Taken from The Hulbert Financial Digest 04/04
Commentary
Brinker’s letter primarily is intended to help fund investors time the domestic and international stock and bond markets
as well as select individual funds. His approach involves a combination of both technical and fundamental analysis.
Brinker maintains three model portfolios. He also recommends two additional portfolios, one for fixed-income investors
and another that utilizes index funds, neither of which is considered a model portfolio. Even though the HFD calculates
track records for these two portfolios, their performances are not included in what the HFD calculates to be the letter’s average. In addition, his Portfolio III, currently designed as a “Balanced” portfolio containing both equity and fixed-income funds, used to be intended for “telephone switch traders.” The HFD treats the new portfolio as a successor to the old one. Calculated in this manner, Brinker’s portfolio average as of 3/31/04, is ranked in 4th place over the last decade (among the 30 mutual fund letters the HFD tracked over this period). Its rank over the trailing 5-year period is 5th (out of 39).
Though Brinker is a timer, he typically focuses on longer-term trends rather than on short-term gyrations. Over the 17+ years that the HFD has tracked his letter, in fact, only twice has he deviated from being fully invested. The first was after the 1987 Crash, a move that ended up costing his portfolios. His second deviation lasted from January 2000 until March 2003, which was a profitable one. Despite this mixed market-timing record, Brinker’s timer has added value. Consider the gain of a hypothetical portfolio that switched between shares of the
Wilshire 5000 index and cash since the beginning of 1987 according to the marketvs.- cash allocation of Brinker’s “Aggressive Growth” portfolio. This hypothetical portfolio gained 13.6% annualized through 3/31/04, beating the 11.6% annualized the Wilshire gained over this same period.
Brinker’s fund selections on average have lagged the Wilshire. The HFD reports a 12.5% annualized gain for his “Aggressive”
portfolio, which is 1.1 percent age points per year less than what this portfolio would have made if each of its funds had performed as well as the Wilshire during the times they were owned.
For investors who therefore are interested only in his timing, as opposed to his fund selection advice, Brinker provides
a so-called “Active/Passive Portfolio.” It “is designed to provide active management in the areas of long-term market timing while maintaining an indexed approach to the U.S. equity market.” From the beginning of 2002, when the HFD began
monitoring this portfolio, to 3/31/04, this portfolio gained 14.2% annualized, vs. 3.0% annualized for the Wilshire.
Please note: In late 2000, Brinker forecasted a several-month bear market rally and recommended an investment in the NASDAQ 100 Index—a trade that turned out quite unprofitably. However, because Brinker at the time of making this forecast chose not to make this trade part of his model portfolios, his HFD record has not suffered as a result.
Henry |
