Tuesday, October 13, 2009

Fund Performance Period 10

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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 (Investopedia.com) as the old system would not allow shorting of individual stocks, among other "technical issues" that often came up. Hence while the website and portfolio began in August 2007, we're "starting over" in terms of performance with portfolio "B" as of early 2009. Detailed history on latter 2007 and 2008 can be found on the above mentioned tab.

Under the new tracking system, our tenth 4 week period is now complete. (Data is through last Friday's closing prices)

(click to enlarge)

A mixed period with stocks but ultimately markets ended up higher then they started; rallies in the first and last week book ended a 2 week period of weakness. Weakness in week 2 began post Federal Reserve meeting and lasted for about 8 sessions - through to the monthly employment report, which disappointed. No worries - that was forgotten by the following Monday and the last week of period 10 was particularly strong with a 4.5% gain that more than erased the previous 2 weeks of downside. There was no specific sector that stood out but the "inverse dollar" trade once more was dominant. Precious metals were a darling of this time frame.

For the 10th "four week" period the fund returned +9.5%, versus the market's +2.8%, so an out performance of +6.7%.

On a cumulative basis we are now +62.0%, versus the Russell 1000's +16.2%, so an out performance of +45.8% for our "year to date" if you will.
(thus far 40 weeks)

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

Our yearly goal of beating the index we track against by 15% has been reached, and we're now at the highest level of outperformance versus the market for the year. Both absolute performance (making money) and relative performance (outperforming the market) were achieved in the period - which is always the best outcome.

*** Long/Short Discussion below

This period was far and away the most 'fun' from a stock perspective in at least a year ... since summer 2008 the market has been stuck in student body trading where almost everything either goes up or down en masse. And whichever trend subsists, it is persistent to a degree of annoyance. We finally had a time frame where the market went both up and down - we could sell a portion of our positions, get them back at cheaper prices on a pullback and then enjoy the ensuing upside. Even more important some basic technical analysis rules were obeyed; the key this period was a 4-5 day period at the end of week 3 and the beginning of week 4. Due to a "gap" in the S&P 500 ETF (SPY) around 102 (equivalent to S&P 1020) we were positioning to press short exposure on any break of S&P 1040 for a quick 20 S&P points. Once that happened, we covered (and sold puts we had bought) and went heavily back to the long side, so we enjoyed the 4.5% rally in week 4. This allowed us to add a lot of pep to our step with some option strategies, while our core stock positions, with a few exceptions, did a great job of outperforming the broader market. Further, unlike previous periods where we had some longer term put exposure as an insurance policy (which weighed on returns) that was not the case in this period.

Please note on the right margin of the blog is an archive in which you can see all these events in chronological order, clicking on any link within the sentences below will take you to that transaction - a summary below:

In week 1, we were squeezed out of some short exposure - Riverbed Technology (RVBD), Caterpillar (CAT), a portion of Capital One Financial (COF). We closed a long position in Geoeye (GEOY) out of sheer boredom; the stock barely moves. I began to mention I "SPY'd" a gap at 102; this would benefit us greatly 2 weeks hence. I added to our precious metals exposure as gold broke out to 2009 highs. By Wednesday, as we "melted up" I became more cautious and dumped some SPY calls I had bought earlier in the week. I continued to take profits later in the week selling 1/3rd of RF Micro Devices (RFMD) and Blackstone Group (BX). We noted that we were at a statistical extreme, with the market at 20% over the 200 day moving average - more caution was warranted.

In week 2, we actually entered the week quite hedged at almost a 1:1 long v short ratio. We did not want to be overweight long or short going into the knee jerk reaction that is Federal Reserve day so we did little until late Wednesday. After a head fake upward, the market actually reversed and sold off post Fed announcement. We began a small starter stake in Las Vegas Sands (LVS) late in the week. Excel Maritime Carriers (EXM) was closed out, there were better fish to chase. Fish such as silver! We began a decent sized stake in Ultra Silver (AGQ) - a decision that was a big benefit immediately. Julian Robertson said the US has a good chance to be sunk if the Chinese and Japanese don't support our debt load. Research in Motion (RIMM) proceeded to fumble its earnings report. As the S&P 500 fell to its first support area - the 50 day moving average, I lifted short exposure and closed out my long term put "insurance". This was at roughly S&P 1045; I had mentioned then below 1040 we'd be moving to the dark side more aggressively, but we first expected a cursory bounce.

The S&P 500 has trailed exactly down to its 20 day moving average. We certainly should see at least a cursory (reflexive) bounce here. The question is degree.

The next 48 hours will be very interesting (48 market hours that is: today and early next week) ... if bulls don't do their normal dip buying and we reverse back down through the 20 day, this will be the 3rd negative reversal within a week. That would embolden bears.

We restarted a very long term position in Myriad Genetics (MYGN) despite a gosh awful chart; we're not looking for anything positive near term due to the technical condition.

In the beginning of week 3, we did get the textbook bounce off that 20 day moving average; this took us from the S&P 1040s to the S&P 1060s. Wyndham Worldwide (WYN) was upgraded by Goldman - as I was trying to put a stop loss limit order, in error I put in a limit order and sold 75% of the position; at a good profit at least. We closed the Capital One Financial (COF) short with a 16% loss. Some weak data came in Wednesday - i.e. weak Chicago Purchasing Manager index, the market did not enjoy that. Not so fast! Within 2 hours the Chicago report was ignored and the market RALLIED on the same data; it was a crazy day. Thursday we sold down early in the day to take us back to our line in the sand at S&P 1040 - our strategy to ride the market down to S&P 1020 was ready to be launched if and when. We shorted some Bunge (BG), while cutting back on E-House Holdings (EJ) which had rallied 12% in 2 sessions. We attempted to add to RF Micro Devices (RFMD) , as it finally fell back to support but would later (in the same day) be stopped out of this position. Finally S&P 1040 was broken, we announced we were pressing our shorts. Friday morning in premarket as we awaited the monthly employment report we noted the target area (S&P 1020 or right below) as a very obvious support level. The market sold off immediately to this level, at which time we covered some puts for a 70% gain. That selloff from S&P 1040 to 1020 even surprised us in how fast it happened. A slew of limit orders went off Friday morning - limit purchase orders outstanding hit in BHP Billiton (BHP), Blackstone Group (BX), and E-House Holdings (EJ) while stop losses in First American (FAF), Skyworks (SWKS), and TriQuint Semi (TQNT) hit. The selloff allowed us to cover our Eaton (ETN) short for only a 5% loss, an improvement from where it had been the previous 2 weeks. We also covered most of our Bunge (BG) short for a quick 5% gain.

Week 4 was just a party - everything rocketed as the previous Friday's unemployment figure was quickly forgotten. We entered the week with the lowest short exposure in a very long time at only 5% of the portfolio - so we were skewed very long and benefited. Monday, we got back our exposure in TriQuint Semiconductor (TQNT) since it recaptured support, it went on to have a fabulous end of week run. The S&P 500 bounced smartly after "filling the gap" Friday, and now was approaching the 20 day moving average again - this time from below. We had no idea what it would do but would position ourselves based on what it did at that time - it obviously broke north and off to the races we went for a 4.5% week in the markets. Gold and silver continued to rumble. By Tuesday of the week - we were back to "normal times" in a "buy anything" market - almost all stocks in my watch lists were surging ... unemployment? what unemployment? I tried getting a little short exposure back on (just a small amount) via Analog Devices (ADI) and re-expanding Bunge (BG), with the intent to get more balanced short v long on any move over S&P 1070... changed my mind based on the stampede of bulls. Our 2 main laggards this period were stocks that gave us some very good gains the previous period (#9), Skyworks Solutions (SWKS) and RF Micro Devices (RFMD) - we continued to cull these 2 positions Wednesday as they were weak technically and not joining the bull parade. Thursday we took profits on Meritage Homes (MTH) as Obama and friends floated a new housing handout in the New York Times. I began cutting back a lot of other names, to lock in profits of 10-20%+ in under a week - too many to mention. We were stopped out of the Bunge short for a 4% loss by the end of the week, and as the US dollar crumbled we awaited the bulls march to S&P 1080....

[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]
[Jul 20, 2009: Fund Performance Period 7]
[Aug 17, 2009: Fund Performance Period 8]
[Sep 14, 2009: Fund Performance Period 9]

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