Tag Archives: top flight portfolio

What is going on with the stock market?

Posted July 9, 2010 by admin. tags:Tags: , , , ,
Depression in the markets

photo by pedrosimoes7

Written by Dave Young, President of Paragon Wealth Management

After starting out the year strong, the market has retraced, erasing its first quarter gains.

The S&P 500 is down about 6.66 percent year-to-date. From its peak in April, it has dropped a total of 14.5 percent from peak to trough.

Our conservative portfolio, Managed Income, has done well despite the difficult market. It s still up 0.48 percent year-to-date. Our growth portfolio, Top Flight, has done relatively well. It is down only 7.7 percent for the same period. At the end of the quarter, our investment models put Top Flight 20 percent in cash and 80 percent invested.

What is going on with the stock market?

I am asked this question on a regular basis. One day the Dow is down 300 points, and the next day it is up 300. Volatility levels have been extreme the past couple of months. In the short-term that can be a little unnerving to say the least.

In order to make good investment decisions, this question has to be addressed on two fronts.

-First, what is the market doing? (Going up or going down.)

-Second, do fundamentals justify the direction the market is moving?

The markets are continuously going through small up and down cycles within longer-term trends. Every time the market starts a downward cycle we attempt to determine if this is the beginning of the long-term trend turning downward. If it is, we should reduce market exposure. If it is not, we should stay fully invested.

If we sell out too early, we will miss out on returns if the market continues its upward trend. If we sell out too late, we may take more of a capital loss than we want to as the market declines. Investing when everyone is optimistic and selling out when everyone is scared is a recipe for buying high and selling low. It is also a great way to generate horrible long-term returns.

It is vital for us to make the right investment decisions, because if we are wrong, it negatively affects our long-term returns. A bad move not only negatively affects our clients, but it also hurts Paragon because our interests are identically matched with our clients’. If our clients are not happy with us, they can leave at any time without paying any surrender charges. This is unique in the financial industry. Most financial products have a penalty for leaving early. Because our clients’ investment success is very important to us, we place the utmost importance on our investment performance.

Fortunately, we have developed several investment models that take emotion out of the process and help us determine where we are in the market cycle. Also, we rely heavily on sector rotation models, which have done a good job of moving us towards those areas of the market that are holding up when the overall market is declining. While they are not always right, our long-term track record indicates that our models have done well at keeping us on the right side of things. From January 1, 1998 through June 30, 2010, our growth portfolio, Top Flight, has generated a net total return of 325 percent versus 32 percent for the S&P 500. (Click on this link to see our full track record and disclosures Paragon’s Track Record.)

To be continued next week…

What do you think? Feel free
to leave comments, questions or thoughts.

Paragon Wealth
Management
is a provider of managed portfolios for
individuals and institutions.  Although the information included in this
report has been obtained from sources Paragon believes to be reliable,
we do not guarantee its accuracy.  All opinions and estimates included
in this report constitute the judgment as of the dates indicated and are
subject to change without notice.  This report is for informational
purposes only and is not intended as an offer or solicitation with
respect to the purchase or sale of any security.  Past performance is
not a guarantee of future results.

Investing is like a baseball game

Posted June 11, 2010 by admin. tags:Tags: , , , ,
Baseball



photo by laffy4k

Written by Dave Young, President of Paragon Wealth Management

Imagine yourself as a baseball player.

First, your team gets a base hit, next you get a double. Then, another base
hit. This is followed by a triple, and then you strike out. Then, you strike out twice in a row! Just about the time you are ready to abandon your team, they hit two home runs.

The moral of the story is you never know how the game is going to turn out unless you stay for the whole game. 

When investors see the returns our growth portfolio, Top
Flight, has generated over the past 12 years, they get excited about
them
.

Then, when the market goes through a downturn, and Top Flight goes
through a mild downturn, they start questioning their investment
strategies.

Paragon’s Top
Flight Portfolio
has generated a total return of 351.1 percent
versus 39.2 percent for the S&P 500 from January 1998 through May
2010. (see www.paragonwealth.com for full
track record and disclosures.)

It is important to understand the
ups and downs that investors went through in order to capture those
extraordinary returns investors have seen since Top Flight’s inception in 1998.

Its also important to understand that investors who did not
keep a long-term perspective and bailed out of their portfolios along
the way, never saw those returns.

It is only those investors who had the discipline to keep a
long-term
perspective who got the long-term returns.

For
example, in three of the past 12 years, which is 25 percent of the time,
Top Flight underperformed the S&P 500. In two of those years, Top
Flight declined and investors lost money.

The investors who focused on the short-term during those times, bailed
out of their portfolios. They were shaken out of their long-term investment strategy and ultimately hurt themselves by
selling out of their portfolio.

In an ideal world Top Flight would always outperform and would
travel a straight line of positive returns year after year. 

Unfortunately, we do not live in a perfect world. Reality is more
like two steps forward and then one step back over and over.

With Top
Flight
we never know in advance when we are going to under perform
the market or when we are going to “hit a home run.” Although there are no guarantees, we do believe that if
we keep stepping up to the plate and executing our investment strategy
that we are going to outperform more than we under perform. Over time we
believe that disciplined execution of our investment strategy will
deliver outsize results.

However, that means we have to
keep stepping up to the plate, and we have to consistently follow our
investment strategy.

That is how Top Flight has generated returns almost nine times more than the broad market as measured by the S&P 500 over the past 12 years.

If investors want those long-term returns, then they must “stay for the whole game”. 

Paragon Wealth
Management
is a provider of managed portfolios for
individuals and institutions.  Although the information included in this
report has been obtained from sources Paragon believes to be reliable,
we do not guarantee its accuracy.  All opinions and estimates included
in this report constitute the judgment as of the dates indicated and are
subject to change without notice.  This report is for informational
purposes only and is not intended as an offer or solicitation with
respect to the purchase or sale of any security.  Past performance is
not a guarantee of future results.

Happy Thanksgiving!

Posted November 25, 2009 by admin. tags:Tags: , , ,
2008 Paragon Team

The Paragon Team:  Trudy, Shannon, David, Nathan and Elizabeth

Happy Thanksgiving to you and your families! We hope you have a wonderful holiday.

Every November we celebrate our company anniversary. This year we celebrated our 23rd anniversary.

Paragon has grown significantly since it began in 1986. David Young started the company because he wanted to give investors a smarter way to invest their retirement funds. In the early 1980’s he opened over a dozen successful businesses. He sold his businesses in 1985 and wanted to invest the proceeds, but was unable to find an investment firm to meet his needs.

He began conducting extensive research to find the best ways to invest. After a year of trial and error, David opened Paragon for business. Its original name was The Center for Financial Excellence. It was later changed to Paragon Capital Management, and then most recently Paragon Wealth Management.

David managed his friends’ and family’s portfolios in the early years of his business. When he avoided the 1987 crash, his methods sparked a lot of attention from investors, and his company began to grow. He built and tested basic quantitative models that determined when to be in or out of the equity markets. The models measured, monitored, adjusted and changed the investments as market conditions changed.

Today, David continues to research ways to improve Paragon’s portfolios. Paragon is known for its flagship portfolio called Top Flight. It has generated a total return of 323.01% versus 30.82% for the S&P 500 from its inception on January 1, 1998 through October 31, 2009. Its compound annual return is 13.16% versus 2.33% for the S&P 500. (Visit www.paragonwealth.com to see complete track record and full disclosures.)

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Investment Strategy Update

Posted February 25, 2009 by admin. tags:Tags: , , , ,
The Catastrophe So Far

Written by Nathan White, CFA

Much of our quantitative work indicates that the stock market is setting itself up for an intermediate term rally that would start to develop over the next few months.

This rally could propel the S&P 500 into the 950-1000 range.

Negative sentiment is running wild with nearly everyone giving into the bear. Emotions are running high. This is a contrarian sign.

One catalyst to begin a rally is to get the White House and Congress to stop giving daily speeches and TV appearances!

It is flat out amazing to see the markets sell off every time the President speaks. The recent sell-off in the markets has been caused by all of the uncertainty created by the government.

NO one knows what the rules of the game will be or what to expect and so the markets continue to pull back. The markets are pushing the government to act and create some sort of credible end game to the financial/credit mess. Government inaction is causing the markets to price in all bad scenarios with the banks.

In light of the current choppy conditions, our Top Flight Portfolio still holds some defensive sectors such as Conservative Staples and Health care.

We have steadily been moving the portfolio towards those areas that would do best in a broad market rally such as Technology, Materials and some emerging markets. If a bull trend develops we will increase our allocation to these areas. If the bear trend resumes, we will take off the more aggressive portions of the portfolio.

Stay tuned…

Paragon Wealth Management Webinar/Seminar Schedule
Are you worried about the stock market and economy? Listen to our free webinars online or at our office.

Tuesday, March 3 (6:00-7:00 p.m. MST)
Thursday, March 19 (12:30-1:30 p.m. MST)
Wednesday, April 8 (6:00-7:00 p.m. MST)
Thursday, April 23 (12:30-1:30 p.m. MST)

R.S.V.P.
Shannon Golladay
801-375-2500
shannon at paragonwealth.com

Investing in the Stock Market is Like Freeway Driving

Posted August 7, 2008 by admin. tags:Tags: , , ,
The Open Road

 


photo by Shek Graham

Written by Shannon Golladay

The other day, my husband, Patrick, and I were driving home on the freeway, talking about how the day went. We talked about the stock market and how it was doing.

As we talked we looked out the window at the freeway.

Patrick said,  “Investing in the stock market is like driving on the freeway.”

I had never heard this analogy, and asked, “What do you mean?”

He said, “Most people try to drive in the fast lane on the freeway, but when someone blocks them, they go to another lane even though in the long run the fast lane will get them there the fastest.

The stock market is the similar. Most people are happy when the stock market is going well and don’t want to leave, but when the market goes down they leave. In the long run, they would be better off if they stayed in the whole time instead of leaving when it got bad.”

I thought that was a good way of looking at it. It seems like it would be the right thing to pull out when things are bad in the stock market, but in reality it only hurts you in the long run.

I’ve talked to Dave Young, President of Paragon, about this a few times. He agrees and usually shows me Paragon’s numbers to illustrate this point.

Let’s look at Paragon’s Growth Portfolio ,Top Flight, as an example.

Top Flight Performance Numbers vs. the S&P 500

2008 (thru 2nd quarter)    -4.70%                  -11.91%
2007                             16.98%                      5.50%
2006                               5.91%                    15.79%
2005                               6.30%                      4.89%
2004                              10.15%                    10.87%
2003                              50.31%                    28.69%
2002                             -13.60%                   -22.12%
2001                                9.10%                   -11.92%
2000                              62.42%                     -8.82%
1999                              17.69%                     20.66%

1998                              31.67%                     28.58%

As you know, past performance is no guarantee of future results, but as you can see in most cases, performance went up after it went down. So the people who stayed in during the difficult times gained a much larger return on their investments for staying.

Investment performance reflects time-weighted, size-weighted geometric composite returns of actual client accounts. Investment returns are net of all management fees and transaction costs, and reflect the reinvestment of all dividends and distributions. Benchmarks are used for comparative purposes only. Past performance is no guarantee of future results. Investments in securities involve the risk of loss. An investor’s actual returns may vary due to timing of withdrawals, contributions and other factors. Before investing, contact Paragon to discuss your investment objectives, risk tolerance and fees. The S&P Index is a market-value weighted index comprised of 500 stocks selected for market size, liquidity, and industry group representation. It is not possible to directly invest in this index.

A Review of Our Investment Strategy

Posted July 23, 2008 by admin. tags:Tags: , , ,
Arizona Desert

As seen in Paragon’s second quarter 2008 print newsletter

Written by Nathan White, CFA

Photo by Kevin Dooley

We’ve had a good year so far relative to our benchmarks (S&P 500 and Lehman Bond Index).

Our models kept us fully invested during March as the credit crisis hit full steam with the Bear Stearns collapse unfolded and the markets sold off.

I must confess during that time the mood was so foul that I kept

Life Really Isn’t That Bad

Posted July 9, 2008 by admin. tags:Tags: , ,
B/W US Stock Exchange Photo

As seen in Paragon’s second quarter 2008 print newsletter

Written by Dave Young, President

The first half of the year made life difficult for investors.

Worries about the financial sector scared the market down during the first three months. Just as everyone decided “life was not over as we know it,” the market rallied and came back to life during April and May. this was short-lived as high oil prices and inflation prospects gave us one of the worst “June’s” in history.

For the first six months of the year, the S&P 500 finished down -11.9% and the Dow Jones Industrials ended down -14.4%.

Portfolio Performance

Our portfolios performed exceptionally well last year. That’s great, and most of our clients appreciate it.

But, in this business everyone still asks the question, “What have you done for me lately?”

Paragon’s Conservative Portfolio

Our conservative portfolio, Managed Income, has stayed in capital preservation mode. As a result, we have held more cash than normal for the first six months of the year. We have taken selective positions in high yield bonds, dividend paying funds and natural resources. As valuations have reached the ridiculous level, we have been taking some small positions in the financial and real estate sectors. Managed Income is down -1.89% through June 30, 2008. The Managed Income portfolio has done a great job so far this year, considering its first priority is to preserve capital.

Paragon’s Growth Portfolio

Our growth portfolio, Top Flight, has been invested in Canada, Brazil, Steel, Transports, Mid-cap stocks, real estate and energy, to name a few areas. We have also held some excess cash for protection. We have started to see a shift from the international markets back to the U.S. Market. So far this year, our stock selection has added more value than our cash allocation. Recently, we have been reducing our energy exposure and adding more cash. When our models move more positive we will begin reducing cash and increasing equity exposure.

For the first six months of 2008, our Top Flight Portfolio is down only -4.7%. In a very difficult environment, Top Flight actually gained 4.36% over the past three months.

While we are not thrilled to be down at all, with our benchmark the S&P 500 down -11.9% and the Dow Industrials down -14.4% for the first six months, Top Flight has performed well. (See Paragon’s full track record for more details).

Bear Market #34

The bear market we discussed last quarter has continued, and everything we talked about still applies. Click here to read the article about bear market #34.

Since bear market #34 began, over eight months ago, the S&P 500 has lost -16.5%. It has continued for 261 days through June 30, 2008.

Since 1981 the median bear market decline has been -24% and lasted a median of 204 days. However, since 1900, the median bear market has lasted 363 days and taken the Dow Industrial down by -27%. As you can see, this bear has lasted longer than the more recent bear markets, but has been shorter than the historical bear markets dating back to 1900. Also, its decline thus far has not been as deep as normal.

I wish I could tell you when this bear market will end, but unfortunately, no one knows that answer. No one rings a bell to tell us to sell at the top or buy at the bottom. There are two things that we can say with certainty. First, this bear market is closer to being over today than it was yesterday. Second, when a bear market finally ends, historically there are always significant gains.

Investment performance reflects time-weighted geometric composite returns of actual client accounts. Investment returns are net of all management fees and transaction costs, and reflect the reinvestment of all dividends and distributions. The Lehman Bond Index is a benchmark index made up of the Lehman Brothers Government/Corporate Bond. Benchmarks are used for comparative purposes only. The Paragon Managed Income Portfolio is not designed to track the Lehman Aggregate. Past performance is no guarantee of future results. Investments in securities involve the risk of loss.

How Much Risk is too Much?

Posted March 25, 2008 by admin. tags:Tags: , , , , , , , , ,
Annuities

Written by Dave Young, President

Most investors assume that high risk (and the additional stress that goes with it) inevitably accompanies the potential for high returns.

Steve Shellans, the editor of MoniResearch, decided to test this theory by using a statistical formula to accurately measure the amount of stress various investment strategies typically inflict on investors.

He decided to use the Ulcer Index, and according to Nelson Freeburg, the respected editor of Formula Research, the Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.”

The Ulcer Index is different from other risk measurement indexes, such as standard deviation, beta, and the Sharpe ratio, because it does much more than simply measure portfolio volatility. Traditional risk indexes falsely assume that all volatility is bad. The reality is that investors welcome upside volatility—but deplore downside volatility.

The Ulcer Index accounts for this basic psychological fact by ignoring upside volatility and penalizing downside volatility.

In addition, it increases the penalty based on the depth and the duration of the drawdown. At a more technical level, the Ulcer Index calculates the difference between each day’s equity and the most recent equity peak. The formula then squares these numbers, averages them, and uses the square root of the average as the Ulcer Index. The smaller the number, the lower the risk.

Paragon’s Top Flight Portfolio certainly delivers the kinds of returns that are typically associated with high-risk funds.

But does it carry the same risk—and the same potential to cause ulcers—as other aggressive, high-return funds? According to the Ulcer Index, the answer is a definitive no.

How does Top Flight maintain such high returns with such a low Ulcer Index rating?

Paragon’s models and systems are based on a quantitative and technical approach to money management. Generally, fundamental analysis is not used. Using this very innovative and creative approach to money management has allowed Paragon Wealth Management to create portfolios such as Top Flight that have generated exceptional returns while taking on lower levels of risk than its benchmark, the S&P 500.

Patience

Posted January 22, 2008 by admin. tags:Tags: , , , , , , , , ,
Patience

Written by Dave Young, President

Once an investor has accumulated capital and implemented a good investment strategy, then the final and most important piece of the puzzle is patience.

In 2006, Top Flight had an off year versus the S&P 500. Historically Managed Income and Top Flight haven’t underperformed very often. However, when they have, that hasn’t been a good time to change strategies. For example:

*  In 1999 Top Flight earned 3% less than the S&P 500, but then the following year it gained 71% more than the S&P 500.

*  In 2002 Top Flight had its worst year ever, losing 13.6%, and the next year it gained 50.3%.

*  In 2002 Managed Income underperformed its benchmark, the Lehman Bond Index. The following year it gained 25.4% more than the Lehman Bond Index.

*  In 2006 Top Flight had an off year earning 5.9% versus 15.8% for the S&P 500. The following year (2007) Top Flight earned 16.9% tripling the S&P 500 (see our track record for full disclosures).

Past performance is not a guarantee of future results, and there are no guarantees in this business. According to our track record, every time we have underperformed, our performance has exceeded the benchmark the following year, quite significantly in most cases.

Copyright 2008 Paragon Wealth Management

The Year 2007 in Review

Posted January 17, 2008 by admin. tags:Tags: , , , , , , , , , , ,
Happy New Year

Written by:  Dave Young, President

Once again, we are at the beginning of a new year. Each year seems to pass by quicker than the previous. In 2007, the markets started strong with a lot of optimism. The optimism disappeared when the market dropped in March, because the Dow lost about 700 points and found itself just above Dow 12,000.

Just as everyone was beginning to question their optimism, the market rallied off of the March lows, and by April reached Dow 13,000 for the first time. By mid-January the Dow was knocking on Dow 14,000. Everyone was euphoric, and according to our sentiment models, most investors thought the market would continue its upward climb.

As usual, once everyone is in agreement about where the market is going, it goes in the opposite direction. The sub prime debt problems became a serious issue in July and August, and the market sold off once again. This time the Dow fell again, but hit higher lows than the March sell off. The Dow sunk to 12,7000.

This is when things became interesting. The media was in full swing with their pitch that the market is “always” horrible in September and October. Clients called us and wanted to be taken out of the market because of the recent sell off and all of the doom and gloom in the press.

Not surprisingly, the market performed the way it usually does in order to make the majority of investors wrong. In what are traditionally the worst two months of the year, September and October, the market instead rallied. During the historically worst months to invest, the market put together its strongest rally of the year peaking back at just under Dow 14,200.

The credit fears and worries about the strength of the economy pushing the market down came back again, and the Dow finished the year at 13,264.

The broadly watched, large cap DJIA gained 8.7% for the year. The S&P 500, which is also more representative of the large cap U.S. market, gained 5.5%. The Russell 2000 which represents 2000 small cap stocks lost – 1.6%. Finally, the Value Line Geometric Index, which is the broadest based index and represents 1,626 stocks, declined -3.8%. Overall, depending on where you were invested, it was a marginal year for many investors.

Paragon Top Flight Portfolio

Our Top Flight Portfolio had an exceptional 2007 returning 16.98% versus 5.5% for its benchmark, the S&P 500 (See track record for full disclosures).

How did Top Flight generate such good returns in a year when the major market indexes were just slightly positive or and even negative?

There were three reasons why we were able to triple the return of the S&P 500 benchmark this year.

1- The change from mutual funds to Exchange Traded Funds (ETF’s) boosted our returns. Because mutual funds are generally broader based, in the past they made it more difficult to “dial in” exactly where our models are pointing, and there is no slippage. Also, the ETF’s allow us to follow our allocation models with exactness because unlike mutual funds, we don’t face early withdrawal fees or penalties.

2- Our Allocation Models signaled opportune times for us to reduce and increase exposure  during  2007. Twice, at opportune times, we reduced exposure from 100% invested to 56% invested. These allocation changes benefited our returns.

3- Our Focus Models pointed us towards the areas of the market that showed the most strength. We experienced additional gains by following our Focus Models recommendations and investing in natural resources, emerging markets, Brazil, Canada, Australia, and Europe. Our limited exposure to the U.S. market was positive for Top Flight.

Top Flight portfolio recently completed 10 years of performance from December 31, 1997 through December 31, 2007. During this period, Top Flight generated a total return, net of all fees, of 417% versus 77.4% for the S&P 500. Its compound annual return is 18.03% versus 5.95% for the S&P 500 (see track record for full disclosures).

In the investment industry, 10 years is significant. Almost anyone can get lucky and have an exceptional year. If you see three years of good performance, investment advisors will start to notice. A five-year track record is even better. To generate 10 years of exceptional performance is even more meaningful.

I have sat on several industry panels where other “experts” have argued that active management doesn’t work. I believe that Top Flight’s 10-year track record indicates otherwise.

Managed Income Portfolio

Managed Income returned 2.24% for the year (see track record for full disclosures). It performed well from a relative standpoint, but not so well from an absolute standpoint. So what does that mean… it sounds like investment mumbo jumbo?

From an absolute standpoint, 2.24% is nothing to get excited about. We could have put our money in a bank CD and done much better if we had known the return in advance. Unfortunately, no one announced last January how the year would unfold.

From a relative standpoint, Managed Income performed exceptionally well. The underlying asset classes that make up Managed Income were a minefield last year. Managed Income invests in real estate, convertibles, preferred stock, high yield bonds, treasury bonds, bank loan funds, dividend income funds, etc. It invests in all of the more conservative asset classes that generate income. Most of those asset classes struggled last year and anything associated with real estate ended the year down about 15 percent.

Relative to previously mentioned investment groups that Managed Income is forced to stay within; we will take 2.24% for last year and be pleased with it. The fact that Managed Income was able to even generate positive returns last year was noteworthy.

Also, keep in mind that Managed Income’s primary objective is to avoid losses. Its secondary objective is to generate the highest returns possible within the investment constraints of avoiding losses. In 2007 it met both of these objectives.

Longer term, since Managed Income’s inception on October 1, 2001, the portfolio has generated a total return of 76.33% doubling the 36.95% earned by its benchmark, the Lehman Bond Index. Its compound annual return is 9.63% versus 5.23% for the Lehman Bond Index.

Copyright 2008 Paragon Wealth Management

Blog Role

Meta