Fund positions of 1.0% or greater can be found each week in the right margin of the blog, under the label cloud and recent comments areas; I highlight weekly the larger position changes.
Being a long only fund, via Marketocracy rules, the only hedges to the downside I have are cash or buying short ETFs. I cannot short individual equities.
To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.
Cash: 31.9% (vs 22.8% last week)
50 long bias: 47.2% (vs 49.3% last week)
9 short bias: 20.9% (vs 27.9% last week)
59 positions (vs 61 last week)
Additions: N/A
Removals: FTI Consulting (FCN), Consol Energy (CNX)
Top 10 positions = 28.2% of fund (vs 33.2% last week)
28 of the 59 positions are at least 1% of the fund's overall holdings (47%)
Major changes and weekly thoughts
Much of the same this week as many in the past, and I believe many in the future. Continued deteriorating economic conditions but "not as bad as expected" so we continue to muddle along. Remember, as long as the conventional wisdom is things will be better "in 6 months" (they never really tell us which 6 months) we can continue this type of action for a long time. Along the way I expect a few periods where bad news overwhelms and the market takes a dip, but it appears it will take a lot of bad news in a short span to trigger this and with the parody that are government reports, "better than expected" can be seen on the economic front "forever"? :) At it's basis the stock market should be a value of future earnings; we've already outlined the case that currently fourth quarter 2008 earnings are showing to be 60% higher than fourth quarter 2007. If this comes through, than I'll be the first to say I underestimate the roaring come back of October - December 2008. It seems a bit fanciful to me, but on the basis of that set of earnings one could say the market is a decent value. That appears to be the current mood, and with light volume we can be moved quite easily in any direction on a day to day basis.
Right now, the conversation has moved from the "credit crisis" to "oil". What is funny (to me) is many times the market would rally WITH oil rising, as energy stocks have come to dominate more and more of the S&P 500. So that was a "good thing". Now the same people giving us that thesis say the market should rally with oil falling as well, because that will help put a lid on inflation/help the consumer. So once again it's the "have it both way" pundits - when oil is up, it's good because it helps stocks in the S&P 500, and when oil is down it's good because it helps consumers and producers avoid ever higher prices. Conclusion: No matter what the news, it's a good thing. That's unfortunately, how Wall Street seems to think, which is why those of you who are right brained will constantly be frustrated ;) I myself am right brained, but try to revert back to 4th grade level thinking when trying to explain why the stock market can rationalize everything. It serves me well; along with my heavy drinking of Kool Aid. But on a serious note - this is one of those periods where I feel I don't have any near term advantage - most stocks I like best have made huge runs with no meaningful correction, and stocks that could benefit from the "2nd half recovery" are based on a thesis I find completely baseless. I've been typing this for a few weeks now, so I'll continue down that path and remain patient, waiting for juicier pitches to hit.
For the fund while we mentioned last week it was possible that the market would make a bounce after a very heavy selloff, I mistakenly assumed the charts would dictate a further move down. I also ran out of Kool Aid last week which also weakened my rational thinking skills, and turned me too bearish. Now with stocks restored, I can see the market should (and deserves) to go up 50 of every 52 weeks even in the worst credit and housing crisis since the Great Depression. ;) So we took a hit, and since this is one of those periods I have no good feel on the near term direction of the market I have raised cash to a high level, but also lowered short exposure since we are in the middle of a trading range on the S&P 500; 1380 on downside, 1430 on the top side. That entire range is only 3.5% so we should know sooner rather than later which way the next move is. I am not doing much these days, other than adjusting short vs cash allocations as we wait to see how things play out.
Below are the fund changes this week - the specific rationale for each of these major moves is explained in the weekly posts which can be accessed in the left margin of the blog under archives.
Some of the larger changes (chronologically) to the fund below:
- Monday, we BBQ'd - enjoying the last time it won't cost a mortgage payment to do so.
- Tuesday, we began to rebuild a position in dry bulk shipper DryShips (DRYS) after the stock fell 27% in 6 days to the mid $80s.
- We closed a position in consultant FTI Consulting (FCN) - a high quality company that I still like the long term positioning of, but I am trying to narrow the portfolio even further and can see more upside in other areas.
- I cut back 4 positions for technical reasons (breaking key support level), all but 1 proceeded to disobey the technical condition and bounce back the next day - nothing works all the time.
- Wednesday, a few names in the natural gas area pulled back to nice support area - so we added to both. I did not buy the 3rd name, Cabot Oil & Gas (COG) hoping to see it hit $57... which it did later in the week but I was not at the computer at the time or apparently not paying attention when it happened so missed opportunity there.
- Thursday, we began rebuilding a stake in Chinese educator New Oriental Education (EDU) on a breakdown to support on "no news". We gave some speculation but it appears with time since, the news is that the earthquake will effect future results. Makes sense but doesn't change the business for the long run.
- Late Thursday, I took out my last layer (I still hold a 1% stake which I won't sell) of Alpha Natural Resources (ANR) after a 60%+ 1 month run. Amazing. Friday, I decided to winnow my coal exposure to concentrate on 3 names instead of 4 (I might go back to 4 at a later date), and of the 2 names more focused on thermal coal I decided to stick with Arch Coal (ACI) and eliminate Consol Energy (CNX). I like every name in this sector for the same fundamental reasons - just trying to find some relative outperformance - Arch Coal has had a good month but at this point after some other names have had such huge runs it has become a more compelling valuation versus the group; so I moved some of my Consol Energy sales directly into Arch Coal.
