We begin with a universe of stocks that meet minimum dividend yield and market capitalization parameters. Stocks meeting our criteria are then ranked using a variety of performance and valuation measures. From the top two deciles, we select 25 stocks offering the best relative combination of performance and value to build an equal-weight portfolio.
Once our offense is in place, we evaluate the QRI each month to determine portfolio allocation. We remain fully invested in our equity portfolio unless the QRI provides a defensive signal. When this happens, we will allocate fully to U.S. Treasuries and/or cash. An allocation shift may occur at the beginning of any month.
We rebalance our equity portfolio quarterly when the QRI remains positive. By repeating our equity selection process, we retain any holdings that still represent a good value according to the model, and replace others—even well-performing companies—with new and better opportunities. The rebalanced portfolio is set to equal-weight.