TOP 12 STOCK FROM NASDAQ 100 - 2017
TOP 12 STOCK FROM NASDAQ 100 - 2016
TOP 12 STOCKS FROM NASDAQ 100 - HEDGED - 2016
Scroll to the right to see the percentage weighting of each stock. Also, see notes below on selection method.
TOP 12 STOCK FROM NASDAQ 100 - 2015
Version 1
With the current list of stocks in NASDAQ 100, investing in the top 12 stocks on the basis of prior year returns has produced very good returns - 31% CAGR since 2003, despite the 40% loss in 2008, and 30% in 2014.
See comments section of Seeking Alpha article.
Backtested performance is as follows;
2003 75.88%
2004 42.47%
2005 64.99%
2006 16.65%
2007 62.11%
2008 -40.24%
2009 40.03%
2010 49.27%
2011 1.47%
2012 38.91%
2013 41.52%
2014 30.97%
CAGR 30.99%
Version 2 - Hedged
One way to mitigate the 40% drawdown in version 1 is this:
1. Add TLT to the 12 top ranked stocks, and compute the weights using risk parity on the basis of daily returns from the previous year.
2. Allocate to TLT the weight of TLT computed from 1.
3. Allocate rest of the portfolio equally weighted to the twelve stocks.
In principle one can directly use the weights from 1, but the implementation is much easier with the modification.
This simplification, as expected, costs quite a bit, but also reduces the drawdown:
2003 35.58%
2004 29.40%
2005 37.03%
2006 12.13%
2007 41.12%
2008 -2.75%
2009 6.73%
2010 29.58%
2011 16.77%
2012 21.08%
2013 22.07%
2014 29.08%
CAGR 22.5%
This hedging requires that in 2015, 47% of the portfolio be invested in TLT, and the rest equally in the 12 stocks mentioned above.
| 
