October ended weakly but was still one of the best months in the past several decades. We were able to recover relative underperformance in Top 20 and Sector Selector ETF and to extend the lead against the benchmark in Conservative Growth/Balanced:
Top 20 soared over 13%, beating the S&P 500's 10.93% gain by 2.14%. The model was helped by its exposure to smaller stocks, as the Russell 2000 index jumped over 15%. We had two stocks that we held for the entire month decline, while two others rose 28% and 40%. Quite frankly, our sector exposures weren't very helpful, as we didn't have above-market exposures to the two strongest sectors (Energy and Materials). We were very overweight the 3rd best (Industrials). We also had no exposure to the three weakest sectors (Staples, Utilities, Telecom).
Conservative Growth/Balanced returned 8.34% compared to its benchmark of 60% stocks (+10.93%) and 40% bonds (0.11%) rising 6.76%. We were near our maximum exposure of 75% in equities most of the month, which accounted for most of the relative gain. Stocks were quite mixed, with returns ranging from 1% to as high as 19%. The rally in CSCO helped a lot, as it was our largest position. In a big rally such as we experienced, it can be very difficult for conservative stocks to keep up, so this was a reasonable performance.
Sector Selector ETF rallied over 14.2%, beating the S&P 500 by almost 3.3%. Heavy exposure to Small-Caps, Emerging Markets and Financials were the key drivers of the strong performance. The only two positions that didn't match the S&P 500 were Technology and Mega-Caps, both of which we reduced early in the month.
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