Friday, September 5, 2008

Bookkeeping: Closing Out Some Smaller Positions

We've added quite a few names the past few weeks, especially healthcare (and retail I suppose), as we "turn" the direction of the fund. I have a lot of 0.1% type of positions in the fund which are "holding stakes" waiting for better action in the stocks - I do this so I don't have to constantly say "I'm starting a new position" or "I'm closing a position". Effectively these 4 positions have been "closed" since they only sit as 0.1% stakes, but now I'm doing it formally. Since I want to keep focused on a relatively narrow band of long positions I'm going to cut some of these to keep the fund from getting bloated with positions. 3 of the names were bought on day 1 or day 2 of the fund so these are some long term positions we've held.
  1. (CTRP) - Chinese travel; hedge funds have informed me that China just fell off the map and as the rest of the world turns into chaos (as the US markets, of course, rally for the next year) there will be no need for such a stock ;) On a serious note - it's expensive and the chart, while it should have a near term bounce is now below both the 50 and 200 day moving averages. We started this on day 2 of the fund and leave with a $1800 gain.
  2. Mastercard (MA) - Zach will cheer this; I like the business model for the long run but I've come upon some data and just doing a lot of reading which says that the US credit business model might have some near term issues as credit card companies retract credit limits. In our "develeraging world" this could cause some issues. I still think this is a "rest of the world play" so going back to point #1, hedge funds have told us the rest of the world is imploding so there is no need to own a stock that relies on the rest of the world anymore. The chart is now officially trouble and "a short" from my point of view (not that I can) but I think $165 is a nice target range now. I'd short with a tight stop over $232 or so (current $220) if our fund was up and running. This is one of our original holdings, started on Aug 6, 2007 - we leave with a $9000 gain.
  3. Kinross Gold (KGC) - who needs gold? I am torn on gold - if we go into deflationary spiral it's not a good investment. If we go into a chaotic world it would be a good investment. Since I have no stated thesis with it anymore I am just going to take my ball and go home. Cash seems easier at this point. I'm taking a $3000 loss here and have owned this twice (in and out) of the fund.
  4. Jacobs Engineering (JEC) - my jaw in on the floor when I see what "they've" done to McDermott (MDR). The news is not much better with my other remaining global infrastructure names - I still think these are vastly undervalued and over the next 3-7 years will have great stories to tell, but they are all now treated as "crude oil" so this is just a case of overlap - owning 1 is really no different than owning 4. I would not be surprised to see some consolidation in this sector if valuations stay this depressed. It was either this name or Fluor (FLR) and I like the Fluor business a bit more - both have similar valuation. We continue in a market that is NOT about individual stock selection but ALL about sector allocation. So owning 3-4 stocks in this particular sector does not make sense "today". I'll be back into this quality company in the future and actually think this stock is ready for an oversold bounce but I don't own enough for it to matter, and I can buy more Fluor for the same "bounce". This is another original holding - we started this position on day 1 and leave with a $4900 gain.
Again, I think some of these actually will bounce in the near term, but we don't hold enough for it to matter to fund performance, and this helps us stay focused on a limited amount of names. I expect to be back in 3 of the 4 sometime in the next 6-18 months.

Long Fluor in fund; no personal position

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