How It Started // How It’s Going

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That Big Money Thing

by Alex King

You know, because we’re always droning on about it, that our motto here at Cestrian Towers is, Be More Like Big Money and Less Like Chad.  None more so than when it comes to running the model portfolios we provide in our Inner Circle service.  We have four of them now, the most recent created just last month, and the logic is the same in each case.  Try to spot a sector-themed group of stocks that are putting in sideways price action at the lows, with high volumes - in other words a potential pattern of institutional accumulation.  Set the portfolio buys up then; and if proven correct, sit back whilst Big Money calls on Late Money to come bid those names up. Then, when Very Late Money is getting all excited about them, and Big Money is in the process of selling their positions to Very Late Money, exit.

In short, nothing more complicated than the sector rotation method used by Big Money practitioners everywhere - the time-honored way of creating returns out of thin air by getting in ahead of the poors then enticing laggards in to buy your wares!

Big Money can do this through sheer force of capital, though it takes all their self-control to not send prices running up whilst accumulating positions.

Whilst they try to run silently, however, if you learn to speak stock chart, you can often see this game afoot.  So whether you yourself be a Master of the Connecticut Universe, or An Individual Investor Formerly Known As Chad, you can learn to play along with the bigs.

Below is the note we just published in our Inner Circle service.  See if there is anything that interests you there.  If so, we’d like to offer you a special discount to move up from this Substack publication.  You can join our Inner Circle with a 25% discount on the monthly or, indeed, a 25% discount on the annual subscription.  These links will do the trick.

Inner Circle Monthly - 25% Off For As Long As I Remain A Subscriber

Inner Circle Annual - 25% Off For As Long As I Remain A Subscriber

You can read all about the service here by the way.  Just don’t sign up from that page, else you will miss the good discount.

Now for those rotating portfolios.

Cestrian Capital Research, Inc:

Inner Circle Model Portfolio Performance

First published here earlier today.

Here’s how our single-stock baskets are doing as of Friday’s close.

Each of these four model portfolios has five stocks. The portfolio logic has been simple; on the day the portfolio was created, the model assumed all five stocks were purchased in equal proportion on day one, leaving no cash in the portfolio. There has been no rebalancing, no additions of new cash. Any dividends that the stocks have generated have been re-invested, by which we mean the cash produced was used to buy additional shares of the company which paid the dividend. In other words - these models are as simple as could be. They also include no fees, and that’s because we provide them as models for our members to consider investing themselves; we don’t manage client assets so we charge no such fees. Our business is purely investment research - the actual investing is your business.

Each portfolio is benchmarked against the four major US equity indices, being the S&P500, the Nasdaq-100, the Dow Jones 30 and the Russell 2000. We use the total return benchmark which assumes the same dividend re-investment logic that we describe above.

Inner Circle Core Stocks - From Inception (7 February 2023).

Our thesis in February 2023 was that the market had put in a major low in October 2023 and that if we put together a core basket of high quality names spread across growth and value, it could perform well if the market recovered.

Inner Circle High Beta Stocks - From Inception (17 March 2023)

By March 2023 the initial moves to the upside in major market stocks had been made. The high-beta stocks we cover were lagging and we thought the time was ripe to accumulate such names before they were swept up by the bull tide.

Inner Circle Financial Stocks - From Inception (23 June 2023)

This portfolio was set up in the wake of the regional bank failures that commenced in March 2023. We thought that the financial sector had sold off excessively and that there was an opportunity to buy high quality financial names at an attractive entry point. This was intended to be a way to balance out sector exposure; as it happens it has, to date, also outperformed each of the indices. If the Nasdaq continues its current trajectory it will likely eclipse this basket before too long!

Inner Circle Defense Stocks - From Inception (24 January 2024)

The impetus for this portfolio setup was that many of the defense sector stocks we cover were sat in what appeared to be an institutional accumulation pattern, much as were tech names in H2 2022/Q1 2023, and energy names in H2 2021, in each case prior to their launching into a move up. Sectoral stocks putting in sideways price action at the lows does not mean they will certainly rise thereafter, but it is a common pattern to witness, a hallmark of institutional sector rotation. Kudos to Abhi Singh for spotting this pattern in the defense names.

Now, defense isn’t a sector that typically sets accounts alight; if this is profitable over the medium term we’ll be happy. Think of it as a risk-management method rather than a swing for the fences idea. It’s off to a good start but if this beats the Nasdaq long term than we probably have other worries! Most likely we will close this portfolio out if and when we see institutional distribution in this sector.

Cestrian Capital Research, Inc - 10 Feb 2024.