Friday, June 27, 2008

Bookkeeping: Morning Transactions

Tricky market right now - very oversold ("worst June since the Great Depression") and prone for some bounce but not doing so (I find that bearish). Sort of seems like a market where a lot of people would be willing to jump in, if it showed any real strength... but everyone is looking around the room waiting for someone else to go first. It certainly is not going to be me.

A few quick transactions
  1. Buy in Research in Motion (RIMM) - I had this as a 0.1% stake going into the week and bought a small splotch yesterday to get it to 0.4% but was targetting $120 to add anymore, but today it gapped down yet again to the upper teens, so I added a little bigger stake in $117s. This looks destined for the 200 day moving average of $113. Still going slow and only up to 0.7% stake.
  2. Buy in Lennar (LEN) - this homebuilder is now at 2007 lows, so I bought in low $12.00s. I am hoping this huge double bottom formation holds, and we can make a nice flip trade out like we did in DR Horton - so far this position has not worked for us as well as DHI. Shamefully this has moved into the top long position at 2.6% of fund. Breaking below $12.00 would be a very bad thing in this name - so we'd cut back what we bought today if that happened.
  3. Sell in EOG Resources (EOG) - I added some natural gas exposure earlier this week and simply am hording a bit of cash here. The stock is building a very nice base from which it should make a nice move, but it keeps flailing over and below the 50 day moving average. ($130ish) So I am selling just below that number and reducing this to a 0.5% stake. With the weakest chart in the basket of 4 I own, I decided to cut back for now but my sector exposure is about the same that I entered the week since I added elsewhere.
I almost added to my solar basket with 2 new purchases in former holdings - LDK Solar (LDK) and Solarfun Power (SOLF) this morning, former near $40 and latter near $18. However, in a continued market sell off these type of names will be sacrificed on the alter since they are dominated by retail investors. I'm willing to miss some upside for now on a dead cat market bounce to conserve cash, and try to keep losses contained. Judging from the action in the portfolio today I have a lot of stocks doing far more poorly than the indexes. So the index shorts are not that effective here on days like this; somehow we are managing to lose more money on a day like today with the market up, then yesterday with market down 3% (hedges sort of useless today thus far). Bah.

The "generals" continue to be impervious to sell offs - and we haven't tested S&P 1275 so it is hard to really get too constructive on the long side, other than some dead cat bounce opportunities. I continue to believe we don't put a bottom in until people give up in natural gas, fertilizer, and coal. It appears all the institutional money is hording in the same 25 commodity stocks. I am amazed there has been no rotation at all for weeks on end. I'll be curious after quarter end Monday, if these big pools of money rotate away to new pastures, since they can show their clients "hey look at us, we're brilliant we held these best performing stocks all quarter" :) I never understood window dressing - say your fund is down 6% for the quarter but in the last week you loaded up on the big winners so that when your holdings on June 30, 2008 are made public you look smart. Wouldn't anyone question that? How did you lose 6% when you had the biggest winners in the market all quarter? I guess not because that seems to be a popular strategy for managers to bamboozle their investors. Anyhow, I digress...

Oil spiked $5 in the last 30 minutes of trading yesterday - once again Ben - a measly 25 basis points and you could of changed the whole psychology and not made people feel bullet proof buying crude day after day. The world won't be any different at 2.25% versus 2.00% - other than psychology. Oil spiked $11 in the day and a half since Wednesday 2:15 PM. Psychology is everything in the short run - another misstep.

Long Research in Motion, Lennar, DR Horton, EOG Resources in fund; long Lennar in personal account

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