After my month end update when I discussed the early performance of the Mechanical Compound Income Scores Portfolio, I read some interesting stuff on the topic of dispersion which I thought I would share with you as I warned that a focussed portfolio was likely to be extremely volatile versus the more broadly based index.
This came from the excellent Tobias Carlisle, the co-author of the Quantitative Value which inspired me to come up with the Compound Income Scores. In his post on Greenbackd he writes about Dispersion by Market Capitalization: A Stock Picker’s Market. In it he references the following graphic which is worth a thousand words and comes from another useful site written by Patrick O’Shaughnessy.
His conclusions are interesting for individual investors as he says: "I do believe that these results highlight an opportunity in micro- and small-cap investing. This is especially true for smaller, individual investors who don’t have to worry about market impact when trading. Large institutions simply can’t run meaningfully large micro-cap portfolios, and so many small stocks go unnoticed."
But mind how you go as the results will be different to the index both good and bad! Finally I bring you a picture of a different kind of dispersion, which puts me in mind of a band, so time for some more music which is related to this and kind of appropriate to my Man Versus Machine idea - click the prism to watch and listen - enjoy!