Bookkeeping: Weekly Changes to Fund Positions Year 2, Week 9

Year 2, Week 9 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): 24.0% (vs 44.8% last week)
30 long bias: 63.3% (vs 51.4% last week)
7 short bias: 12.7% (vs 3.8% last week)

38 positions (vs 39 last week)
Additions: Portfolio Recovery Associates (PRAA), PNC Financial Services (PNC), BB&T (BBT)
Removals: Fluor (FLR), Polo Ralph Lauren (RL), Parexel International (PRXL), Blackrock (BLK)

Top 10 positions = 38.4% of fund (vs 30.4% last week)
31 of the 38 positions are at least 1% of the fund's overall holdings (81%)

Major changes and weekly thoughts
Not much to say this week. There has been nowhere to run, and nowhere to hide. What was worrisome this week was some sectors that had been holding up the past 5-7 weeks took a hit, from the airlines (despite falling oil prices), to healthcare stocks that had been holding up, to some financials. With the short sell ban coming off financials now that the bailout plan is approved, we'll see how those react.

There really is nothing to say at this point - fundamental analysis has been proven useless, and stock after stock is breaking down on its charts. Every time you move to a place that has been holding up for a few weeks, it begins selling off. If this was just a "bear" market, I could be a bit hopeful here because we are so oversold, but with the credit contraction along with the amazing effect of hedge funds liquidating day after day - there is simply no precedent here. So even after a 9% drop last Monday alone, and 13-14% over the past 2 weeks - I am open to anything at this point, including another huge drop. Despite oversold readings across the board that are historical - without confidence it seems no one wants to step in for more than a few hours on the long side - and without knowing what hedge funds own the stock you own, it's dangerous to own anything because of their relentless selling. Credit markets are also completely frightening - the Federal Reserve is literally supporting the entire financial system over the past 2 weeks. Levels not seen since 1987 are plentiful.

Frankly I've been typing there are no place to find winners for "investors" (different from very short term traders) for months now, and analyzing what we've been trying to do, all it has been is fluttering in and out of stocks trying to make 3% here, 4% there - while exposing ourselves to 30,40,50% losses. So the risk / reward simply has not been there on the long side. Each time I sell something I say "this is capitulation, this is the sale I will regret" but right now 19 out of 20 stock sales has been "the right decision".

I did look back at other market low points over the past 15 months... I wanted to see how far below the S&P 500 was from its 50 day moving average. At the worst periods, in August 2007 the S&P was roughly 8% below its 50 day moving average, in January 2008 12%; in March 2008 7%; in July 2008 9%. Right now we are 10%. So this is right around the median low that marked other "throw in the towel" short term bottoms. But just because that is how it was historically, does not mean in unprecedented times we cannot see something completely different. But outside of a cataclysmic event (which I am not counting out considering how poorly we closed Friday) we are near where other (short term) bottoms were made in terms of divergence between the stock market and moving averages - even in bad times you have a tendency to snap back towards the moving average (think of an extended rubber band). We'll see if this is near the maximum the rubber hand can be extended. Earnings season begins this week ...

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

1. Monday was the worst down day on the S&P500 since Black Monday October 1987 - we had bought Regions Financial (RF) late last week anticipating some sort of rebound on the House vote - the stock was down 40% Monday so as a risk aversion move we had to cut some in the $11-$11.40s range - in case some sort of market panic took over and took what appears to be a good company to $0. Anything is possible in this market.
   
2. We added to James River Coal (JRCC) in the $20s as it had fallen by over a third in a week, along with Mosaic (MOS) in the $68s ahead of earnings. Obviously the latter was a bad move as earnings later in the week were frowned above in a big way. Also added a touch of Potash (POT).
   
3. Tuesday, on a big rebound day we closed out Fluor (FLR) - a global engineering firm which is among my favorite companies - I've attempted to hold this through thick and thin but its down 50% in just a quarter. Sickening to watch. This means we've cut Jacobs Engineering (JEC), McDermott (MDR), and Fluor (FLR) - all we have left from this group is Foster Wheeler (FWLT) - again owning 1 is the same as owning all of them.
4. Wednesday, we began a new position in debt collection firm Portfolio Recovery Associates (PRAA) - the obvious downside to this name is people are in such bad condition that the company is unable to collect debts. We'll see - it is one of the few good charts I can find.
5. Thursday, we started PNC Financial (PNC) and Friday BB&T (BBT) - I do believe this current bailout plan will not work over the long run and in the end the US government will have to go the full monty and pick "winners and losers" - companies they decide they will keep alive and those they will kill. They will inject capital directly into the ones that they have chosen to win. It might take early next year for this next step to happen, but I do believe the problem is so big we will need to do this.
6. Closed out retailer Polo Ralph Lauren (RL) and contract research organization Parexel International (PRXL) Thursday as they broke their 200 day moving averages. Simple as that.
7. Friday, after a 50% drop we added to A-Power Energy Generation (APWR) - within hours the stock was down another 20%. Typical.
8. James River Coal (JRCC) seemed to be "bottoming" around $19 - I only say that because all week it hit $19 and bounced. That does not mean it cannot go to $15 or $10 next week in this market with no sense of valuation. But I added more Friday, assuming we could have even a short term rally.
9. We still have a basket of 3 solar names, and I added to them Friday taking them from around 0.3% of portfolio to north of 7%. Within a few hours they all dropped 10%.
10. Late in the day, we closed Blackrock (BLK) which has been one of the best performers in financials the past year. But the stock has not been acting well of late. I assume if the market does well the stock will rebound, but I decided to build some cash instead.

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