Spotlight: Varan

Varan is a regular contributor at Seeking Alpha, who among other things, presents and backtests various rotation strategies. Here are some of the most interesting strategies to me that he has devised or presented over the last few years.

I have not programmed Excel sheets or TOS codes to follow these strategies. If you find any of these intriguing, feel free to do so and share!

What I generally look for in a strategy is a good return, low drawdown and long enough backtest, which includes various market conditions. Of the following strategies, I'm most intrigued by the first one, because it has a backtest history of 20 years (and being a quarterly strategy, more data-points than the tri-annual strategies), a nice return and a very low drawdown. Though to be noted with any of the strategies, is that the intra-period drawdown can be higher; the drawdown indicated only takes into account the moment of rotation.

Fidelity Select Funds Quarterly Sector Rotation (Varan)

FBNDX FSUTX FSVLX FSAIX FSHOX FSENX FCYIX FSESX FSHCX FWRLX FBIOX FSAVX FSLBX FGMNX FSCSX FSRPX FIGRX FDLSX FFGCX FSDCX FSMEX FSLEX FSCGX FBMPX FSAGX FBSOX FSCPX FSPHX FSELX FIUIX FIDSX FSCHX FPHAX FSRBX FSPTX FFXSX FSTCX FDCPX FNARX FSNGX FSPCX FDFAX FSDAX FSDPX TLT (VUSTX)

- at the close of the first full week of each quarter, invest in top1 asset of best relative performance preceding 8 weeks, ending on the close of the previous week, for 13 weeks

- if the top ranked fund performed worse than TLT (bonds), invest in TLT for 13 instead

- 1991-2011 CAGR +25%, Max DD -11% (note that as with other strategies, intra-quarter drawdown can be more than 11%)

- note that these are mutual funds rather than ETFs, apart from TLT (VUSTX was used in the backtest prior to 2003 instead of TLT)

Utility Stocks Annual Rotation (Varan)

AWR AWK WTR ARTNA CTWS MSEX SJW YORW UGI WR SRE WEC ED SO BIP D NEE NGG OKE DUK

- annual rotation, first trading day of every year, select 10 assets of best annual performance prior year, if any performed worse than VBMFX (bonds), replace the assets with VBMFX

- 1991-2013 CAGR +15.3%, Max DD -12%  

Closed End Funds Tri-Annual Rotation (Varan)

GAB PDI PHK ETO GPM AWF BKT MMT CEF BIF MIN TLT IEF

- every four months (first trading day of January, May and September), invest in top2 assets of best relative performance over preceding 3 months

- 1991-2013 CAGR +23.8%, Max DD -12.7%

PIMCO Tri-Annual Rotation (Varan)

PIXDX, PIPDX, PETDX, PCRDX, PTTDX, PFSDX and PSSDX

- every four months (first trading day of January, May and September), invest in top2 assets of best relative performance over preceding 3 months

- 2004-2013 CAGR +25%, Max DD -16%

- note that these are mutual funds rather than ETFs

MLP Tri-Annual Rotation (Varan)

WPZ, SXL, RNF, PAA, NS, MWE, KMP, EXLP, FGP, DPM, BPL, BBEP, and BWP

- every four months (first trading day of January, May and September), invest in top2 assets of best relative performance over preceding 3 months

- if either two top assets performed worse than TLT (bonds), replace one or both with TLT

- 2004-2013 CAGR +32%, Max DD -20%