After writing last week's essay, I felt that there was still a lot more I'd like to know about the performance of high VST stocks. Sure, the 2,176 tests I wrote about last week confirmed my faith in the efficacy of the VectorVest system of analyzing and ranking stocks, but they didn't tell me all I wanted to know. For example, they showed me that a typical portfolio of top VST stocks continued to appreciate in value as the holding period increased, but it did not tell me which holding period gave the best results. So we had more work to do.

We conducted a series of tests in which we looked at holding periods of 4 weeks, 8 weeks, 13 weeks, 26 weeks, 52 weeks, 104 weeks, 156 weeks and 208 weeks for portfolios containing the top 5, 10, 15 and 20 VST stocks. In all, we ran 15,160 tests. The results were very interesting. In every case, the percentage of winning runs and the average annual rate of return were favorable. The distribution of results was a smooth, bell shaped pattern, biased to the side of the longer holding period. The poorest results were shown by the five stock portfolios with four week holding periods. They gave an average annual rate of return of 12.16% with 51.83% winning trades and 55.08% winning runs. The best results were shown by the 15 stock portfolios with 52 week holding periods. They produced an average annual rate of return of 19.91% with 60.12% winning trades and 78.90% winning runs. Not bad. Not bad at all. (A lot of money managers would kill for results like these.)

Given this information, my next task is to learn how to apply it in developing a practical investment strategy. I'll do this by seeing what happens when we rebalance the various sized portfolios as a function of holding period. As described in my essay of July 10, 1998, I did a bit of this work many years ago. It wasn't an elaborate study, but it still took a lot of time and effort. Yes, I ran a top 20 VST stock portfolio test with a 52 week holding period last week just for the fun of it. I started on June 02, 1995 and rebalanced once a year. I got the wonderful result of a 421% gain in 10.5 years. Is this the best we can do? I don't think so, and I'm going to find out. If you don't think that running 15,160 tests like we did last week wasn't a lot of work, this next stage of testing will take far more effort. But I don't care. I'm determined to find The Best High VST Strategy.