Tuesday, September 1, 2009

Bookkeeping: Covering about 90% of Riverbed Technology (RVBD) Short

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I am going to cover the majority of the Riverbed Technology (RVBD) short in the $18.70s, giving us a 8%ish gain. I know 8% in 3 weeks seems very stodgy when I should be buying AIG or Fannie Mae and making 8% in under 3 minutes, but I'm old school and if one can annualize 8% a month you can still make a meager living, while being able to sleep at night.

We will leave a 0.4% stake in RVBD, and hope to reShort on any rally - preferably near $20. Think of this in reverse to our strategy on the long side - instead of buying on dips, we're covering on dips... and instead of selling on rips, we're shorting on rips. We re-established the 2nd episode of shorting of RVBD on the 7th of August at $20.44.

Our ultimate goal with this name remains the same - a gap fill in the $15s (late April 2009). Actually I'd call that fill the chasm.


The main thing that could go wrong here is the stock plummets during a period when we are mostly out of the position but that's how it goes some times - we usually never catch the top or bottom but can snare a lot of the meat of the middle part of a move. If the freefall happens and we're at a lower exposure, all we will have lost is some opportunity to make even more money - there are no bad choices in this scenario ... either (a) make a good amount of money or (b) make more than choice a.

We've played RVBD like a fiddle from the long and short side in 2009; 2 successful shorts in the past 8 weeks after riding it for a great gain on the long side and escaping ahead of an earnings implosion.

I lightened up a few of the other short positions by a magnitude of 15-20% as well. This "correction" is "long in the tooth" (ahem) ... at well over 2 days. After heading into the week with a big cash horde and skewed 2:1 short to long in equities we are back to around 1:1 ...recall we sold a 4% short exposure in Valueclick yesterday while purchasing a 1.4% stake in CNinsure - so a 5.5% swing just in those 2 transactions. This is overlaid with our long term October puts. I'm not actively looking to add much on the long side here but I have a bevy of long positions with limit buy orders at lower prices and we'll see if these begin to hit in the days and weeks to come.

Depending on the action from here, we'll re-emphasize one side or the other; long or short when the pig entrails tell us more. Cash levels have breached 70% for the first time in a long time as we await. S&P 906 and NASDAQ 1800 are gaps that still beckon.

Short Riverbed Technology in fund; no personal position

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