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Equity & Commodity Rotation SMA


Split Rock Private Trading & Wealth Management strategically manages its Equity & Commodity Rotation SMA by continually monitoring which phase of the economic cycle we are currently in. Split Rock then invests in companies that are best-positioned within the current cycle. On an ongoing basis, Split Rock makes tactical adjustments based on geopolitical events and various micro and macro-economic factors. 


Approach

Split Rock Private Trading & Wealth Management strategically manages its Equity Rotation SMA by continually monitoring which phase of the economic cycle we are currently in. Economic cycles are divided into 4 separate phases: early cycle, mid cycle, late cycle, recession. Based on which cycle we are in, we feel that some sectors may stand to benefit over others. For example, in a recessionary phase, defensive stocks such as consumer staples tend to outperform the wider market. Regardless of high unemployment and economic recession, people still need consumer staple companies to provide them with food, beverages, toilet paper, soap, etc. Inversely, in an early cycle recovery, consumer discretionary stocks tend to outperform. For example, as unemployment falls, more people have money to spend on discretionary items such as new tv’s, cars, etc.

Our strategy is driven primarily by fundamental analysis. We tend to favor companies with consistent growth and stability of earnings and dividends, limited debt, low P/E multiples relative to peers, and strong cash flows. We supplement our research with technical analysis, focusing on moving averages and support levels, as well as identifying current and potential industry trends.


Research

Our research begins with all publicly traded companies listed on the NYSE, NASDAQ, and AMEX. We then identify sectors that will stand to benefit from the economic phase we believe we are currently in or evolving into. We then screen the stocks within the identified sectors using fundamental and technical analysis. We conclude by cross checking our internal research with other well-respected analysts recommendations before we make our final selections.


Allocation Discipline

Our Allocation Discipline consists of the following:


  • Holdings = Typically no more than 50
  • Weightings = Typically minimum 2%, Maximum 15%.


Rebalancing techniques are based on either tactical or performance related adjustments (through Sell Limit or Stop Orders). Following trades, proceeds are used to rebalance existing holdings, held in cash for future buying opportunities, or used to enter new positions.


Sell Discipline

Our sell discipline is based on many factors including but not limited to:
1. Strategic and tactical adjustments as discussed earlier.
2. Using trailing limit orders to help protect gains or minimize losses.
3. Ongoing fundamental and technical analysis.