Reading this post on the Farnham St blog got me thinking about designing a simple algo to control my portfolios.
click here to view articleJust putting it out there for now, the idea being that its probable that a simple algorithim to quantify whether a company is investible or not should be easy to design. Also ongoing portfolio management should be improved by control with a simple algo.
Its really just a matter of selecting some simple criteria and applying them without personal emotional involvement. It would certainly help bypass the narrative bias!
Now I will have to give some consideration to the metrics!
* Debt/equity <50%
* Interest cover >6
* Operating Margin >12
*
Thinking about this overnight and maybe its better to design an algo to exit holdings - something that would have got me out of SGH would have been more valuable than an algo that picked 2 or 3 good companies!! In the case of SGH the trigger might have been increased debt alone.
Here are some similar ideas from a fund manager,
click here to view article
