In this episode of Strategic Investor Radio, host Charley Wright interviews Joe Childrey. Mr. Childrey is the CEO and founder of Probabilities Fund Management, and a three-time guest of the show.
Conventional wisdom teaches that investors can’t reliably time the market, but Mr. Childrey has a strategy that’s unconventionally wise. The Probabilities Fund enters and exits the broad market, primarily through the Vanguard S&P 500 index fund, moving to cash or even going short during bear markets, and using leverage to amplify long positions during bull markets. Morningstar says the fund has 1,000% annual turnover – that’s an active strategy.
But does the strategy work? The performance of Childrey’s Probabilities Fund speaks for itself: Since January 1, 2008, the fund has returned approximately +145%, while the broad market has returned around +68%. This period, although brief in the century-plus history of Wall Street, includes both the bear-market period of 2008-09, as well as the multi-year bull market we’ve been experiencing since.
How does Childrey know when to buy and when to sell? The Stock Trader’s Almanac is one source. The Probability Fund bases part of its outlook on long-term, repeatable patterns (like “sell in May and go away”) and uses tactical overlays (“sell when Congress is in session”) for more nuanced decision-making. Childrey says he thinks there will be a recession in the next couple of years, and long-only investors will suffer. Long-term, “buy and hold” may work out, but most people are unable to adopt a 20-year time frame.
The Probabilities Fund is available as a mutual fund in three share classes, listed below with their net-expense ratios:
A (PROAX), 2.14%
C (PROCX), 2.89%
I (PROTX), 1.89%
The minimum initial investment for A and C shares is $2,500, and the initial minimum for I shares is $100,000.
The strategy is also available in a variable insurance trust (“VIT”), a separately managed account (“SMA”), or as part of HedgeCoVest’s real-time hedge-fund replicator.
Childrey also discussed his company’s sector-rotation strategy, which is available in SMAs and through third-party investment advisors.