Friday, January 11, 2008

Bookkeeping: 'Rising Tide' Performance Week 23

Week 23 performance of the mutual fund

Comments: Another interesting week all around - the indexes actually held up relatively well but did NOT tell the story underneath. As I wrote earlier this week, the average stock is now down 30% from October peaks although the indexes are off around 10%. So the sledding is beyond tough right now - even stalwart "safety" blue chips like McDonald's (MCD) and (egads) Procter & Gamble (PG) are being taken to the woodshed (the latter down 3% and broke below its 50 day moving average). The only thing that is left appears to be Altria (MO). The Dow was down a lot worse than it looked today due to 2 components really being awful - MCD and American Express (AXP). So today was the day, even the big cap blue chips outside of financial got their come uppance. The S&P 500 held up reasonably well this week (all things being relative) and closed above all important 1400 (by a thread). But there just seems to be a total absence of buyers and if its not one thing its another. A perfect storm of bad news all at once. Hours after Countrywide is eliminated as a problem, American Express hits us with bad news... or a home builder heads to $0. A lot of things I have been forecasting are coming true - I just did not expect all of them to start hitting within a 2 week period. The news flow is just awful, but as I keep saying - the more we hear it, the more it gets priced into the market. But it's still not fun to go through it from the long side.

I wrote last week:

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.

Sometimes, I really hate when I am correct! :) We beat the indexes by a supernatural 3.5% last week (annualizes to >180% outperformance). Well that was all taken back in a snap of a finger this week as we had a complete reversal of last week's gains vs indexes. Neither last week, nor this week is normal - volatility is extreme at this point. Hopefully we get back to a more consistent pace of good solid outperformance here soon.

As stated (and it is hard to believe) but the S&P 500 was only down 0.75%, and the Russell 1000 down 0.93% for the week. Rising Tide Growth Fund was down 4.37% and had its first underperformance since week 15 (2 months ago). Since I started tracking the weekly performance in week 10, we've only underperformed 3 weeks (of 13) but this one took the cake @ 3.5% behind the indexes (reversing last week's gains off the map). The other 2 weeks we trailed the market (back in November), we were behind only by -0.7% in week 14, and -1.7% in week 15. So we are back to where we were 2 weeks ago, in week 21, in relation to outperforming the indexes.

Much of the damage this week came Monday when the agriculture, solar and infrastructure sectors took a severe beating - combined with my selling off of most of the insurance/hedges (Ultrashort ETF positions). That said on a day like today the Ultrashort Financial ETF (SKF) was down nearly 4% (so it would not of helped), and the Ultrashort Real Estate (SRS) was flat (and far lower @ $127 then where I sold off mid week @ $140). So there is not much room to hide this week; even the index shorts would of not worked very well as the indexes held up much better than the average stock. It seems financials finally found a floor and that helped the indexes stay up, relatively speaking. Needless to say, you will have weeks like this every so often when the best sectors are hit, and the worst sectors do ok since they are completely washed out. In the long run I still think this is an opportunity like August and November to load up on the best merchandise while the market is in free fall. To wit, top position Mosaic (MOS) was up 6% in this awful tape today, and up over 20% since it fell to $80 in the panic selling earlier this week. Unfortunately I have 60 other positions in the fund :).

Price of Rising Tide Growth: $11.833
Lifetime Performance to date (vs Aug 3, 2007): +18.33%

Comparable S&P 500: 1,401.0 (-4.38%)
Comparable Russell 1000: 761.1 (-4.40%)

Fund return vs S&P 500: +22.71%
Fund return vs Russell 1000: +22.73%

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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