Bookkeeping: 'Rising Tide' Performance Week 38

Week 38 performance of the mutual fund

Comments: One more week until our 3rd quarter of life closes and it was a solid week. My goal entering (any) earnings season, but especially this one is simply to stay afloat, not give back much of our gains, and try to keep close to the pace of the market if it remains strong while holding good amounts of cash and hedges. So far, two weeks in, it has been working. With 50 some names on the long side we usually will encounter a few blowups in earnings along the way - that is just probability, but none so far.

As for the markets it was a bit of a sleepy, rangebound week. S&P 500 level 1400 remains a ceiling but we almost got there late Friday with a push to 1399.11 before pulling back a bit... oh so close. The majority of the week was dominated by ignoring all bad economic news, and clutching to the strength of US multinationals as reasons to hope for the US economy. Domestic based companies have lowered guidance so much that their "better than expected" reports were cheered, even though year over year comparisons are quite awful for many of these companies. I spoke of a potential rotation shaping up [Sector rotation?] and the strength in financials and especially retailers continued Friday. I guess hope never ends for those rebate checks (hello, those will be used in gas stations and grocery stores) - but I guess news that these will be out earlier than expected was enough to push up the retail stocks. Whatever the reason is moot - it is what it is. Aside from that we had a massive, 6 hour sell off in commodities... what a "correction". While I wrote about a week and half ago that I expected the Fed to stop cutting rates after this meeting and the dollar to bounce - by the middle of this week I was reading that logic EVERYWHERE - which probably means the dollar won't bounce after all since everyone is already anticipating. Or that flub of a bounce this week was "the bounce". If so, the US consumer is in even worse shape. But great for those multinationals! Here is the problem - after next week, we are pretty much done with multinationals and are going to need to rely on (plug your nose) American companies who rely on Americans. Boo. Hiss.

For the fund, I stood conservative most of the week, but once the "correction" in commodities occurred, I took the opportunity to rebuild some positions in coal, iron, fertilizer, etc. Somehow these stocks cannot keep going up (can they?) without a more meaningful correction.... but I've been saying that for a few weeks now. So we need to make hay while we can, realizing a correction, when it comes, will be swift and punish the portfolio. In the meantime I drank some Kool Aid and bought some investment banks to help balance out the portfolio allocation away from commodities. Thursday, I was looking at some Kohl's and JC Penney based on charts, but could not listen to the devil on the shoulder to buy those. As I wrote in my sector rotation piece, if I were a very short timing hedge fund I'd probably go into retailers for a week, enjoy the Kool Aid, get my 10% move, and leave. But that's not our strategy here. (but it would of worked nicely through 2 days) - today alone Kohls up 5%, Ralph Lauren Polo 4.5%, Coach 4%, JCPenney 3%. Once these rebate check dreams fall flat on their face we'll have an excellent shorting opportunity in these same names....

This week the S&P 500 gained 0.5% and the Russell 1000 +0.6%; with much of our portfolio in cash or hedged in short exposure (except for Friday) Rising Tide Growth Fund was able to gain 0.8%, so we returned to a week of absolute and relative (vs indexes) gains. One more week and we are 75% of the way through year 1. My goal of beating the indexes by 15% remains intact.

As an aside, blog traffic really took off this week. If you are new (or not so new) and enjoy the blog, please read this post on how to pledge a future investment. I also posted an entry earlier this week on how I am doing compared to my peer group of "mid cap growth" mutual funds thus far; I'll update that monthly.

Price of Rising Tide Growth: $11.818
Lifetime Performance to date (vs Aug 3, 2007): +18.18%

Comparable S&P 500: 1,397.84 (-4.60%)
Comparable Russell 1000: 762.52 (-4.23%)

Fund return vs S&P 500: +22.78%
Fund return vs Russell 1000: +22.41%

Last week's results here.

Since the market cap of the median stock in the Rising Tide Growth fund (median $7.1 Billion as of April 08) 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 April 2008.

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