Bookkeeping: 'Rising Tide' Performance Week 52

Week 52 performance of the mutual fund

Comments: Year 1 ends with a plop. The market had vicious up and down moves all week, but ended up not too far from where it began. Once again - the only people making money are daytraders who flip in and out of positions on a daily basis, as no trend lasts for more than a few days. It is not an investors market. I have to say on a personal note - this was a dispiriting week. There are other week's we've lost more money, or trailed the market performance by a much wider margin... but this week was a lot harder to reconcile for completely different reasons. The fun in investing is finding opportunities and watching companies / stocks blossom as the potential is unfurled. But this market for many weeks is no longer about that - it simply random events and fundamentals mean little. So the quest to find good stories is useless and it is akin to running into a wall. Even the people calling for a "change in character" or a "rotation" are not seeing that play out in a consistent basis. There is no "leadership" aside from some financials (how long will that last?) or health care but even some names in that sector have had enormous blowups this week. Elan (ELN) down 50% today or Biogen (BIIB) down 30% interest anyone in 'safety' or 'leadership' or 'rotation'?

I cannot remember another time or week like this where company after company I follow announced stellar earnings/guidance (many beating by huge margins), and the reward was selloff after selloff, or at best muted sideways action or slight marginal poof upwards (before selling off the very next day) Sohu.com (SOHU), CF Industries (CF), Walter Industries (WLT), Mosaic (MOS), Alpha Natural Resources (ANR), National Oilwell Varco (NOV), Cummins Engine (CMI), First Solar (FSLR), Visa (V), Flowserve (FLS), Cleveland Cliffs (CLF), Exactech (EXAC), Massey Energy (MEE). Thats 25% of our portfolio. Today was just the latest example with Massey Energy - a quick spike up only to bleed off it's gains throughout the day and end with a thud. Embraer (ERJ) which we don't own but highlighted this morning beat by a huge margin, and after its pike all it did was sell off all day. Over and over - the same pattern. I'd consider the majority of the above to be blowout earnings, and yet the rewards are sparse and in fact punishments handed out in many cases. And it is not like these stocks (for the most part) ran up ahead of the earnings to create a "buy the rumor, sell the news" reaction - most had been beaten down even going into earnings... so it appears to be "sell the rumor, sell the news".

Usually we worry about "earnings season" for completely different reasons - we want to avoid stocks having earnings misses or guidance that did not make the minions happy but that has not been the case this time around ex-Mastercard (MA) which was a minor position for us. It is simply a case where any & all news in our stocks has been used as a selling opportunity. Even as we try to find new ideas in "non global growth" sectors - we are finding those being punished along with the rest. In the long run, stocks have always been rewarded for outperforming on the earnings line. But in this short/middle run, there is no current reward and hence putting the work in to squirrel out the best ideas, is proving to be a wasteful exercise. I'll have to bring out my trusty dart board for new ideas, because it would probably outperform the portfolio nowadays. And save me a lot of time.

There was not much to say about this week. Bulls were trying to find silver linings where there are none. Oil determined the fate of about 400 global growth stocks across the commodity chain AND across areas such as global infrastructure (many contracts signed when oil was below $70 apparently now will be cancelled as oil falls to $120 or $100). Stock prices were random events this week based on oil or hope. Not much to hang one's hat on, and it's been like this for a while now. I just don't see much to buy out there anymore; when fundamentals mean little and most charts are weak. We had a 2 day rally Tuesday/Wednesday and just when the technical picture "could" of changed for the better, those darn facts reared their ugly head the next morning and the market sold off heavily. I don't have any insight into this type of market. It's random. And the names on my watch lists seem to be selling off much more than the indexes. Due to all the above reasons I see no reason to change from a very hedged position (short and long positions quite balanced) with high cash levels. It is boring, but it is the current necessity. For excitement or "calling the bottom" I'll refer you to other sites. We're going to (try) to preserve our capital until things change. It seemingly just is bleeding away piece by piece on a daily basis right now.

Since this is the end of our year 1, I am going to do the weekly and yearly performance into 1 separate post which I'll put up tomorrow. We've had a good rookie year, we beat all our goals versus the indexes, we've beaten all (or near all - we'll know in a few weeks when the data comes in) of our 1870 future peers [Jul 26: Rising Tide Growth Performance v Peers July Update], but we've had some concentrated periods of underperformance and this past month has taken the cake.

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 are quickly approaching $4 million pledged - great news and thank you for continuing to pledge during this month of misery.