The portfolios are created and managed according to the following:
- A new portfolio is established at the beginning of every quarter (the first one was established January 5th 2018).
- A portfolio is held for one year.
- Stocks included in the portfolios are exactly the same as the stocks qualifying for the Top Stock Bargains Watch Lists (at the time when a new portfolio is established.) These stocks can be found here: The Top Bargains Watch List. Here you can also read more about the selection criteria for the Top Bargains Watch List. You will find more information about MATS (the Market Adjusted Total Score), how the numbers and scores are calculated and how the model works here: “The Market Adjusted Total Score – MATS”.
- Once a stock is included in the portfolio, it remains in the portfolio for the whole period (one year).
- In addition, risk adjustment principles(*) are also included with keep-gain and stop-loss principles (more information below). The purpose is to make a comparison of the performance of the portfolios with and without risk adjustments. This results in a second, “corrected” portfolio which, most likely, after one year not will contain all stocks that were included from the start. The principle behind this is to keep the winners and get rid of the losers. Surplus from the gainers that are “sold” and taken out of the portfolio, is reinvested in the remaining portfolio.
(*) Risk adjustment principles applied in the additional “corrected” portfolios:
- No action required when the stock quote moves in the range between -25% and +50%.
- When the stock price has reached a 50 % gain, the model allows the stock price to move in a wide area on its way upwards. Specifically, this means you keep the stock until it loses 1/4 (25 %) of its gain after it has passed its 50 % target.
- The Stock Bargain Method uses a loss of 25 % as a limit for selling. Losses that exceed 25 % are not considered beneficial to keep.