Bookkeeping: Weekly Changes to Fund Positions Week 11

Week 11 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: 5.8% (vs 16.1% last week)
54 long bias: 86.9% (vs 70.0% last week)
3 short bias: 7.3% (vs 13.9% last week)

57 positions (vs 53 last week)
Additions: Sterlite Industires (SLT), Tata Motors (TTM), CGGVeritas (GGV) , Baidu.com (BIDU)
Removals: None (I sold them all last week)

Top 10 positions = 31.9% of fund (vs 35.8% last week)
44 of the 57 positions are at least 1% of the fund's overall holdings

Major changes and weekly thoughts
I am going to split the week into 2 pieces; Mon-Thu, and then Friday. In general it was a pretty quiet week for the fund for the first 4 days. I continued my cautious stance and my relatively large cash and short stake positions (relative to where they have been the past month). On Friday I took the opportunity to rebuild some positions I had on my shopping list, as the market seemed to selloff in a very intense manner, especially the last 30-45 minutes. Hence my cash and especially short ETF positions are less than where I usually have them. I also have less in the top 10 holdings than I normally do, as I have the opportunity to build a lot of "smaller" positions which I had sold off on high prices, and make them "middle size" positions.

I'd been warning about the narrow breadth for weeks, and the same "old names" leading the markets up day after day. Eventually this has to end, so perhaps this is the beginning. However, many of those names indeed held up well Friday. Generally at some point in a full bore correction those names get thrown out as well. But with the market already down about half of what a traditional 'correction' would entail (a 10% drop) in 6 sessions, it was time to at least begin the shopping. With the indexes (save for NASDAQ) now firmly below technical resistance, my view is at some point soon we need to at least have a technical bounce, at which point I'd reload on the short ETFs to continue to provide portfolio 'insurance. If however, the market goes straight down from here, I will continue to sell down the short ETFs, and apply cash to the long side. However, with what struck me as emotional selling late Friday, and such a stark correction I'd expect at least some bounce relatively soon.

Again, it was generally a pretty quiet week for the fund in terms of major transactions up to Friday so I will break the moves down into 'pre Friday' and 'Friday' buckets. The specific rationale for each of these major moves is explained in the weekly posts which can be accessed in the left margin under archives.

Some of the larger changes (chronologically) to the fund below:

1. I was selling down Trina Solar (TSL) early in the week in the $56 range, which I later culled by a much larger amount on Thursday.
   
2. On Monday for the first time in a long time I cut back some Core Laboratories (CLB), as the stock has strayed so far from any meaningful support; I also cut back New Oriental Education (EDU) which was up 11% that day on its solid earnings report.
3. I sold down my Indian banks in a stroke of good timing, as the Indian market skidded later in the week on news of some plans to restrict foreign investment.
   
4. On Tuesday, I cut back some of my coal which has a really nice run, Consol Energy (CNX), also cut CNH Global (CNH), and Garmin (GRMN)
5. I began cutting back some of my larger than normal short ETF position on Tuesday as well as the market had weakened considerably from the intraday reversal last Thursday (1.5% on the major indexes in a 2 session drop)
6. I also began building positions in Indian stocks that had dropped severely that day, including the 2 banks which I had sold down the day before (again, stroke of luck there); 2 of these positions were new, Sterlite Industries (SLT) - a copper play, and Tata Motors (TTM), a transportation play. While I was able to buy these stocks considerably off their recent highs, they still have made huge runs off their August lows, so I am holding off adding any more for now - this is a 'basket play' on India.
7. I kept adding exposure to the deep sea oil drilling names as the technical picture was looking good (unfortunately Friday's sell off hits these names very hard). With the GlobalSantaFe (GSF)/Transocean (RIG) shareholder meeting in early November to approve their merger and what I expect to be continued great earnings - these stocks which are (mostly) shielded from the weak Gulf market and natural gas market, should be the strength of the drilling sector - but when you have a sector sell off, there is little differentiation and everything is sold.
8. I cut back some of my networking exposure, as both Ciena (CIEN) and Juniper (JNPR) were looking a little long in the tooth at their price levels.
9. I bought more Mosaic (MOS) - hey I like fertilizer, what can I say.
10. I started rebuilding my Mastercard (MA) position at the 20 day moving average, mentioning I'd add more to this financial name (which was unfairly being thrown out with the financial stock bathwater) as it fell to the 50 day moving average - which it promptly did the next day. As an aside Mastercard held up VERY well Friday in the sell off, holding the low $150s level where I was buying - that makes me even more interested in this name.
11. Again, good timing but I restarted a Bolt Technology (BTJ) position in the lower $40s, that I had sold a day earlier in the upper $40s.
12. I sold more of my short ETFs ahead of the Google (GOOG) earnings in case the market rallied off a (at that time) weak week.
13. I kept adding to my CF Industries (CF), as its valuation was clearly below peers, has an earnings catalyst coming in a few weeks, and the technical picture looked close to breakout level - what more can you ask for? This was another stock with great strength in the teeth of Friday's selling.
14. I did a little buying in the infrastructure names, as they began to finally pull back a bit.

Ok, now onto to Friday's hot and heavy action:

1. I started buying back positions in my trio of favored oil service stocks, as they were weak off the Schlumberger (SLB) earnings report. A good report by the way; only weak in US Gulf. I added to these positions later in the day as the sell off intensified.
2. I started a new position in CGGVeritas (CGV), yet another energy name in the seismic field - this stock held up very well most of the day until the last 30 minutes, but still relatively well considered the trashing energy stocks took Friday.
3. I bought even more CF Industries (CF), as it performed like a champ all day.
4. I bought 3 lots of infrastructure stocks, beginning early in the day, then mid day, then late in the day as they weakened throughout the sell off. This hit me Friday but in 6 months people will be wishing they had bought at these levels (I think) :). Granted, they could go lower in the near term. I will be buying more if they do.
5. I sold 2 lots of my short ETFs, some during the day, and some in the last 5 minutes of the day as the emotional selling crescendo hit a peak.
   
6. I bought a "little" Apple (AAPL) as it held up all day (I was hoping it would get wacked $7-$10 at least), going into Monday's earnings which I expect to be the best of this entire quarter from any large cap. Analysts are expecting a $6.07 B revenue number; would I sound mad if I say it will be far closer to $7 B than $6 B? Thinking $6.7+ B, in a "shocker".
   
7. I welcomed back Baidu.com (BIDU) to the portfolio as it held its 20 day moving average throughout the recent weakness.
   
8. I topped off the day with a buy of Blue Coat Systems (BCSI) as the stock was tanked in the last hours of the day.

I had not noticed Consol Energy (CNX) was so weak, or else I would of bought that as well; if it opens flat to downish Monday AM, I will be in buying back part of the positions I had been selling earlier in the week. I'm a little below where I want to be on my coal exposure, although my energy exposure is a bit too high, although I break my energy 'universe' into specific narrow subsectors.

Again, let's see how the market reacts Monday. With such a steep selloff, I'd expect at least some muted attempt at a rally, but with the technicals of all the indexes save NASDAQ damaged Friday I am interested to see how things play out. I am also interested to see if the market continues weakening, if NASDAQ can stay above its 50 day moving average (2685)

Halliburton (HAL) just announced earnings (on a Sunday?) and they look very promising so maybe it will offset the Schlumberger (SLB) 'weakness', which I thought was a major overreaction and an 'excuse' to sell off stocks that had had a huge run.

• Bill Herbert, analyst with Simmons & Co., said in an e-mail that results were "commendable," especially considering two weeks of work were lost in the Gulf of Mexico because of storm-related evacuations.
• As a result of the company's efforts to increase its business in the Eastern Hemisphere, revenue grew 29 percent, operating income gained 40 percent and margins increased to 24 percent, Lesar said.
• "I thought you had fairly bullish comment on the outlook," said Dan Pickering, analyst with Tudor, Pickering & Co. Securities. "Halliburton was coming off a tough second quarter, and they saw improving North American profitability."
• In the Middle East and Asia, Halliburton's revenue rose to 28 percent to $693 million and operating income was $182 million, up 31 percent from a year ago. (this is where we want to be, where the money is - not with places with devalued pesos, err I mean dollars)