Tuesday, December 8, 2009

Fund Performance Period 12

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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 twelth 4 week period is now complete. (Data is through last Friday's closing prices)

(click to enlarge)




Aside from a quick move up early in the period, this time frame was market with a very range bound market. Earnings season was winding down in the first half of the period, and a "Dubai" surprise (quickly forgotten) marked the second half. The S&P 500 rallied over key moving averages and essentially consolidated over these levels; whereas the smaller Russell 2000 under performed. There was no specific sector that stood out but the "inverse dollar" trade once more was dominant - this has been a theme for half a year+. Precious metals were a darling except for the tail end of week 4. Large caps were dominant over small and mid caps. One strange factor was how almost all the gains seemed to be concentrated on Mondays as for this period and the last [Nov 20, 2009: What the Heck is Going on With Mondays Lately? Always Up] .... markets rallied on the same weekend pledges of 'easy money' and 'more stimulus' (which caused the dollar to fall, and every asset on Earth not named the dollar to rally).



For the 12th "four week" period the fund returned +5.2%, versus the market's +3.4%, so an out performance of +1.8%.

On a cumulative basis the fund is now +78.3%, versus the Russell 1000's +19.6%, so an out performance of +58.7% for our "year to date" if you will. (thus far 48 weeks)

Please note we did not start this year 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 out performance 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

Period 12 was actually a difficult period to navigate in terms of trying to create much outperformance. An index trade created at the very end of period 11 helped to push the fund to a large gain very early in week 1, but after that the going was tough. Weeks 2 and 3 were random and directionless whereas some failed breakouts in week 4 cost us a few percentage points of performance. During the period, market participants rewarded very large cap companies, especially mutual fund favorites such as Google (GOOG), Apple (AAPL), and Amazon.com (AMZN). In the mid cap and small cap space, sectors we are not exposed to very much such as healthcare or retail were favored. One exception was speculative Chinese small caps which caught the attention of bored daytraders - Thanksgiving week always seems to do these stocks good. The fund did have some nice gains in precious metals but most of our stocks simlpy traded back and forth in a narrow range much of the period, similar to the S&P 500. Having a very good year, we decided to go to a very heavy cash position for much of the period, only wishing to commit further funds if the market could break out - which it never did.





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:

Week 1: As the market bounced upward, after a quick correction, at the tail end of period 11, we had some index long positions (including options) in the portfolio, hence we entered period 12 with 70% cash, 26% long, 3% short. (a) We enjoyed a big surge Monday morning so we sold half the SPY calls we had bought the previous Friday for a quick 30% gain (on 2.5% of our portfolio) as the S&P 500 rushed to 1080 (b) we were forced out of our only real short exposure: Costco (COST) short for a 4.6% loss. (c) we added 1% exposure to Discover Financial (DFS) under $15 as it broke back above key resistance levels. (d) Late Monday we sold another quarter of our SPY calls as the S&P hit 1090 for a 70% gain. (e) Tuesday afternoon we sold the last quarter of the SPY calls for about a 65% gain. That quick in and out SPY call trade was the main highlight of the entire period, and we should of just called it quits.

(f) With Costco gone, we wanted to have some sort of hedge on so we decided to short a small long position we had, which was struggling - E-House Holdings (EJ); with a 3% allocation. (g) By Wednesday, after such a strong move from the Friday bottom we decided to begin selling off some individual stock exposure: HDFC Bank (HDB), BHP Billiton (BHP), Wyndham Worldwide (WYN), Market Vectors Brazil Small Cap (BRF), Las Vegas Sands (LVS), Discover Financial Services (DFS) were all harvested to the tune of 33-50% of stakes, for nice gains. (h) By Thursday the S&P had raced to a "double top" pattern near S&P 1100.... so traders simply waited for the next pledge by Fed officials to punish the US dollar so the "inverse dollar trade" could begin anew.


Week 2: Having taken many gains the previous week, we entered the week with an over flowing cash position of 83.5% (most in 2.5 years), 13% cash and a cursory 3.5% exopsure short. (a) Monday, as the dollar was crushed, another "double top breakout" ensued taking the market over S&P 1100 - precious metals roared ... it was raining silver.. (b) We added to our position in CNinsure (CISG) as the stock broke over resistance. (c) as was the rule with almost any short we have tried to deploy since July, we were stopped out of E-House Holdings (EJ) short we had attempted the previous week with a 5% loss; shorting almost anything in this market has simply been impossible. (d) so instead of being short, we added to our long position in EJ the next morning - after an earnings blowout the evening before.

(e) We mentioned Potash (POT) looked poised to breakout and we'd be there if it broke over $106... that happened with an hour or two of our blog entry; we were in the stock upon that event. (f) Wednesday E-House Holdings once more reversed on us, breaking support as if the great earnings report meant nothing, and we left 90% of the position with a 6% loss. Burned twice by the same stock in 48 hours. (g) Thursday, we began a starter stake in Chinese travel firm Ctrip.com (CTRP) after a stellar earnings report was followed by some selling - we hoped it would fall more so we could buy cheaper but that never happened. (h) Friday, Chinese video game maker Perfect World (PWRD) broke support, so we cut back 90% of our stake.


Week 3: Thanksgiving week; always a time for ripe speculation as the retail trader takes over and almost always a winning week, especially the Wednesday and Friday around Turkey day.  Expunged of almost short exposure going into the week we had 80.5% cash, 19.5% long and almost nothing short.  Everything [almost] went according to plan... Monday up, Tuesday up, Wednesday up, Friday... Dubai'd! (a) Monday we began a position in smart grid company EnterNOC (ENOC) as it had a dramatic drop the previous 2 weeks, and brushed against its 200 day moving average in the $24s.  (b) Tuesday we took a round of profits to many individual names - in the strong dollar category we took 90% off BHP Billiton (BHP), Ultra Silver (AGQ), and Powershares Double Long Gold (DGP); we also placed a stop loss for half of our Potash (POT) at $112 (which ended up hitting later in the week) to lock in profits.  We sold almost all of our remaining Priceline.com (PCLN) position and completely closed E-House Holdings (EJ). (c) Much like E-House, CNinsure (CISG) has done nothing for a few months but go sideways, so once more as it broke support, we were heading to the exits with most of the position.

(d) at this time, having seen stop loss after stop loss hit on almost any short position attempted for months, I tried a different tactic deciding to go long volatility (ETF) and the dollar (UUP calls) as portfolio hedges.  The volatility ETF actually exploded up higher Friday on the Dubai news but since it was unclear if this was the beginning of something bigger we did not take profits and eventually lost them all.  (e) Wednesday, we began a starter stake in bond insurer Assured Guaranty (AGO). (f) Half of our EnerNOC (ENOC) position was sold as the stock rallied despite Dubai right to the 50 day moving average and tacked on 11% in under a week.


Week 4: Another week started with immense cash holdings of greater than 80%; long exposure under 13% and what I consider "synthetic shorts" (long dollar, long volatility) of 4.6%. Everyone was looking for a new breakout level of S&P 1112 by this point to jump aboard. (a) Monday we cut back on a Blackstone Group (BX) position which has treated us well all year, but broke support - that was a good move.  Unfortunately we also shorted iShares MSCI Japan (EWJ) just hours before a surprise intervention overnight by the Bank of Japan.  We waited to see if it was just a 1 day event, but by Wednesday we were out with a 5% loss. (b) The last of Meritage Homes (MTH) was closed out as winter approaches... we'll revisit towards the end of winter as we drink Kool Aid about the housing rebound of next spring.

(c) In the first of two hand slaps, we bought the "breakout" of S&P 500 over 1112 Wednesday; it failed.  The index remained stuck in a multi week box.  S&P broke out again Thursday, and we tried the exact same trade.  It failed; we were out within 30 minutes.  The same breakout happened Friday post jobs report but we did not bite... thankfully.  (d) Thursday, as we awaited the monthly jobs data we sold most of our Ctrip.com (CTRP) position after the stock was up 8 of the 9 sessions since we bought it, and tacked on 16%. (e) Friday, we closed the position in Perfect World (PWRD) and opened a new one in TriQuint Semiconductor (TQNT).  (f) We took profits in one of our stars, Wyndham Worldwide (WYN).  It was a pretty ratty week all things considered.


[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]
[Oct 13, 2009: Fund Performance Period 10]
[Nov 9, 2009: Fund Performance Period 11]

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