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 weekly 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. I cannot short individual equities.
To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.
Cash: 17.1% (vs 2.7% last week)
53 long bias: 66.8% (vs 91.3% last week)
5 short bias: 16.1% (vs 6.0% last week)
58 positions (vs 56 last week)
Additions: Best Buy (BBY), Huron Consulting (HURN), FTI Consulting (FCN), KHD Humbolt Wedag (KHD)
Removals: CGG Veritas (CGV), JA Solar (JASO)
Top 10 positions = 32.7% of fund (vs 36.2% last week)
42 of the 58 positions are at least 1% of the fund's overall holdings (72.4%)
Major changes and weekly thoughts
After a major down day Monday, the market rallied for the better part of the rest of the week tacking on 5-6% type of moves in the latter 4 days of the week. As the market has rallied from a major oversold condition to reach technical resistance levels, I did a lot of trimming of long positions this week. If the market continues to strengthen in the face of deteriorating economics news, and simply clings onto the Fed's back yet again (much like mid August through late September) I will return to a more bullish mode simply because "the market wants to go up". However despite a quick and strong thrust up, the market is still below key technical levels which I am watching closely to determine near term positioning. On the plus side this week reminded that the positions chosen in the fund will do better than average when the market moves from fear to greed. The volatility has been tremendous of late, and instead of these huge moves up or down I'd simply prefer general down or uptrend so individual winners and losers can separate. Right now we are simply in a market where everything is trashed or everything goes up, so excellent stock picking is not rewarded - simply knowing when a Fed official is speaking or how happy the market will be about future Fed cuts has been all that matters. From a very long heavy exposure last week, I am positioned much more neutral entering this week pending the market "mood".
Economics news is pointing to continuing deterioration of the economy but this can be ignored for many weeks by a market hung up on the thinking of a magical rescue plan by the Fed. (and the feds) What is interesting to me, is the Fed is now warming up the ideas that I have been espousing for months - that we are going to be some serious slowdown in 2008. Now they cannot word it that way because they have to spin things in the most positive light but my take is the Fed is seeing in just 4 short weeks, what level of deterioration is going on. In the typical irony that is the market, we have applause for a degrading economy because that means more Fed cuts. Shortsighted - but typical Wall Street. Bad news is good news, once again - at least for this week.
1490 on the S&P remains key as it has been for much of the past 6 weeks. While on the surface it makes little sense for the market to rally to all time highs in the face of a weakening economy; what makes sense and what happens has little direct correlation in the market in the near term. The huge expanses of liquidity being driven into the economy by the printing press that is our government will eventually put a floor into the market, since this money needs to find a home and real estate and bonds just are not providing any real return.
Below are the fund changes this week - 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:
- I cut back my exposure to refiner Tesoro (TSO) by over 50% Monday when Tracinda started raising a fuss about the poison pill provision; Tracinda fully balked on the tender later in the week and the stock dropped like a rock so this sale, while not insulating my fully, helped save some money.
- I cut some of my #1 position Mosaic (MOS) in the $64s, as the market was degrading, to raise some cash.
- I lowered some of my exposure to Silver Wheaton (SLW) on the rally in the name Monday.
- I stated my interest in Best Buy (BBY) last weekend as its technical strength was lining up with its fundamentals and my belief that consumer electronics will be extremely hot this Christmas, and began a position Monday in the $48s, to which I added to later in the week as the stock rallied and confirmed its near term strength.
- Tuesday I started to build some exposure in 2 consulting firms which should benefit from a slowing economy in 2008-2009: Huron Consulting (HURN) and FTI Consulting (FCN). I did add to these positions as the week went by, but these are more 2008 plays than 2007. In fact, FTI Consulting weakened considerably as the week continued and is in a deteriorating technical condition whereas Huron Consulting strengthened. I am trying to find some ideas that are more buffered from the global growth story but still have their own growth drivers; another area that people will flee to in a slowing economy are medical names so I am poking around this area for some names to build into 2008.
- My near term call on a weakening crude oil price has been correct, however my thesis that the refiners would benefit from it has not been. However, this weakening crude has affected the oil service names, many of which have been weak of late. To reduce my exposure to the space I closed out my position in CGG Veritas (CGV) - but I did add some small portion of Core Laboratories (CLB) Wednesday as it had weakened tremendously. I like the names I hold in this sector but the market overdoes things as usual, and when crude drops 4%, these stocks get whacked for far more even though crude at $65, $85, or $105 have no real effect on the overall business and need for these oil service companies business. But sentiment is all that matters near term, not logic.
- Wednesday AM I continued to cut into the strength, cutting both names with large weightings in the fund and positions with outsized moves - to raise cash. These are trims not wholesale massive moves, consistent with my thesis of layering in and out of positions.
- I closed JA Solar (JASO) Wednesday (about 24 hours too early in retrospect as the solar stocks had a heck of a rally Thursday), but you never catch the timing perfectly. I am simply going to concentrate on names I feel the utmost confidence in right now in the space as speculative furor has once again (just like that) hit some of the weaker names and these names have shown in a downturn to lose 30-40% in the blink of an eye.
- Thursday, I was cutting back some names for technical reasons - those that had fallen well below their 50 day moving average in the selloff but had now risen back to right "below" that level; McDermott (MDR) was a key example. The thinking here is sell them when you can, not when you are forced to. If the market continues strength, one can always buy them back for a few % higher and the stocks will be in a far 'safer' position from the near term technical basis. And if they falter, you saved a lot of lost dollars.
- I continued trimming Friday, as some of the 'high beta' names made some huge moves in a short time - especially the small cap international names which had been beaten (obviously in panic) despite tremendous fundamentals in the selloff. I'd like to buy these positions back, at lower prices, when/if the market returns to weakness.
- I did finally on Friday add some long exposure to existing names - namely Research in Motion (RIMM), CNH Global (CNH), and just a small touch of McDermott (MDR). Aside from Best Buy and the consulting firms I did very little on the long side this week.
- I started an initial position in Hong Kong infrastructure name KHD Humbolt Wedag (KHD) Friday.
