Nov 27, 07: here
Oct 23, 07: here
Overall, obviously with the market swoon, I have very low (nil) cash exposure and very low hedging going on (short exposure) - so its a bit of an atypical time to look at things. Other major differences by sector since late November.
Agriculture (then) 15.9% (now) 12.3%
Technology (then) 10.3% (now) 13.0%
Financial (then) 5.0% (now) 10.2%
Solar (then) 5.5% (now) 9.9%
Coal (then) 4.7% (now) 7.0%
Oil Related (then) 7.2% (now) 9.3%
Retail (then) 4.6% (now) 2.0%
India (then) 4.0% (now) 2.8%
Healthcare (then) 0.0% (now) 2.5%
Steel (then) 0.0% (now) 2.3%
Here are the explanations
- I've cut back some agriculture exposure, mostly by reducing some of the equipment names i.e. Agco (AG), CNH Global (CNH) the latter of which is based in Europe so I am a bit concerned about currency strength hurting exports vs say Deere (DE)
- Technology I've added here in the last week heavily to Apple (AAPL) and Research in Motion (RIMM)
- Financial, I've added Mastercard (MA) as it's pulled back and added to my 2 (sorta financial) names - the two consultants Huron Consulting (HURN), and FTI Consulting (FCN); the former had a nice run but has pulled quite a bit here - but again these are more 2009 plays as their earnings should increase as more and more companies are 'restructuring' in a slow growth USA. If I were in trading mode, I'd actually be buying some of the investment banks like a Goldman Sachs (GS) since they are due for a bounce
- Solar, I've upped this sector - but tried to do it smartly, 10% is actually a lot in my view to allocate to this group but we've seen a heck of a pullback in my favorite name Suntech Power (STP); and Trina Solar (TSL) another major position, is a 'value' play that might not work out in the near term but should have a good back half of 2008. However, value plays in solar never seem to work out.
- Coal is one of my favorite sectors, and my exposure is purely a condition of price. 2 weeks ago at this time I had about a 3% exposure... as I cut back some very big winners. Now as these stocks have pulled back I have been buying heavily in the past 48 hours.
- Oil related - these are drillers and service names. I put Petrobras (PBR) in this group as opposed to "Foreign", and I also have been adding exposure to deep sea oil drillers on their pullback. Last time I did this sector analysis I was actually completely out of the deep sea oil space.
- Retail - on previous look in this space I had added Best Buy (BBY) for a short term trade that worked out decently. Obviously I cut that position as it was a short time horizon and all that sits here is Crocs (CROX). I still do like names like Costco (COST), Gamestop (GME) and eventually Under Armour (UA), and this washed out group is another 'trader's area' in my opinion after this wash out.
- India has been very good to me. The Indian market (SENSEX) is near all time highs, and not missing a blink. I was very bullish on India vs China in the fall after China was getting all the attention and it worked out great as Chinese stocks faltered and Indian stocks flew. I am almost at the opposite conclusion at this time; perhaps both groups will go but I have been seeing some good strength in Chinese names of late. So I am shading a bit away from India for now as my favorite names have done very well and probably need to pull back and consolidate for a while - plus I am always wary of the "emerging growth is not immune" shoe to fall.
- Healthcare - I have been adding healthcare with 2 names: MedcoHealth Solutions (MHS) as a defensive stock and Illumina (ILMN) as a growth stock. Both worked very well. I was nearly at 5% exposure coming into the day but with the large move in ILMN this morning I cut back a lot.
- Steel - this is a trade in US Steel (X) I outlined a few days ago...
Overall I like the mix I have now - cash and shorts are obviously almost nowhere to be found simply as a condition of large sell off in the market. The main thing I want to change is reduce that solar exposure - I still think the majority of the sector is over valued and prone to a serious correction when they report (most in February) but you can never tell with this sector as it is full of momentum chasers instead of (a lot) of fundamental investors. I do expect to lighten up if we can some nice rebounds in some of the names I am in. If/when? we get a bounce I of course need to get some insurance (Ultrashorts) as I still think we have more pain ahead.
I also have a low exposure to silver now, but this is a condition of a great run in Silver Wheaton (SLW) - in which I took profits. With continued cuts coming from the US, and the printing presses worldwide creating more fiat money I do expect hard assets to continue to increase in value as paper money devalues and inflation continues... Europe is trying to act as a buffer but I expect they will eventually cut rates more (England and Canada already started their campaigns, although England did not follow up with a 2nd cut today). The UK is US-lite, so I expect as they contract into 2008 they will follow our campaign... despite inflation risks.
Two notes:
(1) I break up foreign holdings into (a) China (b) Indian (c) Other and
(2) I break up energy into (a) Crude related i.e. deep sea oil drilling, oil service, refining, seismic, etc (b) Coal and (c) Solar as the latter two are not directly related to crude oil.
