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    « Comcast Purchase of Time Warner Looks Good | Main | Liberty in Limbo »

    March 03, 2014

    Style Model Shifts to Growth

    Northlake’s Style model is now recommending Growth. As a result, client positions in the Russell 1000 Value (IWD) have been sold and proceeds reinvested in the Russell 1000 Growth (IWF). The Value signal had been in place since January 1st. During this time, IWD returned about 35 basis points vs. 171 basis points for IWF, so the latest call by the Style model was a little below average.

    There was no change in the Mid Cap recommendation coming from the Market Cap model, so current client holdings in the S&P 400 Mid Cap will be held for at least another month. So far this year, the Mid Cap call has worked well. MDY is up 2.5% through February, comfortably ahead of the benchmark S&P 500 which has gained 60 basis points.

    Two underlying factors influenced the shift from value to growth. First, as mentioned above growth has been performing well relative to value over the last few months. This has shifted the trend indicators in favor of growth. The trend indicators combine a look at performance over two, nine, and twelve month time frames. The second factor to shift in favor of growth is U.S. Dollar momentum. Recent weakness in the trade-weighted-dollar is favorable for growth companies. A weak dollar makes products and services sold abroad by U.S. technology, consumer, and health care companies more competitive. These industries are major components of growth indices making up

    The new growth is just barely across the line from value based on the two-month smoothing used in the Style model. However, the one month reading for March is in pretty solidly in growth territory.

    IWF is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a registered investment advisor. Northlake’s regulatory filings can be found at www.sec.gov.


    Posted by Steve Birenberg at March 3, 2014 12:13 PM in Models

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