Bookkeeping: A Major Overhaul - Selling Down Most Major Positions

Once again, I am not calling a "top" in the market; who knows when the market will reverse. However, I expressed caution Wednesday AM and with this first 'shot' across the bow yesterday afternoon I am going to heed it, and start raising more cash. I did add to some short ETFs yesterday but won't add more until I see a true break downward. Until yesterday afternoon the market has blasted anyone short so I don't want to get overexposed on the short side (already at 13.5% short exposure) if we continue to an era of "hear no evil, see no evil".

The fund has some serious gains I want to lock in, and I am outperforming the indexes I measure against by a wide margin so I don't need to take as many chances as those who have stood on the sideline during this impressive (albeit detached from fundamentals to a large degree) move upward. So in that vein I cut back most of my major positions which I will outline below. I am going to categorize the reasons into buckets as the reasons for selling are not the same.

(A) I sold down my 3 Chinese solar stocks, not because I am any less bullish but simply because if a turn does come, anything Chinese will get thrown to the curb, even those with good fundamentals. I am keeping MOST of my LDK Solar (LDK) simply because the fundamentals look so solid, although the upcoming audit report could be a binary event which drives the stock up/down significantly. Trina Solar (TSL) - again I really like this stock long term, but anything Chinese carries downside risk, and the same goes for Suntech Power (STP) - these sales are not huge, more of a reduction in risk exposure type of thinking. These are high beta names, but I am balancing my belief in the sector fundamentals versus a potential fire sale in all things Chinese if the market turns (again, a big if).

• LDK Solar ($47.25) reduced from 6.1% to 5.4% of fund; selling 200 of 1500 shares or 13.3% - raising $9,500 cash
• Trina Solar ($56.25) reduced from 5.4% to 4.5% of fund; selling 200 of 1100 shares or 18.2% - raising $11,200 cash
• Suntech Power ($41.00) reduced from 2.6% to 1.8% of fund; selling 200 of 700 shares or 28.5% - raising $8,200 cash

(B) I sold 5 of the big winners and largest (non solar) positions in the fund as well. I sold these in larger scale than the solar stocks simply because I want to lock in the gains PLUS the fact when I reviewed the charts, all are significantly away from any meaningful support. Also most were nearing my year end target prices as of yesterday afternoon! I continue to like all 5 names, and am willing to buy back at lower prices. I had already sold down some of these (in small scale) earlier in the week as they mounted enormous runs of late, but am going to take a more heavy handed approach now. If they continue to run, so be it - I still have some exposure.

• Blue Coat Systems ($46.00) reduced from 4.9% to 3.4% of fund; selling 375 of 1225 shares or 30.6% - raising $17,300 cash
• Mosaic ($61.75) (I hate to do it!) reduced from 3.9% to 2.7% of fund; selling 225 of 725 shares or 31% - raising $13,900 cash
• Ciena ($45.00) reduced from 3.5% to 2.0% of fund; selling 350 of 850 shares or 41.1% - raising $15,800 cash
• Consol Energy ($50.50) reduced from 2.9% to 2.0% of fund; selling 200 of 650 shares or 30.7% - raising $10,100 cash
• Peabody Energy (51.00) reduced from 2.5% to 1.8% of fund; selling 150 of 550 shares or 27.3% - raising $7,700 cash

Whew - what a cutback - all together about $93,500 in cash. So I've significantly cut my exposure to solar, networking, and coal.

The hardest to cut is Mosaic as I believe it is still way undervalued but it is so far off any meaningful support, I am hoping for some pullback to get back in at a lower price. I also switched into some CF Industries (CF) yesterday during the afternoon selloff, as it fell to $71 or its 20 day moving average so I flipped from 1 fertilizer company to another. To put it in perspective while CF is near its 20 day moving average, Mosaic is now at $61.50, and its 20 day moving average is $52.50 or a whopping 15% away. So my theory here is I can stay with the agriculture (specifically fertilizer) exposure but I will be shifting assets in the near term from Mosaic to CF Industries. On any meaningful pullback I will reload Mosaic in a heartbeat.

So overall is this "market timing"? - I guess it could be read that way. Personally, I just find very little that is fundamentally cheap in the sectors I am interested in, and with the overall market (to me) overextended, I find it prudent to raise cash and go more conservative in the near term. If stocks I like pullback to support levels I will be content to buy back in some scale. All sales today combined for about 10% increase in cash position, so the fund is now back to 13.3% cash. (up from 3.5% yesterday afternoon)

Long all names above in fund; no personal positions