Thursday, November 29, 2012

If you are reading this, you probably didn't win Powerball last night, better luck next time.  Lottery tickets are low risk and high reward but their low probability of returns doesn't qualify them as investments.  Quant’s top rankers have a high probability of outperforming the S&P 500 and Vanguard sees some of its funds in those top ranks today getting more than 9 Green Reward Diamonds and less than 4 Red Risk Diamonds.  But like earlier this week, we need to ask ourselves if it is the risk side or reward side driving the better rankings.  We may be seeing further evidence of Quant getting more cautious rather than getting enthusiastic about the US market; or the additional US funds in the top ranks could suggest the correction in our markets has run its course.  That question will be answered with hindsight but let’s take a look at those Vanguard Funds scoring well today.  The Vanguard Growth Fund (VUG) has had a good couple of weeks driving its Behavioral Score higher but its Fundamental Score lower, both register in the respectable mid 70s today giving that fund its 2nd place ranking.  If you like to buy at lower valuations, you may prefer the Vanguard Value Fund (VTV) in 7th place today.  That fund is not up as much as its growth counterpart in recent weeks so its Behavioral Score is a middling 63.4 but its Fundamental Score is a high 85.  If you don’t want to decide between growth and income, consider today’s 8th place Vanguard Total Stock Market Fund (VTI).  It refers to the total US stock market and is notable for its 3,267 constituents.  An improving chart has boosted its Behavioral Score to 72.8 while its Fundamental Score has maintained the mid 70s level.  Not making the top 10 but still scoring well is the Vanguard Information Technology Sector Fund (VGT) in 12th place today.  A good couple of weeks has benefited its Behavioral Score but from such a deep hole that it is still in the low 60s, the flip side of its correction is a very good 83.4 Fundamental Score.   One more to consider is the Vanguard S&P Mid-Cap 400 Fund (IVOO) in 16th place today.  Its long term chart looks better than many but it is struggling with a short term downtrend that is keeping its Behavioral Score in the mid 60s.  Trading close to its all time high hasn't hurt the Fundamental Score at 82.3 but a short 2 year life limits the context on that.  As mentioned, all 5 funds have a Red Diamond Risk Rating below 4 which has driven the average risk rating for today’s top 10 down to a low 4.14 which is a message to heed.  The US market has been whipped around by politics recently and Santa seems to like the happy talk, but it remains to be seen if Washington's girls and boys are ready to share their toys.  So make your list and click on Quant to check it twice, you will avoid the naughty and identify the nice.

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