--------- 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 (initial investment of £1k/stock) Run 15/09/2006 @ 13:05pm for September 2006 - Mourad Kara mourad@mobiusclub.co.uk --------- 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 [FTSE-allShare] (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). --------- --------- SEPTEMBER 2006 --------- Current Portfolio: Delta; BetonSport; Robert Walters; Land of Leather. This month's selection: "Hyder Consulting" --------- Stock filters applied on the 15/09/2006 ~ 13:05pm Phase 1 provided 13 stocks (see details below in the execution of the stock screener tool). Babcock International Dimension Data Elementis Fenner Hyder Consulting Invensys John Wood Group Laura Ashley Lookers Morgan Crucible Prudential Robert Walters Vitec Group Hyder Consulting : Support Services Sector; FTSE-SmallCap. Next Yr EPS Growth +19% Next Yr+1 EPS Growth +26% Market Cap (m) £110m Net Gearing 81.9% P/E 17.3 (Sector 25.7 by average - distorted with stocks in Sector with very low/high PEs) PEG 0.1 Price Sales 0.64 Price 333.75p 3 Brokers: 3SB --------- --------- --------- --------- Stock screener tool Operating the Digital Look >From this month, 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: see details below PHASE 1: To implement the criteria in phase 1; multiple operations are required: That is because we have two filters that are relative (steps 2 and 4): e.g. 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. Steps1,3a,3b,5 are entered in the stock screener and lead to 165 companies. We copy and download the large table to an Excel spreadsheet for further maniuplation where we can obtain step 2 and 4. For those interested, we make extensive use of the "precentrank()" function and a number of logical operations. Phase 1 provided the following13 stocks Babcock International Dimension Data Elementis Fenner Hyder Consulting Invensys John Wood Group Laura Ashley Lookers Morgan Crucible Prudential Robert Walters Vitec Group PHASE 2: None of these shares passed ste 6, or step 7 (and hence none past phase 2). Relaxing the filters to half (instead of top 30%) still led to no company passing the whole phase 2, only one company past step 6: Hyder Consulting. --------- --------- --------- QUICK SYS PORTFOLIO REVIEW Delta - PP=125p - SP=129.5p - PH =132p - S/L= 19p - 12Months= 10/05/2007 BetonSport - PP=** - SP= ** p - PH=** - S/L=21p - 12 Months= 14/06/2007 Robert Walters - PP= - SP=236.75 p -PH=265p - SP=35p - 12 Months= 10/07/2007 Land of Leather - PP=248p - SP=241p PH=248p S/L=38p - 12 Months = 10/08/2007 No sale this month. We have five stocks (full portfolio). Only Robert Walters passed all Phase 1 filters this month. PP = Purchase Price; SP= Today's Share Price; PH= Price High since Purchase; S/L= Stop/Loss --------- --------- 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 and assistance 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. --------- ---------