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Cyclicals for Short Term Alpha

Many advisors have asked us our view on what broad market US equity theme they should favor in the near term for their client portfolios. On a relative basis, we believe our Cyclicals Portfolio (which has a lot of value-oriented companies within financial, material, energy, and industrial spaces) is uniquely positioned (relative to our other solutions) as the economy continues to normalize in 2021.

In the report below, we backtested Astoria's Cyclicals Portfolio (description included below) versus the SPDR® S&P 500® ETF Trust (SPY). The key observation in the 13-year backtest is that Cyclicals outperformed SPY in the following years:

  • The global financial crisis occurred in 2008. In the following two years, the economy experienced a recovery and Cyclicals outperformed the broader US equity market.

  • In 2015, the global economy had a slight recession and the economy reflated in 2016. Once again, Cyclicals outperformed the S&P 500.

We believe the same thing is beginning now. Specifically, we believe Cyclicals will relatively outperform as the economy normalizes in 2021.

Additionally, Cyclicals are undervalued compared to many parts of the global equity market. Moreover, there is research demonstrating that as corporate earnings inflect higher, investors have historically rotated away from Growth and into cyclically oriented Value names.

Tactically, Cyclicals outperforming over the next 12-18 months is a very reasonable proposition in our view.

Source: Astoria Portfolio Advisors. The historical backtest is calculated from October 31, 2007 to December 31, 2020. Net Returns incorporate 50bps annualized management fee. The weight of each stock was rebalanced back to equal weight on a quarterly basis. The benchmark for the Cyclicals Portfolio is 100% SPDR® S&P 500® ETF Trust (SPY).

Astoria's Cyclicals Portfolio uses a quantitative and systematic approach.

  • The starting universe is approximately 200 companies exposed to the following sectors: Consumer Cyclical, Industrial, Financial Services, Basic Materials, and Energy.

  • Target 30 stocks that have significantly greater earnings growth, ROE, and ROA compared to the SPDR® S&P 500® ETF Trust (SPY).

  • The constituents are equally weighted and rebalanced annually.

  • Our Benchmark is 100% SPDR® S&P 500® ETF Trust (SPY).


Nick Cerbone

Disclosure: There are no warranties implied. Astoria Portfolio Advisors LLC is a registered investment adviser located in New York. Astoria Portfolio Advisors LLC may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. As of the time of this writing, Astoria held positions in all the stocks within our Cyclicals Portfolio on behalf of client accounts.

Information presented herein is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Readers of the information contained on this Performance Summary, should be aware that any action taken by the viewer/reader based on this information is taken at their own risk. This information does not address individual situations and should not be construed or viewed as any typed of individual or group recommendation. The model delivery performance shown represents only the results of Astoria Portfolio Advisors model portfolios for the relevant time period and do not represent the results of actual trading of investor assets unless otherwise indicated. Model portfolio performance is the result of the application of the Astoria Portfolio Advisors proprietary investment process. Model performance has inherent limitations. The results are theoretical and do not reflect any investor’s actual experience with owning, trading or managing an actual investment account. Thus, the performance shown does not reflect the impact that material economic and market factors had or might have had on decision making if actual investor money had been managed. Indices are typically not available for direct investment, are unmanaged, and do not incur fees or expenses.

Model portfolio performance for the Cyclicals Portfolio is shown net of the model advisory fee of 0.50% charged by Astoria Portfolio Advisors and does not include trading costs. The model delivery performance results are net of Astoria Portfolio Advisors’ fee and does not include any additional advisory fees charged by advisors employing Astoria’s models. Any additional fees charged by an advisor will reduce an investor’s return. Performance results shown include the reinvestment of dividends and interest on cash balances where applicable. The data used to calculate the model performance was obtained from sources deemed reliable and then organized and presented by Astoria Portfolio Advisors. The performance calculations have not been audited by any third party. Actual performance of client portfolios may differ materially due to the timing related to additional client deposits or withdrawals and the actual deployment and investment of a client portfolio, the reinvestment of dividends, the length of time various positions are held, the client’s objectives and restrictions, and fees and expenses incurred by any specific individual portfolio.

Benchmark: The Cyclicals Portfolio performance results shown are compared to the performance of 100%SPDR® S&P 500® Trust (SPY). Return Comparison: The SPDR® S&P 500® ETF Trust (SPY) was chosen as it is generally well recognized as an indicator or representation of the US stock market.

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