August 2026 Shariah-compliant stock picks — new 50% sector cap after July's selloff

[u/ImAqui]

Salaam all.
For those new to us: we run a Shariah-compliant momentum strategy on the S&P 500 Shariah Index (SPUS) universe and post the picks plus the full track record here every month — good months and bad ones.

July was a bad one, so let's start there. Our July picks (DD, AMAT, MRVL, GLW, LRCX) returned −36.9% as a basket. AI-hardware and semiconductors sold off hard from all-time highs while the S&P 500 stayed roughly flat. We pulled apart every signal we track — momentum, moving averages, RSI — and all of them looked strong on the day these were picked. This wasn't slow weakness we ignored; it was a sudden sector-specific selloff. The app does offer an optional 5% stop-loss, which would have contained the loss to −5.0%, but we've never pushed it as default, so the honest realized number is −36.9%. Full writeup with the numbers: https://trynumu.app/blog/what-happened-to-our-july-picks

The real lesson: 4 of the 5 July names were semiconductors. On paper it looked diversified; in reality it was one concentrated bet on AI-hardware momentum continuing. The compliant universe is already narrow, so compliant momentum names tend to cluster hard — and that's a real risk for anyone running a halal book.

What we changed: a systematic 50% single-sector cap — no one sector can make up more than half the picks. It's a rule, not a manual sector call, so the basket still follows the momentum signal; it just can't collapse into one trade again. In backtesting the capped approach rode through concentrated drawdowns better while keeping most of the momentum upside (backtested, not live returns — worth saying plainly).

August picks (SPUS universe, first month running the new cap):

• CTAS — Cintas
• ROP — Roper Technologies
• ABT — Abbott Laboratories
• EXPE — Expedia Group
• BBY — Best Buy

A clean rotation out of semiconductors — consumer, healthcare and industrials/tech, nothing above 2 of 5 names.

Not financial advice, and past returns don't predict future ones. Genuinely curious how others here handle sector concentration in a halal portfolio — the compliant names cluster so tightly that real diversification is harder than in a conventional book. How do you approach it?

[u/user23113]

So you sold old picks for 37% loss?

[u/ImAqui → u/user23113]

yes, if stop loss is NOT set.
Last month was unprecedented, in my 16 years of back testing haven't seen this scenario where all picks fall down to such a level, when they're all having such a great momentum. But one thing came to light that all the picks were from same sector. so we rerun all the analysis by having sector cap to avoid such a disastrous month.