Bookkeeping: 'Rising Tide' Performance Week 14

Week 14 performance of the mutual fund

Comments: After a stunning start to the fund life in "quarter one", quarter two has begun with an ominous week! To summarize the market was bad early, rallied to be more bad mid week, than ended with ... you guessed it, a bucket of further bad. Any questions? It stunk. Many of the economic problems outlined in the blog since we started in August finally came home to roost in the mind of investors after being ignored for months on end. As I have been saying "when will it all matter?" Not until it matters. Apparently it began mattering again.

The S&P 500 and Russell 1000 were both down 3.7% on the week; unfortunately the first time in a long time Rising Tide Growth Fund could not outperform and was down 4.4%. Between Monday and Thursday the fund was actually beating the indexes by 0.3% which is my weekly 'target' to achieve a 15% annual out performance vs the indexes, but that was overwhelmed by ugly action Friday. As many of you can see with your own portfolios the action in the indexes did not reflect some of the ugliness in individual names which were down much farther than 3.7% for the week. With this week's action both the S&P500 and Russell 1000 are now DOWN from their beginning points since fund inception. They were up nearly 7% a month ago. Quite a turnaround.

In terms of the portfolio I had some downside protection with cash and UltraShort ETFs for most of the week but not quite as much as I would like; I tried to remain patient through the week but finally on Friday I went "all in" and sold off my the vast majority of my hedges and started buying more long exposure. The problem here is I cannot short individual names, so even if I had more short exposure today in indexes it would not of offset some of the long positions. For example even UltraShort Financial (SKF) was up just a whopping 0.5% today. Hardly any sort of hedge in the face of some of the carnage out there. With all that said, I have mentioned that my positions were subject to greater than average correction on the way down since they had much greater than appreciation on the way up. This is why I take profit along the way, to preserve some of the profits (although it does make me leave some of the profits on the table by going this route). So I was able to make hay while the getting was good, and now need to give some back. So while I would love to beat the indexes on both the way up, AND way down - each week, every week it's tough to do when you are mostly long only with just minor hedges going on. Previous down weeks I have been able to do so, but this week was just too much.

With that said, I like the long positions the fund holds and when the sell off subsides I feel confidant that the fund is correctly positioned in the sectors and stocks that will outperform in the upside. This is very similar to the mid August situation for the fund when it fell in line with the rest of the market (actually underperformed at the very massive selling in mid August; see graph here), but due to correct sector/stock selection, outperformed to a great degree in the ensuing good times. Hopefully history repeats. Also in the big picture I am still way ahead of the indexes for the "year" (the year being where the fund started) - the main worry now is the emotional panic type of selling (if it arrives) next week - the baby out with bathwater type - especially essentially being 100% long at this point in time. Financials actually looked ok today, as did some retail stocks - so those sectors seem washed out to some degree, but previous strong sectors did get hurt finally late in the week - first the large cap tech 'teflon' stocks and finally today, solar even sold off. Now we have to go through yet another weekend of "Black Monday" inferences... you know the ones, we hear about three times a quarter. TGIF!

Price of Rising Tide Growth: $11.400
Lifetime Performance to date (vs Aug 3, 2007): +14.00%

Comparable S&P 500: 1,453.7 (-0.78%)
Comparable Russell 1000: 792.8 (-0.42%)

Fund return vs S&P 500: +14.78%
Fund return vs Russell 1000: +14.42%

Last week's results here.

Since the market cap of the median stock in the Rising Tide Growth fund (median $9.9 Billion as of October 07) is significantly below the SP500 index (median $13.1 Billion as of September 07) but higher than the median market cap in the Russell 1000 (median market cap $5.8 Billion as of September 07), I am measuring the fund against both indexes. Click here to see all fund's holdings as of mid October 2007.

Basis for indexes is 5 day weighted average of closing prices Aug 3-9
SP500 : 1,465.2
Russell 1000 : 796.2

To see why I use the 5 day weighted average of the first 5 trading days to smooth out the volatility of the indexes as the fund launched, see here.

Please click here: fund performance for previous updates