Hi Jim, I've been watching FVI which is First Star Value Line Index fund. It did very well in the time it's been available during the "bullish" phase of the market. Now that we've been seeing some bear scat around it's (predictably) not quite as happy.
etfconnect.com
It attempts to own a variety of the #1 and #2 Timeliness ranked stocks out of the Value Line 1700 stocks. There's a bit more turnover than a more traditional index fund as V/L changes the rankings over time which might qualify new stocks and eliminate others.
Because of the way it's structured, it tends to be more of a "momentum" based group of stocks. Their Timeliness ranking is based in that arena. Here's what they say:
The most important factor in determining the Timeliness rank is earnings growth. Companies whose earnings growth over the past 10 years has been greater than their stocks' price appreciation tend to have high scores. In addition, the ranks take into account a stock's recent price performance relative to all approximately 1,700 stocks in the Value Line universe. A company's recent quarterly earnings performance and any recent earnings surprises caused because a company reported results that were significantly better or worse than expected are also factors. They are combined to determine the Timeliness rank.
Just one word of caution. Stocks ranked 1 for Timeliness are often more volatile than the overall market and tend to have smaller capitalizations.
Here's what First Trust's statement on it is:
The First Trust/Value Line & Ibbotson Equity Allocation Fund is designed to provide investors with the potential for capital appreciation. Ibbotson Associates will use its proprietary research to determine the weightings for 6 asset classes. The Funds Adviser will select common stocks for each asset class from Value Lines universe of stocks ranked either #1 or #2 for Timeliness, Safety or its Technical Ranking.
So, it's using Value Line's Safety and Technical rankings, too.
SAFETY:
Value Line ranks each stock from 1 (Highest) to 5 (Lowest). However, unlike Timeliness, the number of stocks in each category from 1 to 5 may vary. The Safety rank is derived from two measurements (weighted equally) found in the lower right hand corner of each page: a Company's Financial Strength and a Stock's Price Stability. Financial Strength is a measure of the company's financial condition, and is reported on a scale of A++ (highest) to C (lowest). The largest companies with the strongest balance sheets get the highest scores. Price Stability is based on a ranking of the standard deviation (a measure of volatility) of weekly percent changes in the price of a company's own stock over the last five years, and is reported on a scale of 100 (highest) to 5 (lowest) in increments of 5. Generally speaking, stocks with Safety ranks of 1 and 2 are most suitable for conservative investors. A stock's Price Growth Persistence and a company's Earnings predictability are also included in the box above, but do not factor into the Safety rank. However, they are useful statistics.
And finally "Technical":
]The Technical rank is primarily a predictor of a stock's short term (three to six months) relative price change. It is based on a proprietary model which examines 10 relative price trends for a particular stock over different periods in the past year. It also takes into account the price volatility of each stock. The Technical ranks also range from 1 (Highest) to 5 (Lowest). At any one time, about 100 stocks are ranked 1; 300 ranked 2; 900 ranked 3; 300 ranked 4; and 100 ranked 5.
I think for those of us who like to fiddle around this might be a nice vehicle. My guess is that it's going to have strong bullish and bearish trends depending upon the market.
So, it looks as though FVI has done a lot of hard work for us and let us just coast along on their coat tails if we want. In ETF format it should be easy enough to trade.
I'm considering adding this to my retirement account (and using AIM to manage it, as usual) as I don't really have any "momentum" plays in that account.
Any thoughts?
Best regards, Tom |
