How it works
Core.
Contrarian.
Compass.
One portfolio. Three distinct strategies, each with its own edge. One captures long-term trends, one profits from panic, and one decides how much risk to take.
The long-term engine
Core
Every stock swings between calm spells and rough patches. The Core strategy looks for strong, leading stocks that have just come through a rough patch and are settling into a calm, steady advance.
It holds each stock for as long as that advance persists, and sells when volatility returns, usually as the stock starts to roll over. Core scans the market every day, so the portfolio is constantly refreshed as old positions exit and new ones are added.
Risk is strictly managed. Each new position is limited to 1.5% of the portfolio, and with up to 50 holdings spread across sectors, it stays broadly diversified.
The opportunist
Contrarian
When an earnings miss or a bad headline sets off a wave of fear, even great companies can be sold relentlessly, day after day, driving the price far below anything the news justifies. The Contrarian strategy looks for these moments of capitulation, when forced and emotional selling has run its course.
It steps in gradually to manage risk. Each purchase is 3.3% of the portfolio, and if the selling continues it adds more, up to three purchases (10%) in any one stock. It sells as soon as the price snaps back, usually within days.
Most of the time it waits in cash. It is busiest in market panics, exactly when Core is cutting back.
The risk manager
Compass
The Compass strategy assesses the entire market every day, reading breadth, volatility, sentiment and trend, and forms a directional view.
Most days its job is to protect Core and Contrarian, using Nasdaq-100 index futures to hedge out their market risk so that returns come from stock selection alone. When it has high conviction of a move in either direction, it takes the entire portfolio long or short.
It sizes its positions according to market conditions, cutting exposure when volatility runs high. That keeps losses in check in the roughest markets, while still letting it profit from both its long and its short calls.
Portfolio management
How the three work together
Core and Contrarian decide which stocks the portfolio owns. Compass decides how much market risk it carries. Capital is allocated in a fixed order, and every limit is checked each day before the open.
First call on capital
Contrarian
When Contrarian spots a capitulation opportunity, it is prioritized. If there isn't enough cash, the Core strategy sells its oldest positions to make room. As cash frees up again, Core buys back any of those stocks that are still in a calm, steady advance.
Remaining capital
Core
Core invests the cash that is left, 1.5% per stock. Together, Core and Contrarian never hold more than 100% of the portfolio, so stocks are never bought on margin.
Net exposure
Compass
Compass measures the market exposure of the stock positions and uses Nasdaq-100 futures to set the portfolio's net exposure: close to zero on most days, long or short when it has high conviction.
Strategy & portfolio limits
| Core | Contrarian | Compass | Portfolio | |
|---|---|---|---|---|
| Position size | 1.5% of the portfolio | 3.3% per purchase, up to three purchases (10%) | −200% to +100% | – |
| Max positions | 50 | 20 | 1 | 71 |
| Max allocation | 75% | 100% | −200% to +100% | ±100% net |
| Net exposure | Long only | Long only | Long/short | Long/short |
| Gross exposure | 75% | Max 100% | Max 200% | Max 300% |
| Leverage | None | None | Futures, on margin | None net: stocks paid in cash, net exposure never above 100% |
Why three strategies
Different edges for different markets
Each strategy captures a separate, independent edge, so each makes its money at different times and in different ways. Combined, they allow the portfolio to earn strong risk-adjusted returns whether markets are rising or falling.
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Execution
While the market is closed, the models go to work
The portfolio follows the same routine every day. All decisions are made after the close, and the updated portfolio, with every trade for the next day, is published before the market opens.
Step 1
The close
After the US market closes, the models run on the day's final data. Each strategy reviews its positions and looks for entry and exit signals.
Step 2
The portfolio
Each strategy's trades are combined into one portfolio, in the fixed order: Contrarian first, then Core, then Compass sets the net exposure with futures. Every position and exposure limit is checked before anything is final.
Step 3
Before the open
The portfolio for the next trading day, with every buy and sell to be made at the open, is published on this site and emailed to subscribers. Every day is kept in the archive and timestamped in a public Git repository, an auditable record of every position that can never be quietly changed.
Step 4
The open
All trades are made at the next morning's open. Nothing is changed during the day, and there are no stop-losses. Risk is controlled through diversification and the position limits within each strategy.