Thursday, January 7, 2010

Fund Performance Period 13

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

(click to enlarge)




This period was holiday heavy with the latter 2 weeks shortened by holiday hours.  The first 2 weeks and most of the 3rd the S&P 500 remained range bound in the same range it was stuck within almost all of period 12; we called this "the box" (S&P 1085 to 1115/1120).  At the end of week 3, and through week 4, Santa Bernanke Claus descended on the people, and in light holiday trading a breakout ensued.  News flow was very quiet and unlike previous periods the dollar was strong, not weak.  However this did not lead to a selloff in the general market, although it struck precious metals hard.  Small caps, after struggling versus large caps for months, finally began to show signs of life in the second half of the period.  However, despite the small breakout - many gains in this period happened "off hours" - especially premarket.  The Greek fiscal situation was a source of concern during this time frame, but not enough to derail the market.  A Federal Reserve meeting during week 2 of the period was a non event.


For the 13th "four week" period the fund returned -0.4%, versus the market's +1.1%, so an under performance of -1.6%.

On a cumulative basis the fund is now +77.5%, versus the Russell 1000's +21.0%, so an out performance of +56.5% for our "year to date" if you will. (thus far 52 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% was successful in 2009 although we struggled in the last 4 week period.  Neither absolute performance (making money) or relative performance (outperforming the market) were achieved in the period.  So a period where the only person we made rich was the broker handling trades, but a very satisfying year.

*** Long/Short Discussion below

General: Period 13 was a struggle - very little movement occurred most days, and what little there was, mostly happened in premarket or the first 15-30 minutes of the day.  This only helped those positioned overnight and with a high cash position that was not us.  Then the rest of the day was a lot of churn which only helps quant traders trade amongst themselves and collect rebates; while we sat blankly staring at the wall.    Buying "breakouts" on the market overall failed in this period as it did in period 12; something that helped performance greatly in the summer and fall of 2009.  With that said, no great mistakes were made - it was simply a period where the market was so range bound, and so many stocks were range bound - there were very few opportunities to exploit.  We spent week 2 changing over the portfolio, culling out some smallish positions we had with bad charts, and adding an array of new names.  A late day selloff on the very last day of the period (Dec 31st) pushed us from slightly positive for the period to slightly negative, which was unfortunate.

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: The S&P 500 was in week 5 of the "box", we began the week high in cash (75%), 21% long, 4% short. Our short exposure was mostly not "real" shorts but long volatility and long the US dollar; but due to market behavior we classified them as short. 
  • Top holding AsiaInfo Holding (ASIA) bought out a competitor right before an IPO and started the week off well, with a 25% gain, we sold half our position into that strength.
  • After quite substantial drops in both gold and silver we began a very slow rebuild of the positions (that we had cut to nearly 0% exposure), but we were not willing to add more until we saw how these precious metals would react once they hit some support levels.  Essentially I was adding 0.3% into both gold and silver every few days during this week.
Mid week, the S&P 500 had fallen to the very low end of its multi week/month box at which time I wrote
Dip buyers have been rewarded non stop for 9 months straight, so we'll see if the Pavlov dog response appears again. Until the pattern blows up (and it will someday), traders will keep repeating what works - creatures of habit.

Another reminder, until we exit the box.... the longer the base, the stronger the ensuing move. I am now expecting a move of 7-10%ish on the index, one way or the other, once we leave this trading range.

And so dip buyers came back in, once more.
  • TriQuint Semiconductor (TQNT) was trimmed, on a failed breakout.
  • Almost all of our EnerNOC (ENOC) was sold for a 11% gain in 1 week; as it had run into resistance and I wanted to lock into gains in case it fell back.
  • Closed one of our "short" positions - that was a long volatility position we had on iPath S&P 500 VIX Short term Futures (VXX) for a tiny gain.  Our timing was perfect on this as we bought it ahead of Thanksgiving and the underlying instrument we were trying to capture, the VIX was 17% higher the day we sold.  But due to the poorly designed ETF we only received 1%... very disappointing.
  • Fuel Systems Solutions (FSYS) dropped 10% on news we could not find, so as it approached a support level we added exposure....
  • .... which we were stopped out of the very next morning as the stock continued its free fall.
 
Week 2: The S&P 500 was in week 6 of the "box", we remained mostly sidelined 80% cash, 17% long and the rest short but mostly pseudo sort via "long dollar" (UUP calls).  we made a lot of changes to portfolio composition this week.
  • Restarted stakes in 2 positions last held in 2008: Insituform Technologies (INSU) and American Superconductor (AMSC); the former water/sewage, the latter electrical grid.  Both plays on "even more" stimulus.
  • After selling down EnerNOC (ENOC) the previous week, the stock pulled back than burst back through resistance so we added exposure on the breakout.
  • Stopped out of the majority of Brazilian homebuilder Gafisa (GFA).  
  • Discover Financial Services (DFS) only matched earnings estimates, and the stock sold off sharply post earnings, so with a broken chart we decided to exit completely.
  • Began new positions in Rackspace Hosting (RAX) and Sourcefire (FIRE); the former web hosting/cloud computing; the latter internet security.  Both had excellent charts.
  • After dripping and drabbing back into the precious metals, we decided to sell almost all silver as it began breaking support.
  • We were stopped out of most EnerNOC (ENOC), which stunk because the next week it exploded higher.  This had been our largest position as we thought the breakout the previous week would lead to good things.  We were right, but shook out.
  • Began a new position in Braziliam chemical maker Braskem (BAK) as the stock pulled back to a key support level.
  • After cutting almost all our Fuel Systems Solutions the previous week, we closed out the last bit since we were adding so many other positions and don't want the # of portfolio holdings to be too large.
  • Continuing to right size the portfolio we closed out the last of our Blackstone Group (BX) and Morgan Stanley China A Shares (CAF); we are still interested in the former as a position later in 2010.
  • Covered the majority of our one "true" short, iShares Xinhua China 25 Short (FXI).  

Week 3: Shortened holiday week (Christmas); we were still in the "box" to start the week but with the propensity for the market to go up during holiday weeks we thought there might be upside coming.  There was... it was on almost no volume but it is what it is - the market rallied each day this week.  We entered positioned 78% cash, 19% long, and 3% short - almost all of it the "long dollar" pseudo short which was working very well.
  • Restarted position in Skyworks Solutions (SWKS) with a relatively hefty stake as the stock had been doing a nice job of basing and looked poised to break out.
  • A reader had mentioned Human Genome Sciences (HGSI) looked ready to break out as well, so as it began its move we jumped in with a new position;  this was 100% a technical trade unlike most of our position.
  • Sold half of one of our best positions of the past few months, Atheros Communications (ATHR), as it had posted a quite massive rally to reach summer 2008 highs.  That locked in the gains.  Our strategy from there was to buy on any decent sized pullback or any move over summer 2008 highs.
  • After cutting our smallish silver stake to nearly zilch, we did the same with gold as it struggled.
  • Began a position in DragonWave (DRWI) a small 3G equipment vendor.
  • Braskem (BAK) which we had just started the previous Friday, rallied 9% in 2 sessions so we sold most of the position as it rallied to near $17, its previous recent highs.  Strategy here was to buy back the stake on a pullback or if it broke back north of $17, signaling a new leg up.  After we sold it, it stalled for a week or two, so this was the right short term move.
Mid week the S&P 500, finally broke over S&P 1120, but since the volume was missing and it was a holiday week it was a tricky moment.  Further almost all the gains had been happening in premarket rather than during the day!  We tried some index longs on the "breakout" but it was a limp move and we quickly exited.  Of course the very next morning the market was bid up in premarket - frankly as we predicted.
  • Restarted a position in healthcare stock Myriad Genetics (MYGN)
  • Sold our 'pseudo' short in the long US dollar (UUP calls) for a hefty 27% gain in just over a month as the US dollar hit the 200 day moving average.  If we had sold the previous day the gain would of been 41% but we were a bit asleep at the wheel and missed out.
As S&P 1120 was breached, albeit almost all of the move in premarket - we ended the week 57% long as we went to open presents.

Week 4: Shortened holiday week (New Year's).  With egg nog Kool Aid firmly in hand, and S&P 1120 as our new "floor" we came into the week at 42% cash, 57% long and with our pseudo short (via US dollar) gone, under 1% short.
  • Closed Chinese insurer CNinsure (CISG) as it had been range bound for months on end, and we had many new positions; just culling some names to keep the portfolio from having too many names.
  • Began a starter stake in Chinese telecom supplier Telestone Technologies (TSTC), as this incredibly strong stock pulled back to a support level on the chart.  The hope was that it would fall back further so I could enlarge the position at cheaper prices - did not end up that way.
  • A sell off in the closing 30 minutes of the year smacked our index longs around and we cut back (suffering losses) as the S&P fell below 1120.  These 30 minutes took us from a small gain for period 13 to a small loss.
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[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]
[Dec 8, 2009: Fund Performance Period 12]

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