Saturday, October 13, 2007

Bookkeeping: Weekly Changes in Fund Positions - Week 10

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Week 10 Major Position Changes

Fund positions of 1.0% or greater can be found each week in the right margin of the blog, under the label cloud and recent comments areas; I highlight each week the larger position changes.

Being a long only fund, via Marketocracy rules, the only hedges to the downside I have are cash or buying short ETFs.

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 16.1% (vs 1.3% last week)
50 long bias: 70.0% (vs 87.7% last week)
3 short bias: 13.9% (vs 11.0% last week)

53 positions (vs 60 last week)
Additions: Atwood Oceanics (ATW)
Removals: Sandisk (SNDK), Under Armour (UA), Western Refining (WNR), Shaw Group (SGR), CME Group (CME), Homex Development (HMX), Allegheney Technologies (ATI), Titanium Metals (TIE)

Top 10 positions = 35.8% of fund (vs 41.2% last week)
35 of the 53 positions are at least 1% of the fund's overall holdings

Major changes and weekly thoughts
This was a very good week for the fund and good start to the life of the fund, as I have more than doubled the performance of the indexes I measure against. With the market up so much, with no break for a month and a half I decided to go to a more cautious stance Wednesday morning. This decision was also due to the fact that every major sector I either owned or was interested in (save deep sea oil drillers) had mounted a substantial run; therefore to continue buying here in scale is just playing the momentum game. Granted this game has been going on for weeks, but I'd rather be a net seller rather than net buyer at these levels and wait for either a broad market pullback or individual securities to come back to more meaningful support - this will limit my downside risk in these names to a degree. Many charts have major air pockets of no support (see the performance of Baidu.com this week), so when the worm turns the move down is violent. But valuations are stretched across the board in the universe I am interested in as the "smart money" piled in the past 6 weeks, chasing the sectors that are working.

Last, the market (save for last week) has been marked by a relatively narrow breadth with specific sectors (big cap tech, multinationals, and small cap Chinese stock) getting most of the action. Transports and other sectors which tie to the US economy are not participating in a meaningful way. Generally this cannot go on indefinitely but with the massive money supply being piped into the system, along with massive buybacks, and 'performance chasing' by smart money - it can go on longer than we expect. There seems to be universal bullishness, at least in sectors I am interested in, and a 'bullet proof' mentality when buying anything Chinese or large cap tech. This gets my radar up. We might be in the 6th inning or the 9th inning of this run; no way to tell - but we are certainly not in the first half of the game anymore. The intraday reversal Thursday also must be noted. Tops are generally not spikes down but processes - the open ended question is, was that the beginning of the process. Again, I don't know but due to the confluence of factors above I am going to move back to a larger cash position, and (when appropriate) potentially expand the exposure to short ETFs moving forward. Earnings season is another wild card - my thesis is we are going to see significantly lower guidance in many domestic based industries (without significant international exposure)... and/or if these companies do not choose to lower guidance they are setting themselves up for disappointing earnings (below consensus) in first half of 2008.

The fund was very busy this week making changes (see the archive in the left margin for all of this week's posts to review the following changes more in depth).

Some of the larger changes (chronologically) to the fund below:
  1. I added more exposure in Trina Solar (TSL) and Mosaic (MOS) Monday, as Trina was hit by collateral damage from the Barron's story on LDK Solar (LDK), and Mosaic was set to report earnings on Tuesday.
  2. I sold down a portion of my Ciena (CIEN) position in the first half of the week after a 26% run in a week and a half, and noted both Riverbed Technology (RVBD) and Blue Coat Systems (BCSI) charts were setting up nicely. (good call there!)
  3. I actually bought more Mosaic post earnings as the 5% reaction seems underwhelming in response to the knockout earnings - I also started adding to my 1% position in CF Industries (CF) as a collateral play due to the strength in Mosaic's phosphates business.
  4. I added to LDK Solar (LDK) in the low to mid $40s as the stock seemed to settle at a place it had some longer term support ($40), and then Tuesday when the company raised guidance I added even more.
  5. I sold down Gmarket (GMKT) going into next Monday's earnings; expectations have really ramped for this name and a few analysts were out with cautionary notes just ahead of the earnings, which in a normal market would be a bad sign. In this market, where all things Asian ignore any bad news, it might not matter to investors. But I want to reduce risk exposure in the name until we see what earnings and guidance is.
  6. Wednesday morning I closed 6 positions as I began changing my stance and wishing to raise some cash; 4 laggards (technically) Sandisk (SNDK), Western Refining (WNR), Under Armour (UA), Homex Development (HMX) and 2 winners that were not a big enough portion of the fund to have a major effect on performance: CME Group (CME), and Shaw Group (SGR) post earnings spike.
  7. I sold down some of my coal exposure as both Consol Energy (CNX) and Peabody Energy (BTU) had gained 10% in 2 weeks.
  8. I sold down Frontier Oil (FTO), the one refiner I really *do* like off the Valero Energy (VLO) and Chevron (CVX) warnings - I might need to reverse this decision as the stocks bounced later in the day and might have all the bad news of poor refining margins 'priced in'. I will watch to see how this sector reacts in the coming weeks.
  9. I cut my position in Riverbed Technology (RVBD) by 1/3rd as it ran 19% in just 5 sessions - however later that day the stock was slammed down 11% so I bought that position back.
  10. The technicals for the deep sea oil drillers "might" finally be turning so I added exposure to this basket by adding to existing positions in GlobalSantaFe (GSF), Diamond Offshore (DO), and Pride International (PDE) - while adding a new position in Atwood Oceanics (ATW).
  11. For the first time in a while I added to my trio of ETFs which bet against the market, Thursday afternoon.
  12. In the market swoon Thursday afternoon, CF Industries (CF), Perini (PCR) and Ctrip.com (CTRP) fell to some meaningful support so I took the opportunity to add to these positions in a sizeable way.
  13. Allegheny Technologies (ATI) warned Thursday evening, so I sold the smallish position out Friday AM, and also closed Titanium Metals (TIE) due to some near term negative sentiment in the sector due to the warning and the Boeing Dreamliner delay. ATI actually bounced back decently Friday during the day, but both stocks are now below their 200 day moving averages once more.
  14. Friday morning I also sold down across the board on my largest holdings in the range of 20-33% in most cases. Too many to name, but here is the link to the post.
  15. I reduced my Garmin (GRMN) as I had a nice gain in a short period of time. This is one of the momentum crowds favorites, so it would surprise me for it to continue to ramp up, but I had a nice gain so I took some of it off the table.
  16. I added more UltraShort Financials (SKF) Friday.
  17. While not trying to daytrade, CF Industries ramped up 8% Friday on no apparent news so I sold down 25% of my recently supersized position.
  18. Last, I sold some Juniper Networks (JNPR) as its pretty highly valued and I wanted to continue to build cash going into next week.
Needless to say, with the change in posture mid week it was a very busy week in terms of transactions, at least twice as much as usual.

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