Author: mungofitch

Subject: Re: OT bond funds

Date: 6/11/2022

Recommendations: 10

One other that I have tried to build a value yardstick for: QQQE tracks the Nasdaq 100 equal weight index. Elsewhere you have mentioned successfully investing in IHI - US Medical Devices ETF. If I recall correctly, you said investing in the triumvirate of BRK, QQQE and IHI, would have beaten the broader markets by a considerable margin. What do you feel about the current valuation of IHI? At a forward PE of over 25, it still seems overvalued after a fall of 21% YTD. But then it always trades at high PE multiples. I apologize if this is off topic for the MI board. Actually I said nice things about investing in the stocks, not the ETF. Most ETFs are cap weighted = bad. Two reasons: too concentrated to do well (cap weight is bad), and in this case heavily concentrated in more diversified firms that aren`t as purely medical devices/supplies. See post 278840 What I tested and recommended was a classic MI screen (so not off topic!) Value Line set Industry either MEDICINV "Medical Supplies Invasive" or MEDICNON "Medical Supplies Non Invasive" Then pick a final sort. Two suggestions were highest 5 year sales growth rate, or highest cash-to-market-cap ratio. Elsewhere in the thread it was mentioned that having a Timeliness rating (any value) is useful, eliminating those in the middle of M&A etc. And, optionally for more aggressive/higher returns, limit it to the ones not paying dividends. (the dividend payers tend to bigger, stodgier, lower growth) So, one specific recommendation was: Remember that this is a VL screen, a slightly higher return 15-stock version could go like this * those two industries, average 59 stocks * ensure the stock has a timeliness rating (not too new, no huge M&A lately). This chops off 3-4 stocks on average. * no dividend. this is the high flyer version! Down to 32 stocks. * highest 15 by cash to market cap ratio Since the final sort is not that critical, I lean towards "hold till drop" to cut down on trading. So, for example 15 HTD 25. As is usual, the screen underperformed the S&P badly in its first year after the post, by 24% (not annualized) in the stretch Jul-Nov last year. Though it started outperforming a gain last September. It made only 18% (not annualized) in the first 1.25 years after the post versus 25% for the S&P. But I`ve been tracking screens using this industry for some years. 2011 or earlier. This screen, 11 years to March (mostly in sample) would have returned 25.5%/year after friction versus 14.1% for SPY. In backtest, anyway. But, to your original question, what do I think about the current valuation levels? I think it`s an industry that is a perennial outperformer, on average, but some useful amount. (much less than you get in backtests, but a "real" amount) As such, I wouldn`t put my fortune in it, but I can see a good case for having a section of one`s portfolio in it. It will presumably go down when the market goes down, but it will tend to do better than average over time. Unfortunately I don`t have a good rule-of-thumb valuation yardstick for this set, so I can`t really say whether it`s an auspicious good time or not. One could speculate that a particularly good time is after a stretch of underperformance, like last December??? But if you want to have a look yourself at valuations, these are the current top 30 picks, in order: SDC ADPT NVRO QDEL GKOS NVST TNDM ICUI NVCR IART MASI DXCM AVNS NUVA SILK GMED OMCL HOLX HAE LIVN ISRG BIO ALGN IRTC PODD ABMD CTLT PEN INSP VIVO I don`t place a lot of weight on it, but FWIW, Value Line`s "Projected 3-5 year annual total return" averages 22.2%/yr for the top 10 of those. One of the joys of the screen is its extremely low turnover. Jim