Es-CAPE-ing overvalued Sectors

The investment strategy of this portfolio is based on the widely known Shiller-PE, in the following referenced as CAPE (Cyclically Adjusted PE). As nobel laureate Robert Shiller formulated in two of his brilliant working papers ("Stock Prices, Earnings, and Expected Dividends", 1988, and "Valuation Ratios and the Long-run stock market Outlook: an update", 2001), it makes statistical and fundamental sense to rely on a more wide-ranging observation in regards to earnings when building a Price-Earnings-Ratio. He pruposes to divide the actual price of a stock by a 10 year historical average of earnings instead of looking at 1 year Forward earnings and thus relying on only one observation. But as it is the case with the normal PE, the CAPE of different sectors or industries cannot be compared due to the difference in nature. Therefore, it makes sense to build a rolling average of the CAPE on a long-term basis (but limited to 20 years) in order to compare the sectors. This investment strategy is based on the rolling averages of the CAPE of S&P 500 Sectors (GICS LVL 1). It invests in the Top 4 undervalued sectors by Buy-and-Hold-ing the replicating ETFs. The Top 4 are equal-weighted. The strategy is reviewed and the Top 4 are updated at least once a month.