Ride Your Winners, Cut Your Losses
HCM Profit Push is an investment approach that trades individual stocks, striving to target top performers each year by doing more of what is working and less of what is not working. That may sound a bit cryptic, so let us explain.
It starts with knowing the game. Howard Capital Management has been offering professional money management since 1999. We are an experienced money management firm with a proven track record. One of the lessons that experience has taught us is that a good offense or investment approach is only half the game. You must be able to hold on to your gains — that takes a defense. After years of research, we developed a systematic method of investing, based around our proprietary intermediate term indicator, the HCM-BuyLine®, that is designed to protect our clients’ assets during market declines.
At the start of each of two 12-month cycles, which begin January 1 and July 1, we screen stocks for our three Profit Push models — Large Cap, Small- & Mid-Cap and Global — using nine criteria to identify stocks we believe will make up our best players. 20 – 30 stocks will be selected for the Large Cap model; 40 – 50 for the Small- & Mid-Cap model, and 25 – 40 for Global. Each stock will initially have an equal weighting in the portfolio.
Now we monitor the portfolios using proprietary indicators to determine if and when we should exit a position. When a position is sold, the proceeds are evenly reinvested among the remaining positions. This methodology enforces the discipline of riding our winners and cutting the losers. At the end of 12 months, we want to own the very best stocks from the original group.
Sometimes, holding equities isn’t a good idea, no matter how much you may like the individual stocks. The HCM-BuyLine® is our proprietary strategic indicator that tells us when to be in the equity markets and when not to be. If the HCM-BuyLine® dictates a move to the sidelines, Profit Push will liquidate all positions and move to cash, and/or short-term bonds or bond funds. When we return to the market, it will generally be with the same positions held previously, unless that number has become too small. In that case, we will use the original screening process to deepen the portfolio.
The HCM-BuyLine® is a reactive indicator, not a proactive one. It will not catch the first 5 – 10% of a bull or bear move. Ideally, it will avoid most of the downtrends and catch the vast bulk of the uptrends. There may be times when the use of the indicator will result in a loss when we re-enter the market. Other times there may be a modest positive impact. When severe downtrends occur, however, such as in 2000- 2002 and 2007-2008, it has the potential to make a significant difference in portfolio performance.
Naturally, there can be no guarantee that the HCM-BuyLine® indicator or the HCM Profit Push strategy will perform as anticipated. All investment approaches have the potential for loss as well as gain. Please read the disclosure on page 2. What this program provides is a systematic, objective approach to investing in individual securities with both an offense and a defense. We welcome an opportunity to explain their use further and discuss the track record HCM has achieved over both bull and bear markets. Please read the
disclosure.