--------- 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 12/06/2007 @12:30 for June 2007 - Mourad Kara mourad@mobiusclub.co.uk --------- JUNE 2007 --------- QUICK SYSTEMATIC PORTFOLIO REVIEW Nord Anglia Education 12 months = 10/02/2008 Lavendon Group 12 months = 10/03/2008 Chime Comms 12 months = 10/04/2008 Delta 12 months = 10/06/2008 Comment on existing stocks in this month's systematic run: - Nord Anglia Education marginally failed step 2 (PSR), hence phase 1 scored 26.9/44 - Lavendon Group only passed step 4, failed phase 1 (PSR ~2.11) - scored 26.5/44 - Chime Comms marginally failed Phase 1: It failed on the forecast EPS test (step 4) but passed on Step 2,6,7. scored 26.8/44 - Delta passed all filters - phase 1 & 2, and has max score 38.2/44 - max score this month 38.2/44 (Delta) - Sold Logica CMG (triggered S/L exit) Sold LogicaCMG @18% loss 12 Months = 10/01/2008 Exit: S/L 15% off peak. Sold Robert Walters @53% profit 12 Months = 10/07/2007 Exit: 50% (not in policy) Sold Delta @8% profit 12 Months = 10/05/2007 Exit: S/L 15% off peak. Sold LandofLeather @15%profit 12 Months = 10/08/2007 Exit: S/L 15% off peak. Sold Hyder Consulting @31%profit 12 Months = 10/09/2007 Exit: S/L 15% off peak. Sold BetonSPort @100% loss 12 Months = 10/06/2007 Exit: LSE termination (liquidation). We have one vacancy in the portfolio --------- PORTFOLIO SUMMARY Current Portfolio: Nord Anglia Ed, Lavendon Group, Chime Comms, Delta The portfolio has one vacancy The stock for selection this month is Senior Sector : Industrial Engineering Index: FTSE-SmallCap --------- 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 MS 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): 177 Phase 1 pass: 19 shares (sorted by phase 1, step 6, and then step 7) Delta Senior Home Retail Group Ashley (Laura) Holding Business Post Game Group Morrison (WM) MyTravel Group Sainsbury (J) Styles & Wood Ricardo Group Debenhams Hampson Industries John Wood Group Babcock International 4imprint Group BBA Aviation Connaught Dimension Data Comment on stock screening share output this month: One share passed all filters (Delta). Only one share passed phase 1 and step 6 (Senior) with 27/44. --------- --------- 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. --------- 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 compulsory 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) --------- ---------