Every VectorVest subscriber should know that portfolios of top-ranked VST stocks make money and beat the market over 95% of the time. Even better, if one were to buy, say, the top 15 stocks ranked by VST-Vector, sell them after one year and repeat the process year after year, they would be virtually certain of making money and outperforming the market by a wide margin. Our "Strategy of the Week" dated December 9, 2005 and March 24, 2006 illustrate this technique in mouth-watering fashion.

There's only one hitch. You have to have the intestinal fortitude to stay with the strategy through gut wrenching market corrections. Personally, I can't do it. So I asked for your help in my essay of March 24, 2006. I called it "The Chairman's Challenge." The challenge was to find a practical way of managing a portfolio of top ranked VST stocks that would out-perform the strategy illustrated on 03/24/06, while reducing the pain of deep draw-downs. The first place winner would receive a check for $2,500. Second and third place winners would receive $1,250 and $625, respectively.

This challenge was a lot more difficult than it sounds. Only 39 qualified entries were submitted that beat the 198% gain shown in our 03/24/06 "Strategy of the Week." Moreover, most of the entries were not actively managed portfolios, but a variation of our basic rebalancing technique. Nevertheless, some truly outstanding results were obtained.

The Third Place Winner is Mr. Ariel Rosenfeld, of Kfar Saba, Israel. His entry showed a gain of 317%, a max drawdown of only 21% with 55% winners. Mr. Rosenfeld's entry used the Primary Wave to determine which exit to use. When the Primary Wave was Up, he used a 26-week hold as an exit. When the Primary Wave was Dn, he used a 26-week hold or VST trending lower for five days as an exit. We tested this strategy during the period 01/05/96 to 01/03/03. It showed a minus 6% return with a max drawdown of 50%.

The Second Place Winner is Mr. Bruce Gillett, of Lamone, Maine. His entry achieved a gain of 346% with a max drawdown of 24% and 78% winners. Mr. Gillett bought and held 15 stocks for the first six months, then he used the % Buys to determine whether to be in or out of the market as follows: If % Buys < 25%; then buy 15 stocks and hold until the % Buys > 35%. Stay in cash until the % Buys < 25%. Although this strategy brings an interesting market timing sequence into play, it showed only a 60% return and 42% max drawdown over the 01/05/96 to 01/03/03 time period. It is featured as this week's "Strategy of the Week." Make sure you see it demonstrated at the VectorVest University.

Now, how do I feel about these entries? Well, they certainly beat the pants off of the 198% gain we showed on 03/24/06, but they didn't beat our basic rebalancing strategy, which gave a 323% gain and max drawdown of 35% over the 01/05/96 to 01/03/03 time period. Moreover, neither entry solved the major problem of mitigating major draw-downs. So I'm still looking for something a chicken like me would use. Hopefully, the First Place Winner's entry, which we'll reveal next week, will do the job. Until then, let's give some credit to Mr. Gillett and Mr. Rosenfeld for producing The Chairman's Challenge Runners-Up.