Your Advisor Doesn’t Have You in the Year’s Top Sector

Back in April, I sent an email to a firm I keep a little bit of money with.

About 5% of my overall worth is “professionally” managed, essentially to keep me honest relative to the things I’m doing on my own. And also so I can see how institutions allocate capital.

And in April, I noticed that professional account wasn't making new highs along with the market, whereas it had been prior to April.

The reason was clear to me: that account had technology and health care as its biggest weightings.

But tech, while it had been outperforming for years, was no longer doing so.

Sectors that I've been talking about here — like energy and materials — had started to outperform as early as November of 2020, when I was telling premium readers as much as we were rotating into energy funds.

So I sent my advisor an email articulating as much and showing the performance of the S&P sectors. And the reply was, "We really don't make sector bets. We're not focused on sector rotations. And since 2017, the tech sector has outperformed and we're not ready to deviate from that yet."

That's a fair response, I guess, except that when you look at the allocations of that portfolio, it's 22% weighted to IT and over 13% weighted to healthcare.

And those are among two of the worst performing sectors year-to-date.
Year-to-date is getting to be a bit of a long time now as we get into June. So the year’s half over!

And so if you look at a chart from the day I emailed that of the Energy Sector Select SPDR (NYSE: XLE) versus the First Trust US Equity Opportunities ETF (FPX), which is where over 10% of my managed account is allocated as a “more calculated call… based on how our analytics team feels about the broader market as a whole, potentially favored asset classes and how that particular holding fits into the rest of the allocation.”
You can see the energy sector is up 15% since that email on April 12. And the tech and healthcare-weighted fund is down two and a half percent.

Imagine if my entire worth was in that sort of account? Or managed by that sort of institution?

Which is why it's not.

I need to be able to be more flexible and, frankly, be in other opportunities where I can harness bigger gains.

Let's just take a look quickly at the performance of those sectors of the S&P year to date and in the past several months. 
You can see which ones are outperforming at the top there.

A lot's happened since 2017. A lot's changed.

And I just like to be a bit more nimble with my money. 
It doesn't mean I don't have a long-term approach or a long-term time horizon. Six months in the span of 10 years is 5% of the time frame!

I was telling you last week that I was buying oil stocks. Oil is now up over $70.

If you look at a fund like, well, XLE, for example, but also XOP, which I recommended early in May to premium readers of Foundational Profits, that the fund is now looking very strong

I might even be looking to sell a little bit of energy stocks here. They're up 40% across the sector over the past six months.

That's how to play the game.

That's how you rotate in and out of sectors — not trading, not day trading — but checking in at least every quarter to rotate. 
Call it like you see it, 

Nick Hodge
Editor, Daily Profit Cycle

Nick Hodge is the co-owner and publisher of Daily Profit Cycle and Resource Stock Digest. He's also the founder of Hodge Family Office, the umbrella organization for his three premium services: Foundational ProfitsFamily Office Advantage, and Hodge Family Office . He specializes in private placements and speculations in early stage ventures, and has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world.
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