Monday, July 20, 2009

Fund Performance Period 7

Data 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)

**PLEASE NOTE - as of about 4 weeks ago this link has been disabled due to updates on the website; hopes are in the next month they will make the data available again - for further information please see the notice we posted about this subject here ---> Account Balance Tracking

In lieu of that "not working" link, below is a "screen shot" of the account balance as of Thursday the 16th (Friday the 17th is not ready yet for some reason so I'll swap it in when it is) - click to enlarge


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 seventh 4 week period is now complete.

(click to enlarge)

The first 3 weeks of this period were part of a month long skew downward in the market, that took off about 7% of value on the S&P. The 4th week of this period was a straight shot up rally that completely offset the month long 'correction' as the markets enjoyed 7% gains. The reflation trade was hurt most of this period but gained some fans again late last week; healthcare and technology were outperformers. The "speculation" into dollar stocks that marked much of the previous 3 months mostly ended. We also had a much more calm market with a heavy amount of "premarket" surges or drops; most of the action was DURING the day for a change. We swung back nicely this quarter as almost everything went "right" - all losses were small and contained and we had some nice winners, as well as hedges working for us.

For the 7th "four week" period we returned +16.6%, versus the market's +2.2%, so an out performance of +14.4% during the past four weeks. On a cumulative basis we are now +16.9%, versus the Russell 1000's +1.5%, so an out performance of +15.4% for our "year to date" if you will. (thus far 28 weeks)

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

As mentioned in the previous update we had one of the coldest streaks I can ever remember in terms of duration (12 weeks). Going back 5 years I cannot recall a similar period where almost so many steps were "not so great" - that said; we still were ahead of the market for the year due to a stellar beginning of the year. In this period we just reverted back to "Mark's mean" offsetting 12 weeks of below average performance with a good 4 week period. So we're back where we were a few months ago in terms of RELATIVE performance (versus the market), and at our high for the year in terms of ABSOLUTE performance. As always our outsized goal is to beat the markets by 15% a year, something we did with ease in 2008 and now we're back on track to do it for 2009.

*** Long/Short Discussion below

I will continue to say I disagree with those who believe its a stock pickers market. I think it has NOT been a stock pickers marker since summer 2008. It's been an allocation market - be "in" the market at the right times, and be "out" (or short) the market at the wrong times and the specific instrument you use means very little. Our correlations are at record highs and almost everything moves together now. This is again why I focus so much on the indexes - if you put probability in your favor on which way the market will trend in the near term, I think 70% of the battle is over with. This is a very different situation than 3, 5, 7 years ago... so much of our good times this period was being conservative (high in cash, with selective short exposure) at appropriate times as the market weakened through the first 3 weeks of the period. Then as important, when the S&P was at the "neck" of a potential head and shoulders formation (if it broke, we could of fallen quite severely) we did not press on the short side (only some nominal exposure) and indeed we were looking for a bounce from S&P 870s anywhere up to S&P 910 as we outlined in our weekly summary. Well, our goal was surpassed but more importantly we were positioned correctly.

The week before this period started I wrote in [Jun 18: Top Position Reviews]

I am going to have to be a lot more strict on positions until this ship is turned around in the right direction - I've been lax in placing stop orders and taking on some water on positions. The past week I've been more firm on that, but I want to go through the major positions and show via chart where I am going to cut the chord (cut back sharply). Of course placing stops exposes you to being shaken out of a position on a volatile day and then missing out on a rebound, but at this point I need to be conservative.

I took this to heart, and both on the long side we placed tight stops and in our shorts we placed tight stops. This goes back to rule #1 of making money: Don't lose money. While we were stopped out of some longs that continued upward, we kept all losses small and when positions turned against us we were out - quickly. The biggest % loss for this period was Yingli Green Energy (YGE) at 20% but it was a small position that we had a previous gain in the period to offset against. Next biggest was Mosaic (MOS) where we lost 10% overnight on a buyout rumor. Can't do much about that. Next biggest was Las Vegas Sands (LVS) at 7% on a gap up overnight but we had just made 7% shorting it a few days before, so they offset. All other losses were 2-3-4% in nature; if the position turned against us, we left. No questions asked.

In terms of positioning we had a bit of good fortune not only to be in large cash levels as the market 'corrected' (and while the index was only down 7% a lot of individual names fell 15-30%) but we bought some "insurance" out of the money puts at the right time. I actually touched on that earlier today. That benefited us. I outlined our major long positions last week [Portfolio Review - State of the Longs], but we harvested gains of 20-30% in quite a few names this period - all in different position sizes. Further, some of our big losers from previous periods such as Allegiant Travel (ALGT) bounced strongly in this period; another benefit. Last, we had some intraday trading with some ETFs/options that helped to supplement the core strategy as we had many TREND days [Trend Days] (down in the first part of the period, and up the last week of the period) where once the pattern was set by 10:30-11:00 AM the market just continued in that direction all day. So we took some trades for 2-5 hours and got back in cash by end of the day.

Overall a simple story: overall positioning was correct week after week, we did not go long at the top of the range nor short at the bottom. We benefited from longs that were in good chart formations and (a) held up well during the correction then (b) bounced strongly during the market rebound. We benefited from well placed "insurance" in some out of the money puts in late June. These paid off in under 10 sessions. Our losses were almost entirely short and sweet and taken very quickly. And last, we were simply very overdue to have a good period after a losing streak that stretched for far too long. So go forward, let's try to keep doing the same and get back to what we were able to do most of 2nd half 2007, 2008, and the first few months of 2009. And less of what we did this spring and early summer.

[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]
[Jun 21, 2009: Fund Performance Period 6]

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