The Priceless MasterCard

MasterCard was a one way road from 2009 lows. On Jan 30 the stock was 135. Now it’s at 800. This means a return of near 500%. This means more than 100% returns annually. Even if for a moment we accept that it was humanly possible for you to pick up MA there in Jan 2009, because you are a contrarian, because you trained under Warren, or maybe you are just too good. Now if we tell you to repeat this by picking not one but three stocks from Jan 2009. We know it’s going to get harder and nearly impossible if we tell you to pick a portfolio of 10. We don’t think any available artificial intelligence could accomplish this feat. This is why if we can capture a part of this ALPHA, it’s a hallmark of a good system. If we can repeat this performance for multiple markets we have the RMI Active approach.

The RMI US Active identified MA more than 900 days back delivering 200% from Jun 2011. The other two near 200% winners were VISA and Gilead. Now one may question what the Credit Card companies knew which everybody who questioned the uncertain pit did not? Well these are all questions that accompany hindsight bias, maybe VISA and MA themselves did not know what rockets will power them. At the end of day what matters are results not cause; affect and explanations.

The RMI US Active 10; holds components for an average 267 days, delivered 28% annualized (over 10 years), at 16% Standard deviation; and out of 12 years outperformed all 12. This compared to the US 100; at 4% annualized, 20% Standard Deviation and secular under-performance against RMI in the last 12 years.