Off To A Good Start With Our New Security Selection Factor--Embracing The Power Of Mean Reversion

An Investing Note

As regular readers know, each day the market's open, our system gauges stock and options market sentiment to rank securities by its estimate of their potential returns over the next six months. We made a slight change to our selection process last week, incorporating a new factor we'd been tracking for the last year or so. More on that below, but first, these were our top ten names as of Friday's close. 

Screen capture via Portfolio Armor on 6/24/2022.

As you can see above, they were all long energy names (led by the United States Natural Gas Fund, LP UNG, Occidental Petroleum Corp. OXY, and ProShares Ultra Bloomberg Crude Oil UCO), thanks in part to the new factor we added. The new factor is based on historical data we've been tracking which shows that, all else equal, securities that underperformed over the last week and month relative to their historic averages, outperform ones that did well over the recent week and month.

So you can see why this list was heavy with energy names, given their recent pullback. 

Here's how Friday's top ten performed as of Monday's close: 

It looks a mean reversion effect, but we're continuing to track this as new data comes in each trading day, and adjusting our factors accordingly.

We're also tracking a "plain" version of our top ten without our additional factors, for comparison purposes: the numerical value of our factors going forward will be based on their outperformance (or underperformance) relative to our plain top ten. 

Posted In: contributors

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.