Sunday, June 21, 2009

Fund Performance Period 6

is through last Friday's closing prices....

For those who read the content of the website via email or RSS reader, you can come to the website at any time and click on 'Performance/Portfolio' tab in the menu bar to get updated positions (weekly) and performance.

Total Portfolio Value, as maintained by 3rd party, can be checked here each day with 20 minute delay vs real time (starting value $1,000,000 or $10.00 NAV)

I will post an update of performance versus Russell 1000 every 4 weeks; we've moved over to a new tracking this year as the old system would not allow shorting of individual stocks, among other "technical issues" that often came up. Hence we're "starting over" in terms of performance with portfolio "B" as of early 2009. Detailed history on on the first year and a quarter can be found on the above mentioned tab.

Under the new tracking system, our sixth 4 week period is now complete.

(click to enlarge)

This is now the fourth consecutive four week period where the S&P 1000 (and market in general) was up. The larger cap stocks continue to lag as investors have flooded into lower priced, lower market cap, and higher speculative stocks. Commodities were strong yet again, except for the last week of the period; technology also continued its reign supreme. Under performance versus the markets continued, only this time frame instead of short positions working against us, some of our moderate to larger long positions were firmly in the red.

For the fifth "four week" period we returned -5.3%, versus the market's +3.8%, so an under performance of -9.1% during the past four weeks. On a cumulative basis we are now +0.3%, versus the Russell 1000's -0.7%, so an out performance of +1.0% for our "year to date" if you will. (thus far 24 weeks)

Please note we did not start on Jan 1st... so this is not an apples to apples "year to date" performance but close.

We are now almost halfway through our year in the new tracking platform and all we've done is revert to the mean - after a large period of outperformance for the first 3 periods (weeks 1-12), we've followed it up with 3 periods of lackadaisical action (weeks 13-24). While we try to focus on an "absolute" strategy (making money or at least not losing a lot of money under any condition) all we've doing of late is absolutely nothing. We now have a long way to go to get to our yearly goal of beating the market by 15% on the year, something easily done over the previous 1.5 years.

***** Long/Short Discussion below

I will tell you being transparent is much more fun when you are romping around making gains while the market is falling off the cliff and/or making profit while the market goes sideways. Not so fun when you underperform for such a long time frame... since this website began in August 2007 I have not had a period of underperformance anywhere near the length of this; most skids have been 2-4 weeks at most. Frankly going back 5 years I cannot remember a period like this...

So as discussed last week, we're going to be far more disciplined on stops until we get back in the zone and get on better footing. We held quite high cash all period but the smaller caps outperformed the mid to larger caps, and a lot of the money to be made was in such things as solar which we had no position in. Commodities once more did well, and while that helped us in weeks 1-3 of this period, we lost quite a bit of gains in week 4 when many of these stocks deflated and gave back a month's worth of gains. We also kept a few losers which continued to listlessly perform - these 'losers' now have valuation of 7,8x PE but they are ignored as people gladly chase up other merchandise at 30,40x. This is a momentum market, and hot stocks - no matter the valuation - have been the order of the day for much of the past 2+ months. While the markets were up for the period much of it came on 1 Monday morning gap up on a Chinese PMI report - a lot of the rest of the month was back and forth highlighted by the typical late day 'surprise' rallies post 3 PM along with gaps up premarket. In week 4 healthcare dominated as perhaps a rotation into new ideas began.

Some individual damage as follows
  1. a couple of fake breakouts in Illumina (ILMN) where we chased what appeared to be a breakout and they were reverse, so quick losses were taken.
  2. Excel Maritime (EXM) had been a big winner for us the previous 2 periods, but in this one it fell from $11s to $7s.
  3. Swoons in Allegiant Travel (ALGT) and Fidelity National (FNF) hurt performance significantly
  4. Cut back Mosaic (MOS) after it broke a key resistance level (support), then it reversed back up - thinking the trend was in tact we chased it up, but within a few days the stock reversed back down severely after a Potash (POT) production cut.
  5. Made some nice profit on James River Coal (JRCC) but did not lock it in, and in 4 sessions fell from $23s to $17s erasing gain and then generating substantial losses.
  6. Shorted Sherwin Williams (SHW) as I flipped a coin among SHW or Black & Decker (BDK) or Royal Caribbean (RCL) - the other 2 fell off a cliff in the following weeks, generating 13-20% type of drops, while Sherwin Williams rose enough to trigger a stop loss (and loss)
A few positives
  1. Exiting out of Meritage Homes (MTH) anticipating the weekly mortgage data would suffer badly once rates went up
  2. Traded BHP Billiton (BHP) on a technical basis, 3x on gaps up downs for profits
  3. Axsys Technologies (AXYS) was bought out
  4. Closing a short on REIT SL Green (SLG) that would of cost even more to performance
  5. Nice gains in our small to mid cap technology portfolio - RVBD, STAR, SWKS
  6. Avoided chasing Research in Motion (RIMM) ahead of earnings so no quick losses
So not much more to analyze than that; with such a high cash position you need your long positions working to keep up with the market - and not enough of ours were in the catbird seat this period. Combine that with a few real laggards and it was an uninspiring 4 weeks.

We'll check back in four weeks with a new update.

[Jan 30, 2009: Fund Performance Period 1]
[Mar 2, 2009: Fund Performance Period 2]
[Mar 30, 2009: Fund Performance Period 3]
[Apr 27, 2009: Fund Performance Period 4]
[May 28, 2009: Fund Performance Period 5]

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