-SmallCap. Next Yr EPS Growth +27% Next Yr+1 EPS Growth +17% Market Cap (m) £121 Net Gearing 71.85% P/E 22.6 (Sector 29.2) PEG 0.3 Price Sales 0.52 Price 240p http://www.robertwalters.com/ Operating across five continents, with 23 offices in 13 countries, Robert Walters plc is one of the leading global specialist recruitment and human resources outsourcing businesses. The Robert Walters brand stands for innovation, vision and leadership in the global recruitment market. We specialise in permanent and contract recruitment across all industry sectors, including the world's leading investment banks and multinational blue chip commercial clients. Operating at all levels of seniority we manage the careers of the best people in the Accounting, Finance, Banking, Legal, Technology, Sales & Marketing, HR, Call Centre, Support and Administration fields. --------- --------- QUICK SYS PORTFOLIO REVIEW Delta - PP=125p - SP= - PH = - S/L= 19p - 12Months= 10/05/2007 Delta passed mandatory filters (all filters) this month BetonSport - PP=141p- SP= p - PH= - S/L=21p - 12 Months= 14/06/2007 BetonSport passed mandatory filters (all filters) this month No sale this month. PP = Purchase Price; SP= Today's Share Price; PH= Price High since Purchase; S/L= Stop/Loss --------- --------- --------- --------- Stock screener tool Operating the Digital Look PHASE 1: To implement the criteria in phase 1; multiple operations are required: That is because we have two filters that are relative: i.e. to obtain the top 30%, we need to have the number of companies making up the first few filters. In other words, there is no way of entering filters in Digital Look asking for the top 30%, so we need to establish threshold equivalent. Steps 1, 3a, 3b, 5 are all "absolute" filters and can be entered directly into the stock screener. Step 2 and 4 are relative and we need to work out the PSR and EPS growth thresholds. Establish PSR threshold: ** Enter the Steps 1,3a,3b and 5 into stock screener. ** Output results in 278 companies. 1/3rd of 278 stocks is ~ 92 stocks. We sort the table by PSR value and pick the lowest 92 stocks. The highest PSR within the lowest 92 stocks is 1.1. So now, we enter 025% and EPS (n.Y+1)>15% leading to 94 stocks. So now, we combine all filters with 025% and EPS (n.Y+1)>15% Phase 1 provided the following 11 stocks -BetonSport -Delta -Dimension Data -Elementis -Invensys -Land of Leather -Logica CMG -M&C Saatchi -Morgan Crucible -Robert Walters -Sainsbury PHASE 2: The filters for phase 2 are also relative filters (top 1/3rd). A similar exercise to the one above where we try to find the PE threshold (step 6) ; then the Net Gearing threshold (step 7) and then combine them: 0