Bookkeeping: Weekly Changes to Fund Positions Year 2, Week 6

Year 2, Week 6 Major Position Changes

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 (1 position [SHV] + cash): 34.9% (vs 24.3% last week)
39 long bias: 47.5% (vs 65.7% last week)
7 short bias: 17.6% (vs 10.0% last week)

46 positions (vs 63 last week)
Additions: MFA Mortgage Investments (MFA)
Removals: Illumina (ILMN), Gafisa (GFA), Baidu.com (BIDU), Millicom International Cellular (MICC), Perfect World (PWRD), Sohu.com (SOHU), iPath DJ Livestock ETN (COW), Cleveland Cliffs (CLF), Atwood Oceanics (ATW), Apple (AAPL), Research in Motion (RIMM), China Medical (CMED), Energy Conversion Devices (ENER), Cummins Engine (CMI), Flowserve (FLS), Ultrashort Technology (REW), Ultrshort Consumer Services (SCC), DB Agriculture Double Long (DAG)

Top 10 positions = 25.2% of fund (vs 27.3% last week)
38 of the 46 positions are at least 1% of the fund's overall holdings (70%)

Major changes and weekly thoughts
Sign of the times, both CNBC and FOX Business have special 8 PM Sunday night live editions - free market capitalism works 7 days a week in the new era. Impossible to gauge anything in this market where outside forces mean more than fundamentals so there is not much to say. Now we are hearing stories that instead of Lehman, Bank of America (BAC) is in to save Merrill Lynch (MER) because people know that's the next place the shorts will show up - so a "preemptive move" to draw a line in the sand seems to be the plan to keep the financial system intact.

For the fund, we shrank shrank shrank. And then shrank some more. In past weeks we cut back to high levels of cash but kept a lot of positions at the bottom of the portfolio but this week we cut the vast majority of those out (many were at 0.1% allocations). Just a tough market to make consistent money on the long side, and the days many of these stocks go down the losses are far greater than days they go up. Further, in this "one stock is the same as others" in the same sector, owning multiple names and deciphering the differences between each seems to not be a worthy cause at this time. The market looks to me as something very dangerous right now as there still appears to be mountains of denial, and people are looking for the government to bail them out instead of assessing companies on fundamentals. We can't short individual names although we've named names - so in the current situation cash or broad based ETF shorts (which reverse every 48 hours it seems, as opposed to some individual names which are down consistently) are the only alternatives.

Again, hard to give any sort of forecast or thoughts since everything seems to news driven and so reactionary. Worldwide futures look terrible but hey, that could reverse 180 degrees by Monday morning, or if not Monday we'll completely reverse Monday's huge fall with a huge rally Tuesday for some made up rationale.

I don't know about your local market but I'm wondering how the "consumer is coming back" trade works when gasoline is (temporarily) back up to $4.19+. Maybe he will take a few weeks off before his buying splurge of the past 6 weeks (when gas was $3.69-$3.89) returns. Now if you excuse me, I have to go watch the best drama on TV - the U.S. government and financial markets aka Dancing with the Bureaucrats.

The larger weekly changes (chronologically) to the fund below:

1. Monday, homebuilder Lennar (LEN) jumped to $16, we cut the stake from 1.7% to 0.1%, near $15 confidant that this market with no memory, and only catering to daytraders would punish the name soon enough and we could get the stock back lower. Sure enough the traders abandonded the trade to move to something else to play for 4-5 hours and the stock went into freefall - we were able to buy back the shares we sold near $13 within 24 hours. And that pretty much sums up the stock market these days.
   
2. We reduced EZCORP (EZPW) as the stock spiked up on news of a new acquisition, and locked in some gains.
3. We continued the liquidation of smaller positions that we started Friday of the previous week - we sold Illumina (ILMN), Gafisa (GFA), Millicom International Cellular (MICC), Baidu.com (BIDU), and Perfect World (PWRD) - I continue to like these names but the charts have been showing poor performance. We'll consider buying some of these back either on sustained strength or a washout type of panic bottom. Some of these seem oversold and could have some bounces at least but are below all technical levels so would be considered shorts on their bounces.
   
4. Tuesday, we closed 3 more positions - Sohu.com (SOHU), Cleveland Cliffs (CLF), and iPath DJ Livestock (COW) - the latter 2 being commodity stocks which at this point we can get the exact same return by holding other instruments since the market is treating them all as one stock.
5. One stock doing well for us has been retailer Buckle (BKE) - it's had a 20% run in 2 weeks so we locked in those gains - unfortunately it was only a 1.6% stake so not a huge effect on the fund. We reduced it to 0.6%.
6. We closed Atwood Oceanics (ATW) - again nothing company specific but they might as well rename the company Atwood Crude Oil, Atwood Iron, or Atwood Fertilizer.
7. Wednesday we continued the pattern - 5 more names out the door: Apple (AAPL), Research in Motion (RIMM), China Medical (CMED), Energy Conversion Devices (ENER), Cummins Engine (CMI). The former 2 are really acting poorly even on up days for the market which I continue to find very troubling as they are the "tech leaders" - I can only assume some liquidations are being forced upon these positions. I suspected in the blog entry that ENER could bounce, but we partook in the bounce with our other solar exposure.
8. We saw a dramatic 2 day drop in Sequenom (SQNM) - at this point I just assume everything is a hedge fund seeing redemptions or being forced to reduce leverage. The stock dropped below the 50 day moving average on heavy volume which worried me, so I cut it by 2/3rds. Later in the week the stock bounced back to close above the 50 day - so this one could go either way now on a technical basis. I bought back a bit later in the week a bit higher than where I sold out - but have this one on a short leash.
9. We restarted a position in MFA Mortgage Investments (MFA) after a huge bounce post Fannie/Freddie bailout, and then a retracement to fill the gap in the chart. This is just a play on the spread between money borrowed and the yield on instruements. Those instruments just went from implicitly guaranteed by the US government, to explicitly.
   
10. Thursday, we closed Flowserve (FLS) - I wish they'd announce a buyback because right now they might as well be Jacobs Engineering Group (JEC), Fluor (FLR), or Cummins Engine (CMI) - the market treats them all as one.
11. We closed 2 Ultrashorts as 9 was too many to manage in this market where you have to trade in and out of positions every 48 hours or else they completely reverse on you and take away the previous 48 hour gains. Ultrashort Consumer Services (SCC) we had doubts from the beginning since its top 2 holdings are some of our favorite stocks, Walmart (WMT) & McDonalds (MCD), and Ultrashort Technology (REW) is more or less an overlap with the general market - when the fall, so does REW by just about the same amount. So it's not really value added.
12. Friday, same thesis as the trend of the week - closed DB Agriculture Double Long (DAG)
13. There was weakness to close the week in retail, which was the strength in the early part of the week. This is part of the 24-48-72 hour rotations - consumers were frowned upon after a "reality check" report of consumer spending was announced. However, memories are short and just like job loss reports are forgotten by the following Monday, this report will be forgotten and the consumer wil "be back" by sometime next week, driving these stocks up. After which they will be driven down a few days after. After which they will be driven up as the consumer comes back. Anyhow we added back to some Buffalo Wild Wings (BWLD) as one of our proxies for the "consumer" after a big down day Friday.
14. Commodities/global growth rallied for nearly 2 days, which is a "long term" move, in the current market - so I took some off the table across the board late Friday.
    

The above do not include the majority of my trades in my Ultrashorts which I am trading quite often as the market ebbs and flows