Nov 5, 2026 · 52 min
FFTY loosens its rules to let winners run
Letting Winners Run: David Ryan And Chris Gessel On The Rules Driving The New FFTY
The ETF redesign tests whether flexible sizing, cash management, and sharper market judgment can improve results when leadership narrows.
- 1FFTY now lets strong holdings grow while capping individual-stock exposure near 8 percent.
- 2The revised approach can hold cash and fewer positions when market conditions or stock quality deteriorate.
- 3Recent rotation from technology toward retail and other stronger groups underscores the importance of following market leadership.
Don't miss
David Ryan and Chris Gessel explain how staged reductions can protect a large winning position during a climactic advance without selling it all at once.
The brief
David Ryan and Chris Gessel explain why FFTY’s old weekly rebalancing repeatedly cut strong positions, conflicting with the growth-investing principle of letting winners run.
The redesigned FFTY combines quality and relative-strength measures with flexible sizing, allowing winners to become larger holdings while keeping individual-stock exposure near 8 percent.
Backtests support holding cash and fewer stocks when conditions weaken, rather than forcing the fund to remain fully invested or maintain a fixed portfolio size.
The guests describe staged reductions in climactic advances, using trend lines, market conditions, and planned analysis to protect gains without exiting strong stocks too early.
Their market review finds technology weakening while retail and other consumer-sensitive groups show stronger price action, reinforcing the case for rotating toward genuine leadership.
What was said on this episode
25 statements · 11 positive · 9 negative · 1 mixed · 4 neutral
Weekly FFTY rebalancing harmed performance when market leadership narrowed.
“the biggest issue that um with the way ffty was handled was that it was rebalanced every week and so it was really you know it would work okay in some markets uh when everything was moving but when you know there were fewer leaders then you're you're just kind of whacking the the the etf at the knees and um and so it it struggled uh in many markets”
Listen at 3:48
Reducing winners conflicted with O’Neill’s strategy of letting winners grow.
“it was really, I'd say it's almost anti-O'Neill because he's always talking about you add to your winners and your winners should become a bigger part of your portfolio as time goes on.”
Listen at 7:04
Weekly resets reduced strong stocks back to 2% weights.
“At the end of every week, even if it had a great move, it was knocked back down to 2%.”
Listen at 7:17
The prior FFTY approach returned about 2.2–2.3% annually versus 11% for the S&P.
“the 11% annualized growth on the S&P, and this was 2.3%, or 2.2%.”
Listen at 7:51
The Composite and Relative Strength screen captures nearly all major winners.
“it's a screen that i've been using for years that captures nearly all the big winners”
Listen at 11:29
An individual FFTY stock should be capped near an 8% portfolio weight.
“we found that about 8%. is really a top weighting that you can get to in any one stock.”
Listen at 14:13
FFTY will not force 50 holdings when too few stocks meet its criteria.
“we weren't going to force 50 stocks into the index even if they didn't meet the criteria”
Listen at 17:25
Fewer qualifying stocks automatically increase cash and reduce bear-market exposure.
“if stocks don't make the list then we raise our cash position and we can go sideways in a bear market”
Listen at 17:55
FFTY should hold fewer stocks and cash when market conditions weaken.
“if we can only find 30, then we should go with 30, and then the others will be in cash until the market improves and we can get back up to 50 names.”
Listen at 19:18
FFTY will reduce holdings and raise cash in severe markets.
“when you have enough stocks yes we'll have 50 but if we get into a really dire tough market we're going to cut that down and and hold on to the cash”
Listen at 23:48
FFTY will reduce positions after stocks roll over following long-term channel breaks.
“when the market breaks a long-term channel line, we'll let it run. But when the stocks start rolling over, we will start taking them off using shorter term moving averages.”
Listen at 25:29
A climactic move typically rises at least 30% over roughly 15 days.
“it's called a climactic move when in the last three weeks it's going almost straight up. And it's usually around 15 days and it goes up 30% or more.”
Listen at 27:04
The prior blacklist rules did not improve the overall index in backtests.
“sometimes these rules worked well, but overall they did not. I back-tested all of them. they did not add value to the overall index.”
Listen at 31:14
Sector-group weights can become excessively concentrated in the 30–40% range.
“Sometimes these groups get up to some very high weightings in the 30s and even the 40s percentages. You get almost too much concentration.”
Listen at 33:11
FFTY dynamically shifts toward sectors and stocks currently leading the market.
“individual stocks, which this ETF, which FFDA, TY moves to is dynamically moving to the areas that are leading.”
Listen at 39:47
The revised list captures market leaders and automatically reduces exposure in weak markets.
“I'm very pleased that we've got a list that really captures what is leading the market. And when the market gets weak, those names diminish. and so there's just automatic market timing built in”
Listen at 40:53
Stocks with uptrends and strong fundamentals typically lead the market.
“we want stocks that are in uptrends and have great fundamentals and uh those typically lead the market.”
Listen at 41:29
FFTY market timing adjusts over several weeks rather than daily.
“the market timing is not to the day. Sometimes it takes... a few weeks for a group to to drop out and new groups to come on”
Listen at 42:21
The Nasdaq must reclaim overhead resistance to produce a positive signal.
“you've got now that's that's three or four months of overhead and i would say we'd have we have to get back above that area And that would be a very positive sign if it can do that.”
Listen at 44:57
The market may be shifting from passive investing toward active management.
“we might be moving away for the first time in a decade from passive investing to you have to be active in moving in the right direction.”
Listen at 46:09
Capital is leaving technology, requiring caution toward the technology sector.
“Money is coming out of that area. So you have to be very careful of the technology group right now.”
Listen at 46:47
The semiconductor ETF SMH broke its 200-day average and continued declining.
“SMH, that broke the 200-day. and has now kind of followed through to the downside.”
Listen at 47:18
Investors should rotate into different groups when market leadership changes.
“you just can't get stuck oh i've done so well in this group but you have to be have the flexibility to to move to different groups when that's happening in the market”
Listen at 48:35
Investors should allocate toward areas receiving market rewards.
“You've got to go where you're being rewarded.”
Listen at 49:11
The market is not currently favoring growth stocks.
“we're still not in a growth market”
Listen at 49:47
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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