The Investment Strategies | Our take on trends, momentum, relative-strength ‘winners’ … and the probabilities for the persistence of each.

The math-based methods we employ within each of our investment models acknowledge a few eternal truths about markets and asset classes – ones every ‘quant’ is well-familiar with, and the truths from which all else descends:

  • Markets tend to trend; 
  • Trends tend to persist; and
  • Within each uptrend, there are asset-classes which will – owing to their outperformance, relative to other eligible/potential portfolio constituents – earn their way into our portfolios.

In examining the underpinning math for each of these market trends or asset-class trends, a clear-cut decision is able to be made – whether that means altering our overall exposure to the market, or evacuating out of one asset class and investing in another.  The mathematical probabilities derived from the data we collect, over meaningful timeframes tailored to each market-exposure indicator or asset’s relative-strength measurement, simply tell us which scenario is more ‘probable’ to unfold in the current circumstance vs. another … and dutifully going with the more-probable scenario over and over, has made our strategies more right than wrong, over the long haul.

Our strategies are sophisticated, but not fragile.  As we’ve all seen and heard about in the press over decades, and even experienced personally at times, certain methods collapse unless a specific set of market circumstances converge in a certain way, at certain times. We’re keenly aware of this fragility than can plague a sincere effort to innovate, to enhance … efforts which can sometimes end up greviously ‘breaking’ a perfectly-good existing method – and we’ve striven to stand apart from that crowd.  We’ll always be mindful of that.

The beauty of these strategies, too – as we’ve been told many times by those we serve – is that, first, they’re simple-enough to grasp intellectually and in turn, portray in a very conversational way to your clients; yet also, the strategies are sophisticated-enough to not only bob and weave like a champ during virutally all market conditions … but to make, we feel, even your ‘geekiest’ clients, swoon, and be left feeling impressed and comforted.

Think ‘Dynamically’…

Take a closer look into our managed solutions by scheduling a one-on-one walk-through with us, or call us at (747) 220-6700.

Bill Sherman

Bill Sherman

President, W.E. Sherman and Company, LLC

BIO

Low-Cost ETF Strategies

Our arsenal of low-cost, high-volume ETFs populate our investment models, giving our clients and their investors the full complement of all the most-meaningful, most-important asset classes needed as options in a total-solution managed portfolio.

U.S. Stylebox ETFs Include:

  • Large Cap Value
  • Large Cap Blend
  • Large Cap Growth
  • Dow 30 and NASDAQ 100 as stand-alone Large Cap options
  • Mid Cap Value
  • Mid Cap Blend
  • Mid Cap Growth
  • Small Cap Value
  • Small Cap Blend
  • Small Cap Growth

U.S. Sector ETFs Include:

  • Consumer Cyclical/Discretionary
  • Consumer Non-Cyclical/Staples
  • Energy
  • Financial
  • Healthcare
  • Industrial
  • Materials
  • Real Estate
  • Technology
  • Telecom
  • Utlities

International Equity ETFs Include:

  • Developed International Equity
  • Emerging International Equity
  • Dozens of top single-country ETFs

More ETFs Include:

  • 18 U.S. and Int’l Bond Sectors
  • Gold and Energy, Real Estate, and all manner of commodities worldwide

The trademarked ‘The Blend is Your Friend’ concept.

Strategies that blend two or more single models – given that single models reallocate on different timeframes, hold different types of assets and deploy them utilizing different sets of probabilities – often create smoother equity curves and lower drawdowns, with each piece a flywheel and a complement to another when acting as ‘one.’  CMS is pleased to offer numerous blends of models, in addition to any of the free-standing model strategies.

Why we use CAGR vs. average annual returns.

You may have noticed that we use the Compounded Annual Growth Rate, or ‘CAGR’, for our returns data.  Unfortunately, we feel that the industry-standard Average Annual Return does not accurately portray how a strategy has truly performed – and absent that more-transparent measurement, the viability of any strategy becomes that much harder to gauge.

Take a year where the market was down 50%, then the following year the market was up 50%:  The average return is 0%, of course, by taking -50+50 and dividing by two, to equal 0%.  If you were to use CAGR instead, you would find the portfolio is actually down more like 13.4% per year.  This proves the point that although the investor may see an ‘average’ rate of return advertised at the outset, the account statements from real investors would have told a story a bit too removed from that figure.

Are you a current or former subscriber to The Sherman Sheet?

CMS has been working with Bill Sherman, founder of The Sherman Sheet, for a decade, embracing his philosophies and mastering the Sherman-driven strategies.  In that time, and in all the many ‘seasons’ of the market, we’ve not only optimized and custom-tailored the application of these investment tactics, but honed our own portfolio-management methods, too.  We’d love to introduce you to the output of that focused effort: Our Sherman Sheet-based, third-party management investment solutions for your practice.

When CMS takes on the heavy lifting of managing your portfolios, you can give greater personal attention to each of your clients, and to growing your business.

The Sherman Sheet's exclusive 'Market Condition' market-exposure indicator.

This Market Condition meter tallies the number of our market-exposure indicators – short-term, medium-term, and long-term – that are in a ‘positive’ status at any given time.  Having this data allows us to maximize the probabilies for success in deciding when to deploy new equities longs, when to rein them in, and – for some models – when to short the market.

View our all models at the listing directly below!

Harmony (Conservative, Moderate, Aggressive, Aggressive+) Model

Harmony uses other models, one per Market Condition.  ‘Market Condition’ is determined by the number of timeframe indicators (Short-term, intermediate-term, Longer-term) that are positive, where 0 = “Negative”, 1 & 2 = “Neutral”, and 3 = “Positive”

Client Risk Profile: All Profiles: Conservative to Aggressive

Scheduled Activity Frequency:  Activity Follows the models that are selected for use, plus changes in indicators

Unscheduled Activity Frequency:  Whenever the market condition changes state (e.g., from “Positive” to “Neutral”)

In the Market:  Dependent upon the Models selected for each of the Market Conditions

Out of the Market:  Dependent upon the Models selected for each of the Market Conditions

STAR Min/Max Model

This Model combines relative-strength rankings, current Market trends, and predetermined minimum and maximum Equities exposure.  It provides a very effective way to deal with typical “investor risk profile” considerations, and is a great choice for 401k and other retirement accounts.  Acting only on a quarterly intervals, it fits easily into restricted 401k and VA situations.

Client Risk Profile: All Profiles: Conservative to Aggressive

Scheduled Activity Frequency:
Quarterly Reallocations

Unscheduled Activity Frequency:  None.

In the Market:  Equity exposure is determined by the “Min” and “Max” setting for the specific Min/Max Model selected.  Balance allocated to Fixed Inc.

Out of the Market:  (same as “In the Market”)

Bull/Bear Model

Emphasis is on the longer-term Bull and Bear cycles in the U.S.  Moves completely in and out of the market, in contrast to the Min/Max models, which allow for Minimum and Maximum exposure.

Client Risk Profile: All Profiles: Conservative to Aggressive

Scheduled Activity Frequency:  Quarterly Reallocations

Unscheduled Activity Frequency:  Change in long-term trend, determined by Bull-Bear indicator.  Typical trends last several years.

In the Market:  During Bull Markets per Bull-Bear Indicator

Out of the Market:  During Bear Markets per Bull-Bear Indicator

Buy/Replace Model

Continuously invested through both Bull and Bear Markets.  Use for that portion of portfolios intended to be constantly invested.  Seeks to achieve out-performance from portfolio selection.  Dominantly U.S. focused.

Client Risk Profile: All Profiles: Conservative to Aggressive

Scheduled Activity Frequency:  Quarterly Reallocations

Unscheduled Activity Frequency:  None.  Continuously Invested.

In the Market:  Continuously Invested

Out of the Market:  Never

Bull/Calendar Model

Uses the Bull/Bear Model during Bull Markets and the Calendar Effects Model during Bear Markets.  The goal is to be fully invested in equities during Bull Markets, and only exposed to the relatively few days with the highest probability of profit during Bear Markets.

Client Risk Profile: All Profiles: Conservative to Aggressive

Scheduled Activity Frequency:  Quarterly reallocations during Bull Markets.  Eleven trades per year during Bears.

Unscheduled Activity Frequency:  Change in long-term trend, determined by Bull-Bear Indicator.  Typical trends last several years.

In the Market:  During Bull Markets, 100%. During Bear Markets, approx. 28%

Out of the Market:  During Bull Markets never.  During Bear Markets, approx. 72%

Calendar Effects Model

Conservative in total market exposure – just 28% of market days.  Requires an unrestricted account due to frequency of trades and short duration (6-8 days is typical).  Particularly effective in Bear Markets.

Client Risk Profile: Conservative (in cash 72% of market days)

Scheduled Activity Frequency:  Eleven trades per year

Unscheduled Activity Frequency:  None.  All trades are scheduled in advance.

In the Market:  During Calendar-Effects Days (28%)

Out of the Market:  During Non-Calendar Effects Days (72%)

Sector Rotation Model

A risk-managed Model which invests in either high-ranked U.S. Equity Sectors, or in high-ranked Bond Sectors.  At the start of each quarter a risk measurement is made to determine whether to invest in Equity or Bond Sectors during that quarter

Client Risk Profile: Moderate to Aggressive

Scheduled Activity Frequency:  Reallocations monthly when in U.S. Equity Sectors; quarterly when in Bond Sectors.

Unscheduled Activity Frequency:  None.  All activity takes place on monthly or quarterly intervals.

In the Market:  100% in the Equity market when in U.S. Equity Sectors.

Out of the Market:  100% out of the U.S. Equity market when in Bond Sectors.

Leveraged Sector Rotation Model

Operates the same as the Standard version of the Sector Rotation Model, except it employs 1.5X leveraged funds when invested in U.S. Equity Sectors.  Leverage does not apply when it is invested in U.S. Bond Sectors.  Intended for aggressive investors only.

Client Risk Profile: Aggressive

Scheduled Activity Frequency:  Reallocation monthly when in U.S. Equity Sectors; quarterly when in Bond Sectors.

Unscheduled Activity Frequency:  None.  All activity takes place on monthly or quarterly intervals.

In the Market:  100% in the Equity market when in U.S. Equity Sectors.

Out of the Market:  100% out of the U.S. Equity market when in Bond Sectors.

Global ETF Model

Best suited for a smaller portion of a client portfolio as it can be occasionally dominated by non-equity asset classes.  Higher volatility than all other models, requiring monthly reallocation.  Provides good exposure to global asset classes.

Client Risk Profile: Aggressive

Scheduled Activity Frequency:
Monthly reallocation

Unscheduled Activity Frequency:  None.  Continuously Invested.

In the Market:  Continuously Invested

Out of the Market:  Never

Long/Cash Model

Works best in regular brokerage accounts.  Can be very active when Intermediate-term Indicator changes status frequently.  Emphasis on the up and down moves within a Bull or Bear market.  U.S. focus.

Client Risk Profile: All Profiles: Conservative to Aggressive

Scheduled Activity Frequency:  Quarterly Reallocations

Unscheduled Activity Frequency:  Change in intermediate-term trend, determined by the Intermediate-term Indicator.  Typically last weeks to months.

In the Market:  During Intermediate-term Indicator green (uptrend) periods

Out of the Market:  During Intermediate-term Indicator red (downtrends) periods

Long/Short Model

Rated “aggressive” because of short positions.  Most suitable for regular brokerage accounts.  Can be very active when Intermediate-term Indicator changes status frequently.  Emphasis is on the up and down moves within a Bull or Bear market.  U.S. focus.

Client Risk Profile: Aggressive

Scheduled Activity Frequency:
Quarterly Reallocations

Unscheduled Activity Frequency:  Change in intermediate-term trend, determined by the Intermediate-term Indicator.  Typically last weeks to months.

In the Market:  During Intermediate-term Indicator green (uptrend) periods

Out of the Market:  SHORT during Intermediate-term Indicator red (downtrends) periods

Multi-Sector Bond Model

Continuously invested and reallocated quarterly.  Portfolio members are chosen from 18 wide-ranging bond sectors on the basis of the strength rankings.

Client Risk Profile: All Profiles: Conservative to Aggressive

Scheduled Activity Frequency:
Quarterly Reallocations

Unscheduled Activity Frequency:  None.  Continuously invested.

In the Market:  Continuously invested.

Out of the Market:  Never

Policy Portfolios (Levels 1-5)

Great for clients with a global viewpoint, as it treats the U.S. as just one of many asset classes.  Requires availability of global ETFs or funds not usually found in a 401k or some VAs.  These are the only models with predetermined Equity vs. Fixed Income allocations.

Client Risk Profile: All Profiles: Conservative to Aggressive

  • Level 1 – Conservative
  • Level 2 – Moderately Conservative
  • Level 3 – Moderate
  • Level 4 – Moderately Aggressive
  • Level 5 – Aggressive

Scheduled Activity Frequency
Quarterly Reallocations

Unscheduled Activity Frequency:  Status change in ANY of the 5 Long-Term Bull-Bear Trend Indicators that drive the 5 asset classes.  Typical trends last several years.

In the Market:  During Bull Markets per 5 Long-Term Bull-Bear Trend Indicators that drive the 5 asset classes.

Out of the Market:  During Bear Markets per 5 Long-Term Bull-Bear Trend Indicators that drive 5 asset classes.

Risk-Managed Gold Model

The Risk-Managed Gold Model is a longer-term low-activity model whose goal is to identify and invest in uptrends in gold, while managing the risk of investing in this highly volatile commodity.  Best used in Blends as a diversifier, typically 5%-15% of a portfolio.

Client Risk Profile: Suitable for all when used as a diversifier; aggressive if standalone.

Scheduled Activity Frequency:  None when in gold; when not in gold, activity is per the selected not-Gold option.

Unscheduled Activity Frequency:  Changes in the Gold Trend Strength Indicator from Positive to Negative or vice versa.  Typical trends last months to years.

In the Market:  Invested in Gold when the Gold Trend Strength Indicator is Positive

Out of the Market:  Invested in the selected not-Gold option when the Gold Trend Strength Indicator is Negative

Risk-Managed Energy Model

The Risk-Managed Energy Model is a longer-term low-activity model whose goal is to identify and invest in uptrends in energy, while managing the risk of investing in this highly volatile sector.  Best used in blends as a diversifier, typically 5%-15% of a portfolio

Client Risk Profile: Suitable for all when used as a diversifier; aggressive if standalone.

Scheduled Activity Frequency:  None when in energy; when not in energy, activity is per the selected not-energy option.

Unscheduled Activity Frequency:  Changes in the Energy Trend Strength Indicator from Positive to Negative or vice versa.  Typcial trends last months to years.

In the Market:  Invested in Energy when the Energy Trend Strength Indicator is Positive

Out of the Market:  Invested in the selected non-Energy options when the Energy Trend Strength Indicator is Negative

Visit the 'Resources' page, next! (Click the image)

… dont’ forget to check out our Resources page:  Get samples of Sherman Sheet research, the famed ‘SITREP’, model-matrices (with their client suitability and rules for movement), returns and performance statistics, and more.

Custodians & TAMPS We Currently Work With:

Charles Schwab

TD Ameritrade Institutional

Mid Atlantic Trust Company

Jefferson National

Security Benefit Of America

Scottrade

Investors Brokers Network

Envestnet

Adhesion