Tiger Home Page

How to Order

Email:
bill@tigsoft.com

Trading Fidelity Select Funds in 1997
Using PEERLESS Stock Market Timing Software
Major BUY and SELL Signals

Special Report:  January 25, 1998

by William Schmidt, Ph.D.

Three Important Findings

1.  Using PEERLESS Major Buy and Sell Signals Would Have Improved the Fidelity Gains in 33 of 34 Cases

2.  The Average Gain Using PEERLESS signals was 26.7% while a "Buy and Hold" Strategy Would Have Gained Just 1.9%.

3.  You Can Double These Gains By Selling Short, as well as Selling on a Major PEERLESS Sell Signal.

Important Note:   The price data available from Dial Data for the study was not adjusted for the funds' distributions.  Since mutual funds typically distribute a large portion of their profits, the omission of the distributions affects the results of the study.  In particular, for those funds that had distributions, the percent gain shown for the buy and hold strategy would improve if the distributions were included, and the gain shown for the buy and sell short strategy might worsen depending upon when the distribution was made.

Methodology

Using the TIGER Power-Stock-Ranker software I downloaded 34 Fidelity Select funds' data for the past year  from Dial Data.  I then displayed their data and super-imposed our PEERLESS Stock Market Timing Software's major signals on the DJI for the last year.

Using TIGER's Trade Evaluator feature, I  then asked the computer to show me the trading results using these signals, assuming $20 a trade and $10,000 was originally invested.  The results were displayed in two ways.  You will see them in the two tables that follow.

Results

First, in Table 1, you can see how well each Fidelity Select Fund was traded where a reversing SELL signal would have simply caused a long position to be closed out.

Second, in Table 2, you can see how each Fidelity Select Fund was traded where a reversing SELL signal would have caused not only a long position to have been closed out, but it would also have caused a short position in the fund to have been initiated, which would then have been closed out at the time of the next major BUY signal.

In both tables, the last column at the end shows the percent gain accruing to the investor using a "buy and hold" strategy.

Conclusions

The most important lesson I draw from this study is that it may be a big mistake, especially with the DJI having risen so far (seven years) without a 15% decline, to blindly trust in a "buy and hold strategy".  The study unequivocally shows that the major PEERLESS BUY and SELL signals would have greatly aided an investor in his quest for mutual fund profits in 1997.

The net gain and loss statistics, you will note, were gathered from the point of the first major signal of last year, 2/14/97, to the end of the available data, 1/21/98.  

A "buy and hold" strategy for these 34 Fidelity Select Funds would have brought a mere 1.9% profit.   The worst performing funds were American Gold (-45%), Precious Metals (-47%), Computers (-41%) and Technology (-24%).  Only 11 of the 34 produced a 15% profit or more.  15 of the 34 produced a loss.

Had one applied last year's PEERLESS BUY and SELL signals to the trading of all these 34 funds using just long positions the average gain then would have been +26.7%.  Only 3 of the 34 Fidelity Select Funds did better: retailing (+40%), Air Transport (+32%) and Brokerage (+28%).

The investor who started with $10,000 would have ended the period on average with $2000 more had he used the PEERLESS BUY and SELL signals, instead of just buying and holding these funds for the period.  Only one of 34 Fidelity Select Funds would have been unprofitably traded for the period using PEERLESS.   That was Precious Metals.  The loss would have been just $372 on an original $10,000 investment. 

The best mutual funds to take a long position in on a reversing major PEERLESS BUY signal and sell on the next major SELL signal were Energy Services (+65.2%), Defense/Aerospace (+43.4%), Dev.Comm. (+42.0%), Telecomm (40.1%) and Computers (37.0%), Brokerage (35.9%) and Technology (35.1%).  You can see the actual  PEERLESS signals on these charts by clicking on their links here.

Using PEERLESS Stock Market Timing Software
to Trade the Short Side As Well as the Long Side
Would Have Doubled the Trading Profits in the
Fidelity Select Funds in 1997

The key point here is that using the PEERLESS major signals to buy, sell and to sell short - and emphatically not abiding by a casual, carefree buy and hold approach - would have made an enormous difference to the trader's success with these funds last year.

Look at the fifth column in Table 2.  It shows the net difference between the two approaches when $10,000 is traded both ways.  An investor in the the Fidelity Select Computer Fund would have been $14,994 better off using.   Instead of losing 30.9% with a "buy and hold" strategy, our PEERLESS user would have gained an amazing 117%, by buying, selling and selling short when PEERLESS gave a reversing major BUY or SELL signal on the DJI.

With Energy Services the modest 26.5% gain using a "buy and hold" strategy would have become a massive +107.7% gain using PEERLESS to the fullest.

The volatile Technology Select Fund would have brought the flexible PEERLESS trader who bought, sold and sold short a double, a +106.% profit,  The "buy and sell" investor would have lost 23.7%.

The same huge difference can be seen in other popular, but volatile funds.  If you had invested in the Fidelity Electronics Select Fund using the "buy and hold" you would have lost 23.7%.  An active PEERLESS user would have gained 97.9%.

Or consider the Select Biotech Fund.  It would have lost the inert "buy and hold" investor 5.4%.  The investor using PEERLESS to the fullest would have gained 76.2%.

Of course, past results do not guarantee future results.  But PEERLESS has been tested back to 1965.   For  just $495 plus shipping you can get these PEERLESS-DJI signals yourself.   If you would like to get the same charts that we are using here, you may purchase the necessary software for $995.

Table 1

1997 Results Using PEERLESS Major Signals
with Fidelity Select Funds

Using Only Long Positions

Table 2

1997 Results Using PEERLESS Major Signals
with Fidelity Select Funds

Taking Both Long and Short Positions on Signals