It has been almost two months since my last update so apologies for that. I have been very busy with other things, so just as well the MB strategy doesn't require much investment in time!
There were two drop-outs in December, with Creston & Terrace Hill Group meeting the sell rules. These were replaced by Sweett and Renew. The latter is already up by over 20 per cent in less than two months. Sweett was up over 15 per cent at one point but dropped right back. In January Micro Focus International was replaced by VP, which hasn't done much as yet.
Overall the portfolio continues to increase in value at a blistering pace, up almost 37 per cent since May 2013. This is an annualised rate of over 50 per cent.
One of the things I would like to explore further is the extent to which this kind of out-performance could be down to chance, or whether this strategy will always tend to out-perform. I suspect it is latter, but what level of out-performance would be "par"?
The general area of statistics dealing with such questions in known as Monte Carlo simulations. These do not seem to be written about that much within the blogosphere or popular literature. However they seems to me to be of fundamental importance when evaluating the effectiveness of different investing strategies. It really grates when I read about someone's portfolio being up x per cent over the year, when in fact, the benchmark index is up by a similar amount. I would be more impressed with an approach that delivered zero returns against a sharp drop in the index. Context is everything.
This is something I might try to write more about further in a future post.