Alpha Power Investing Newsletter

October 3, 2016

The Power of Power Periods


When you boil it down, there are essentially two ways to invest: one involves analyzing the current "state of things" and deciding - based on that analysis - how to proceed going forward. The other approach involves analyzing historical data and identifying patterns or trends that repeat, then formulating a strategy to take advantage of these patterns. Regardless, the reality is that there is no "one best investment strategy", and it can make sense to incorporate more than one strategy into your overall investment plan.
 
All of Alpha's strategies fall into the second category. Rather than trying to predict the future based on current events, we have formulated strategies that rely on time-tested trends that have persisted - in some cases - for many decades. We then commit to executing those strategies faithfully regardless of the latest "news of the day."
 
For the Alpha Mid-Cap Power Index strategy, the Alpha Bonds Strategy and the Alpha Seasonal Strategy, one of the patterns that we rely on is something we refer to as "Power Periods". These Power Periods encompass a total of 20 trading days within the fourth quarter of each year.
 
During these 20 trading days the:
  • Alpha Mid-Cap Power Index Strategy holds the MidCap 400 Index using leverage of 1.5-to-1
  • Alpha Bonds Strategy holds the Russell 2000 Small Cap Index using leverage of 1.5-to-1
  • Alpha Seasonal Strategy holds the Russell 2000 Small Cap Index using leverage of 1.5-to-1
Based on the long-term consistency of stock market performance during these Power Periods we are comfortable using a certain degree of leverage in an effort to boost overall returns. To illustrate why, let's take a closer look at the Alpha "Power Periods" and at stock market performance during these periods. Because of its longer track record, we will use the Russell 2000 Index to highlight performance.
 
When Are the Alpha Power Periods?
 
Alpha's research has identified three separate Power Periods within the fourth quarter of each year. When these three periods are combined they represent a total of 20 trading days a year. The three periods and the trading days involved appear in Figure 1.
 
 
Now that we know when the Power Periods occur, let's look at the actual performance of the Russell 2000 Index during these periods. Figure 2 displays six columns of data. They represent as follows:
 
Year: The calendar year for the periods being examined.
 
Power Period One: Displays the percentage gain or loss for the Russell 2000 Index during the trading days listed under Power Period 1 in Figure 1.
 
Power Period Two: Displays the percentage gain or loss for the Russell 2000 Index during the trading days listed under Power Period 2 in Figure 1.
 
Power Period Three: Displays the percentage gain or loss for the Russell 2000 Index during the trading days listed under Power Period 3 in Figure 1.
 
Total Return: Displays the cumulative percentage gain or loss from all 3 Power Periods for that particular calendar year.
 
Total Return with 1.5 Beta: Displays the cumulative percentage gain for all 3 Power Periods for that particular calendar year using leverage of 1.5-to-1.
 
 
To highlight the long-term consistency of stock market performance during the Alpha Power Periods, Figure 3 lists some particulars for each Alpha Power Period as well as the cumulative performance.
 
 
Summary
 
Alpha Power Periods have been one of the most consistent performing trading methods we know of for a number of years. That being said, from year-to-year and from one individual Power Period to another there can be wide variations in stock market returns. And as always, the future is unknowable and the risk of loss accompanies any stock market related investment. But historically, seasonal trends that have persisted over decades often afford investors a consistent edge - provided they are willing to take advantage of them.
 
To learn more about our strategies, go to the Strategies and Performance page of our website at www.alphaim.net to read the brochures and fact sheets.
 

Jay Kaeppel
Vice President and Director of Research
Alpha Investment Management, Inc.
877-229-9400
www.alphaim.net
info@alphaim.net

Disclosures: Past performance is not a guarantee of future performance. Indexes are not investment vehicles. The returns illustrated above are not returns of any Alpha strategy and do not include management fees or the cost of funds, trading, or other expenses. To see the impact of these costs, please refer to the net of fees and expenses performance data for specific Alpha strategies. The illustrations above are designed to quantify the effect of a certain time period on a representative market index.

Alpha Investment Management, Inc. is an SEC registered investment advisor. Such registration does not imply a certain skill or training and no inference to the contrary should be made. The information and opinions expressed in this document are for informational purposes only. Any recommendation or opinion made in this document may not be suitable for all investors. The information contained herein does not constitute and should not be construed as investment advice, an offering of investment advisory services, or an offer to sell or a solicitation to buy any security.


© 2016 Alpha Investment Management, Inc.

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