1. Visual Understanding of Sector Surfer Strategies Are classical visualization tools useful in understanding SS Stephen Lundstrom

2. Process Download.csv file from SS Perform (manual) 11 year backtest (VV) Capture 10 equity curves from backtest Prepare more detailed charts using TC2000: Vertical lines indicate trades Equity symbols indicate what was owned during each period All equities owned during chart time frame shown – provides Sector Surfer context.

3. VV Backtest Settings –Account initial investment $100,000 No commission, no margin No interest on cash (SS includes some interest) –Automation trades entered manually –Dates + Equities from Sector Surfer.csv download –Closing prices from VectorVest »No dividends »Trades following morning –Test Period 1/2/2002 to 12/31/2012

4. TC2000 equity comparisons Used SPY to show overall market behavior –Green dashed line; chart scale applies to SPY Can compare up to 10 equities –Chose only those equities selected by SS during the timeframe depicted –Comparisons used to show trends, not values Annotations –Vertical bars depict where trades were made –Equity owned in each period shown –Primary drawdowns shown (in red – matches backtest annotations) –Yellow areas highlight possible better choices

5. Two Hall of Fame strategies selected as case studies #1 ETFs: SectorVarious1 634933549324271250-3961-3-38782 ZROZ not supported in VV –Manually entered ZROZ gains per SS.csv file #1 Top Dog Stocks: Recent Yield 634891329763437500-3017-1-32874 Dropped some stocks (TC2000 limitations)

6. General Observations Equity selection within portfolios studied generally quite good. Yellow areas on CLOSER LOOK charts highlight better choices –(with perfect hindsight) Not all ETF equities available over entire study periods (mine or SSs) Use of stop losses or other techniques might be needed to reduce max. drawdowns.

7. Strategy: SectorVarious1 Current top SS Hall of Fame ETF –SectorVarious1 634933549324271250-3961-3-38782 ETFs: (study period 1/2/2002 – 12/31/2012) ITB 5/23/06 EEM 4/25/03 EWW ZROZ 2/14/11 GLD 11/24/02 PPH REZ 1/17/08 XLE IWM BAL 7/31/08 QQQ IBB 6/29/01 Stormguard ON From FromFrom

8. 14 Year Chart

9. 10 Year Chart

10. Summary Statistics: SectorVarious1 ETF Strategy Sector SurferBacktest 10 yr annualized return 42.9% 10 yr CROR (w/o dividends)33.2% 10 yr Max Drawdown 25%25.9% Sharpe Ratio 0.98 Score195 Safety 41.0 Alpha 39% Beta 0.81

11. Count of % Gains Reported (does not take holding period into account) 47 trade pairs: 1/1/2002 – 12/31/2012 % Winners77% %Gains Smallest Gains:-7.2% (twice) Largest Gains:32.6%, 76.0% SectorVarious1 Strategy

12. What SS Has to Work With (only 10 of 12)

13. SectorVarious1 Strategy Backtest 10 yr Equity Curve Showing VV Confirmed Calls MaxDD -25.9% $2M

14. Jan 2002 – July 2003 EWW +4.2% $CASH 6/02 – 4/03 IBB +28.7% $95K $125K

15. Jan 2003 – July 2004 IBB +28.7% $CASH 6/02 – 4/03 XLE +7.6% EWW +6.0% EEM +10.5% EWW -4.5% IBB -2.8% $110K $160K

16. Jan 2004 – July 2005 XLE +7.6% EWW -4.5% IBB -2.8% XLE +7.8% EEM +26.7% EWW +6.8% XLE -7.2% PPH -1.8% $150K $200K

17. Closer Look

18. Jan 2005 – July 2006 EWW +6.8% XLE -7.2% PPH -1.8% XLE +10.1% GLD +5.8% EWW +13.7% EEM -1.8% IWM +0.3% GLD -5.9% $200K $250K 21.7% drawdown

19. Closer Look

20. Jan 2006 – July 2007 EEM -1.8% IWM +0.3% GLD -5.9% PPH +9.0% EWW +32.6% XLE +14.8% $250K $350K

21. Closer Look

22. Jan 2007 – July 2008 EWW +32.6% XLE +14.8% EEM +16.5% GLD +18.2% $CASH 2/08 – 5/08 $350K $500K XLE +3.2%

23. Closer Look

24. Jan 2008 – July 2009 $CASH 2/08 – 5/08 XLE +3.2% $CASH 7/08 – 6/-09 $460K $560K

25. Closer Look

26. Jan 2009 – July 2010 $CASH 7/08 – 6/-09 EWW +10.7% ITB +1.7% REZ -2.1% XLE +2.8% GLD -7.2% ITB REZ ITB REZ +6.2% REZ -4.8% ITB +10.0% $500K $640K 19.5% drawdown

27. Closer Look

28. Jan 2010 – July 2011 +6.2% ITB +10.0% ZROZ* +14.9% BAL +76.0% IBB -0.7% $600K $1.4M 25.9% drawdown 25.9% drawdown

29. Closer Look

30. Jan 2011 – July 2012 BAL +76.0% IBB -0.7% ZROZ* +6.8% GLD +12.3% ZROZ* +26.0% $CASH 9/11-11/11 ZROZ* +6.9% ITB +28.7% 25.9% drawdown $1.0M $2.1M

31. Closer Look

32. July 2011 – Dec 2012 ITB +28.7% ZROZ* +0.9% ZROZ* +6.9% ZROZ* +26.0% GLD +12.3% $CASH 9/11-11/11 ITB +17.0% $1.2M $2.2M

33. Closer Look

34. SectorVarious1 - Trades DateSellBuyGain % 12/31/12ITB17.0% 8/31/12ZROZITB0.9% 5/31/12ITBZROZ28.7% 12/30/11ZROZITB6.9% 11/07/11$$$$ZROZ0.0% 9/30/11ZROZ$$$$26.0% 8/31/11GLDZROZ12.3% 7/29/11ZROZGLD6.8% 6/30/11IBBZROZ-0.7% 4/29/11BALIBB75.0% 9/30/10ZROZBAL14.9% 5/29/10REZZROZ6.2% 3/31/10ITBREZ10.0% 1/29/10REZITB-4.8% 12/31/09GLDREZ-7.2% DateSellBuyGain % 1/31/06EWWEEM13.7% 11/30/05GLDEWW5.8% 10/31/05XLEGLD10.1% 6/30/05PPHXLE-1.8% 4/29/05XLEPPH-7.2% 2/28/05EWWXLE6.8% 12/31/04EEMEWW26.7% 8/31/04XLEEEM7.8% 5/28/04IBBXLE-2.8% 4/30/04EWWIBB-4.5% 2/27/04XLEEWW7.6% 12/31/03EWWXLE6.0% 11/28/03EEMEWW10.5% 8/29/03IBBEEM28.7% 4/30/03$$$$IBB1.2% 5/31/02EWW$$$$-2.7% 1/31/02$$$$EWW4.2% DateSellBuyGain % 11/30/09XLEGLD2.8% 10/30/09REZXLE-2.1% 9/30/09ITBREZ1.7% 7/31/09EWWITB10.7% 6/30/09$$$$EWW1.8% 6/30/08XLE$$$$3.2% 5/30/08$$$$XLE1.0% 1/31/08GLD$$$$18.2% 11/30/07EEMGLD16.5% 7/31/07XLEEEM14.8% 3/30/07EWWXLE32.6% 8/31/06PPHEWW9.0% 6/30/06GLDPPH-5.9% 4/28/06IWMGLD0.3% 3/31/06EEMIWM-1.8%

35. Strategy: 9-Stock Recent Yield Started with current best TopDog Stocks: –Recent Yield Limitation on charting Tools (compare 10 stocks, equity not supported) Eliminate laggards on the strategy chart (APOL, NFLX) Eliminate equity not supported with tool (TC2000): PDC

36. 9-Stock Recent Yield Strategy 634955286436756250-3808-8-37784 PCYC MCHP IIVI AMGN SWN AMZN L GMCR SRPT Stormguard ON All equities available for entire backtest 1/2/02 – 12/31/12

37. 24 Year Chart

38. 10 year chart

39. Summary Statistics: 9-Stock Recent Yield Strategy Sector SurferBacktest 10 yr annualized return 85.6% 10 yr CROR (w/o dividends) 67.3% 10 yr Max Drawdown 59%58.9% Sharpe Ratio 0.45 Score390 Safety -0.5 Alpha 92% Beta 2.51

40. Count of % Gains Reported (does not take holding period into account) 29 trade pairs: 1/1/2002 – 12/31/2012 % Winners79% Smallest Gains:-20.8%, -38.3%, Largest Gains:279.5%, 457.2% 9-Stock Recent Yield Strategy

41. What SS Had To Work With SPY GMCR PCYC SRPT IIVI MCHP L SWN AMZN AMGN

42. 9-Stock Recent Yield Strategy Backtest 10 yr Equity Curve Showing VV Confirmed Calls

43. Jan 2002 – July 2003 $170K 6/02 – 4/03 SRPT -20.8% AMZN +29.3% $CASH AMZN +25.1%

44. Jan 2003 – July 2004 $300K $CASH AMZN +25.1% SRPT +1.5% (?) AMZN +13.6% PCYC +13.1% $150K

45. Jan 2004 – July 2005 $300K $350K $200K PCYC +13.1% SWN +89.5% SRPT -10.4% 46.4% drawdown

46. Closer Look

47. Jan 2005 – Aug 2006 $300K $500K $1.1M $600K SRPT -10.4% SWN +53.0% SRPT +8.7% 41.1% drawdown

48. Closer Look

49. Jan 2006 – July 2007 $600K $1.1M $1.0M SRPT +8.7% 41.1% drawdown IIVI +64.2% GMCR +14.4%

50. Closer Look

51. Jan 2007 – July 2008 $900K $1.3M $1.1M 2/08 – 5/08 GMCR +14.4% GMCR +3.3% AMZN +28.9% $CASH +1.0% (?) SWN +7.4%

52. Closer Look

53. Jan 2008 – Aug 2009 2/08 – 5/08 $1.30M $1.35M $1.50M 7/08 – 6/09 SWN +7.4% $CASH +1.0% (?) $CASH +1.8% (?) GMCR +19.1%

54. Closer Look

55. Jan 2009 – July 2010 7/08 – 6/09 $1.50M $1.0M $3.50M GMCR +19.1% SRPT -38.3% 45.7% drawdown PCYC +279.5%

56. Closer Look

57. Jan 2010 – Aug 2011 $2.0M $3.50M $4.50M PCYC +279.5% SRPT -12.0% AMZN -1.2% IIVI -2.8% GMCR +62.1%

58. Closer Look

59. Jan 2011 – Aug 2012 $5.0M $10.0M $15.0M $20.0M GMCR +62.1% IIVI -2.8% PCYC +2.7% $CASH 0% PCYC +457.2%

60. Closer Look

61. July 2011 – Dec 2012 $5.0M $10.0M $20.0M $30.0M $35.0M PCYC +457.2% SRPT +78.8% PCYC +2.7% $CASH 0% GMCR +62.1%

62. Closer Look

63. 9-Stock Recent Yield Strategy - Trades DATESELLBUYGAIN 31-Dec-12(SRPT)78.80% 31-Aug-12PCYCSRPT457.20% 18-Nov-11$CASHPCYC0.00% 30-Sep-11PCYC$CASH2.70% 31-Aug-11GMCRPCYC62.10% 31-Mar-11IIVIGMCR-2.80% 28-Feb-11AMZNIIVI-1.20% 30-Nov-10SRPTAMZN-12.00% 31-Aug-10PCYCSRPT279.50% 30-Nov-09SRPTPCYC-38.30% 31-Jul-09GMCRSRPT19.10% 30-Jun-09$CASHGMCR1.80% 30-Jun-08SWN$CASH7.40% 30-May-08$CASHSWN1.00% DATESELLBUYGAIN 31-Jan-08GMCR$CASH3.30% 31-Oct-07AMZNGMCR28.90% 31-May-07GMCRAMZN14.40% 31-Jan-07IIVIGMCR64.20% 30-Jun-06SRPTIIVI8.70% 30-Dec-05SWNSRPT53.00% 30-Jun-05SRPTSWN-10.40% 28-Feb-05SWNSRPT89.50% 30-Jul-04PCYCSWN13.10% 31-Dec-03AMZNPCYC13.60% 29-Aug-03SRPTAMZN1.50% 30-May-03AMZNSRPT25.10% 30-Apr-03$CASHAMZN1.20% 31-May-02AMZN$CASH29.30% 28-Feb-02SRPTAMZN-20.80% 31-Jan-02$CASHSRPT