Bookkeeping: 'Rising Tide' Performance Week 48

Week 48 performance of the mutual fund

Comments: The market continued to degrade this week, albeit at a slower pace than the previous 2 weeks of back to back 3% losses. Luckily the market closed early today because it felt in the last hour like a football team with a 1 point lead and we were just trying to run out of the clock before the bears made a comeback... in stock market parlance we were hoping the market would not fall back below S&P 1260 at the close and make a new low. We held... by inches. But a lot of individual names took a lot more pain, than what the indexes showed this week.

Oil just continues to go up in unrelenting fashion. The economic news continues to be poor but at some point "some of it" must start getting priced into the market. While we did stave off S&P 1260 there at the end, we still remain in a very dangerous position as a break below should/could/would set off more selling. On the "positive side" we can finally name a few things turning "better" (a) everything I read is negative now on other sites (b) the worst of breed (financials, retail, but not homebuilders yet) have begun to perk up the past 2 sessions - which has been typical of the bottoming process the last few times around as people flee out of global growth.... and (c) the last "positive"- our friend to the right finally found his way to our type of holdings and hence no hiding places are left in the market. Fertilizer was slapped around early in the week, coal was dismembered Wednesday and this morning, and natural gas finally took a hit very late Wednesday and today. We knew this day was coming, as we've avoided "him" all during the month of June while the rest of the market melted down. I wrote last week in the weekly summary

At some point the grim reaper will be coming for us and exact it's toll - perhaps next week; we can't hide forever. But we've built up a huge cushion so we are ok with that.

(Note to self: I wish I were wrong more often on my predictions) Truth be told it never feels very good when it actually happens, but it is part of the process. It happens every correction so we'll just continue doing what we've done in the past - layer into our favorite positions as they crumble and make our weekly performance stink, take the near term hits, and realize in a few months down the road the purchases we make during the worst part of the market are the ones that generate the best gains. It is very easy to look at a chart 2 months from now and say "wow if I had just bought at that low, I could of made a mint" but 2 months later you are not remembering the situation/mood that you do in real time. So hopefully we are making purchases that in 2 months from now we'll look back on and say - yep, some good buys near to the bottom.

Since we hold a concentrated portfolio there is not much we can do to avoid periods when the long positions are attacked for 20%-25%+ losses (in 1 day in some cases) but since we saw this day coming we cut these 3-4-5% of portfolio type of positions down to 1-2%, so the damage was not as bad as previous corrections (so far). However, if the past is any indication usually this period of pain in our type of holdings lasts more than 1 week, so next week could be not so fun as well. While we are hedged, most of our Ultrashorts (this week) were going up 2-4% while some of the longs were taking 10-15% hits (Wednesday some were near 20% in 1 session) so while it is better to have these hedges over nothing, it's not going to quite do the job of saving our bacon. These are weeks I'd really love to have ability to short individual names - look at how "great" some of our favorite Pooring of America stocks have performed...





So we can only watch that happen and not benefit.... but we'll work with what we have so all we can do is soak up good merchandise as it falls and try to offset it with some of the Ultrashorts. One more week of this and I think I can call myself bullish because usually we begin to feel the real pain within the last 2 weeks of previous corrections. I'll call this week 1. According to our proprietary poll 17% of readers are already on the "puke train", and another 48% would probably join in with a bit more of this action. The other 35% are smug and confident and in fact enjoying this! :)

After a long string of outperforming (why? I could not tell) the smaller caps (more tied to the US economy) lagged the large caps again this week. The S&P 500 fell 1.2%, while the Russell 1000 was hit to the tune of 1.7%. Rising Tide Growth asked "can we go back to June when we avoided all the mess?" and meandered to a lowly 5.1% loss. One bright item of news - I'm finally catching up to Mr. Heebner - CGM Focus (CGMFX) lost 5.9% yesterday alone. (ok I'm searching hard for silver linings here - hah) Again, if the past is any indication, we generally take the big hits towards the very tail end of a correction and it lasts 2 weeks, so hopefully only 1 more week like this for us. It's been a bad week but a great year relative to the market - 4 more weeks to close our year 1.

As always if interested in pledging an investment when fund is ready to launch (shooting for late 2008) please attach a comment here, or send me an email (need your state please). We have now breached >$3 million pledged - great news and thank you.

Price of Rising Tide Growth: $11.517
Lifetime Performance to date (vs Aug 3, 2007): +15.17%

Comparable S&P 500: 1262.9 (-13.81%)
Comparable Russell 1000: 690.9 (-13.22%)

Fund return vs S&P 500: +29.0%
Fund return vs Russell 1000: +28.4%

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 May 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