Saturday, January 5, 2008

Bookkeeping: 'Rising Tide' Performance Week 22

Week 22 performance of the mutual fund

Comments: Well I started last week's review with "A quiet week overall". Can't say the same this time around. It's been a long week - so long in fact it feels like it's been over a year long (oh cmon now, I've been waiting to use that line for months). No, on a serious note - this was a bad week. I was not keeping track of the fund/index performance week by week during the August swoon, but this week was worse than anything we had in very awful November on the S&P500. I don't track the NASDAQ weekly but Friday alone the NASDAQ lost nearly 4%... bringing back memories of summer and fall of 2001 or just about any week in 2002.

For the S&P500 in November the worst weeks were week 11 (of this fund) at -3.9%, and week 14 at -3.7%. Small potatoes as we start 2008 off with a bang with the S&P 500 down 4.5%, and the Russell 1000 down 4.6%. That is obviously some serious territory. Rising Tide Growth Fund fell this week too but a very manageable -1.00%. I'll take it! In fact, relative to the indexes this is *the* best week the fund has had period; with an out performance of >3.50%. To put that in perspective that annualizes to a yearly out performance vs the indexes of >180% (I wish)

This was actually quite the week. Monday was in line with the markets but during the heavy drop Wednesday, the 'pair trading' set up I have, long certain sectors combined with Ultrashorts against others worked great, so the fund was actually up during a 1.5% type of loss day, and Thursday with the market flat, this continued with sectors I am exposed to such as agriculture and infrastructure ramping very strong, while my top position at the time Ultrashort Real Estate (SRS) went on a 1 day 6%+ tear, as people start buying into the commercial real estate slowdown. (remember this is not a residential real estate short). And then it had another big day Friday. While I don't have an Ultrashort against the NASDAQ my Ultrashort against the Russell 2000 continues to outperform as it is chock full of companies dependent on the US economy - note the Russell 2000 was actually DOWN in 2007 whereas the S&P 500, Dow, and NASDAQ were up. This all plays into my thesis started in August that companies without benefit of exports will get hit the hardest.

Only on Friday did the longs in the portfolio suffer as the market started "baby with bathwater" type of selling, but the decent cash position and remaining Ultrashort exposure helped to buffer the fall to some degree.

From here, we appear to be approaching critical support on the indexes. If S&P 1400 does not hold, its a free fall situation. I would doubt this happens right away without a bounce first, but anything is possible. For the fund, I came into the week as heavily hedged as I go (19% type of Ultrashort position - I try to limit myself to around 20% since this is a long focused fund) and kept that level most of the week until late Thursday and Friday. Now with the market swooning so strongly, I am going back to a more long stance anticipating some bounce, and then once we hit 'resistance' again, will return to this negative stance as we enter earnings season. But the complexion of the portfolio changed quite a bit on Friday as I did the first round of heavy buying I have done in quite a while. Sentiment is starting to get quite poor so I would expect at least some attempt at rebounds next week. How successful it will be, I suppose depends on the market mood and if Fed cuts, government bailouts and the like convince people (for the fourth or fifth time) that those actions are enough to stop the business cycle.

As for the fund, it has been quite a hot streak of late. This sort of pace will not continue so I expect the market to take some gains back soon. She is a wild beast, and likes to humble us often so I expect to get some of that humble pie sooner rather than later. When things are working this well, it does not last. So I am expecting some weeks ahead where things don't go so splendid as they have of late. With 4 weeks left in my 2nd quarter of the fund life, I'm at pace to beat the indexes by over 60% this year (my annual goal is 15%), if the 3rd and 4th quarters match the 1st and 2nd. Even Ken Heebner would be proud? ;)

Price of Rising Tide Growth: $12.374
Lifetime Performance to date (vs Aug 3, 2007): +23.74%

Comparable S&P 500: 1,411.6 (-3.67%)
Comparable Russell 1000: 768.3 (-3.51%)

Fund return vs S&P 500: +27.40%
Fund return vs Russell 1000: +27.25%

Last week's results here.

Since the market cap of the median stock in the Rising Tide Growth fund (median $9.8 Billion as of November 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 November 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

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