Market good, selections bad

I am really having a rough time. As expected the market is continuing to plod upwards but my share picks are struggling to say the least.

UK selection

UK first. I mentioned a few days ago that I was doing some research on VV stock picking in the UK market. Any of you who have attended the recent seminars will have heard about the picking of stocks that have the following characteristics:

Stock Value (as defined by VV) >price

RV>=1.3

RS>=1.25

Price is above 89 day moving average

Buy when VV gives confirmed up call

I subsequently heard that the lectures have added the notion that the picks work best when they are held over longer periods of time, i.e. you grit your teeth and hold them through little pull backs. I back tested and its quite true; as long as the market does not crash.

When I tested the system back in the days of 2007-8 to check to see what would have happened when the market was less benign the results were horrible. 

I also tested to see what would have happened if the shares were bought on confirmed downs instead of confirmed ups to check on the VV timing system. Here are the results of my tests.

Conclusion:

• the search criterion works very well indeed
• it works best over 6 months and 12 months 
• performance is not so good over 24 months
• it works better when shares are bought on VV confirmed up than on VV confirmed down but the difference is not as great as one might expect

HOWEVER

• When the market is falling sharply as it did in 2007-8 the system returns a huge loss.
• Since it is not possible to distinguish between a short term pull back and the beginning of a market crash, using the system to buy and hold carries significant risks from which VV timing systems offer no protection.

With these results in my toolbox I thought I would have a go and bought the top five shares that came up in the search. It's early days, but they have lost me money. -4% including costs which includes half a percent stamp duty. I'm holding on, after all they are long term picks, but I'm not happy. 

I ran a test to see how my regular unisearches would have worked. There were a couple that would have done better - up 3% was the best, but generally they struggled. We are only a week in so I just have to grit my teeth and hope fore better things.

US selection

The US performance was nothing to write home about. With one exception, ZHNE which is showing an 11% return, every one of the picks is a loser. GNK is currently worst showing a 19% fall. Maybe I should have been more careful since it was looking peaky. 

Average fall is 3.5%. Again I have to remind myself we are only one week in and things can change.

Weeks like this are not much fun.