Thursday, June 24, 2010

2010 Fund Performance Period 6

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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 moved to a new tracking system in 2009 ( 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 "began anew" in terms of performance with portfolio "B" as of early 2009. Detailed history on latter 2007 and 2008, as well as 2009, [Jan 7, 2010: 2009 Final Performance Metrics] can be found on the above mentioned tab. For 2010 our sixth 4 week period is now complete. (Data is through last Friday's closing prices)

(click to enlarge)

Period 6 was volatile but not as heart stopping as the big downdraft in period 5.  While economic news was weaker in this period, everything seemed to trade off technicals.  S&P 1040s level was the key - these were lows of the year in February.  The market first tested it early in the period, rallied to the 200 day moving average, fell back yet again to retest it and then bounced hard again - this time breaking through the 200 day moving average with a lot of help with 'premarket surges'.   The period closed right below the 50 day moving average.

During the time frame bad employment data, bad housing data, and bad retail data was announced in the U.S. - aside from the employment data which had the market sell off sharply for 2 days, the rest of it was quickly ignored.  One of the big rallies of the period came because Prez Obama promised  us a strong jobs report - this crushed the spirits of the bulls when it was proven false.  But again, 3 sessions later that was all ignored.  China continued to underperform and copper fell off a cliff before rebounding late in the period.  BP crushed the oil stocks for most of the period. Fund performance was solid considering the extreme volatility - we caught some nice intraday swings but mostly "stayed out of the way" (very high cash) since the market had no memory from day to day.  Multiple 90%+ days happened and big losses were followed within 48 hours by big gains. 

For the sixth "four week" period of 2010 the fund returned +6.4%, versus the market's +2.8%, so an outperformance of +3.6%.
On a cumulative basis in 2010 the return is +40.6%, versus the Russell 1000's +0.7%, so an outperformance of +39.9% for the year to date. (thus far 24 weeks)

Period 6 was a period of both absolute performance (making money) and relative performance (outperforming the market) - our favorite kind. The yearly goal of beating the index by 15% is on track.


*** Long/Short Fund Discussion below

Overview: Since the S&P 500 was under the 200 day moving average for most of this period we continued to stay very high in cash.  Due to the extreme volatility and +3% days following multiple days of losses in the market, it was dangerous to be short indexes overnight as well.   Hence, much of the shorting was done intraday with index positions (TNA ETF and SPY puts).  We made some good change on "the President tricked us Friday!" in week 2 as the disappointing employment data caused a huge swoosh down.   With that said, after disobeying technical analysis for a long period of time this period was incredibly correlated to TA - which in a sense made it easy.  Everyone was looking at S&P 1040 and the market bounced off that level twice - this allowed traders to cut back their shorts when we hit that level and get out of the way of bounces; or in fact partake on the bounce.  I made some long plays late in the period into stocks with relative strength once the market cleared the 200 day moving average.

Below is the chart for period 6:

Week 1: Entered the week: Cash 85%, Long 14%, Short 2%

Entering the week the S&P was in the 1080s and everyone we had segmented the market into 2 ranges: 1040 to 1070, and 1070 to 1100.  Once 1070 broke on Tuesday of this week, the market was crushed in 1 fell swoop, down to low 1040s.  We made some hay on the short side that specific day for some nice intraday gains on the short side... and then the market bounced strongly for a reversal.  By Thursday we were already back up to the 200 day moving average of 1100, showing you the IMMENSE volatility.  From 1040 to 1100, 60 S&P points in 2 days!

On the long side:
  • Tuesday, as the market swooshed down I was taken out of larger positions in F5 Networks (FFIV) and Tibco Software (TIBX) as they finally broke support... F5 regained support by the end of the day as the market rallied from -3% to flat for the day. Both positions were pared back.
  • Intercontintental Exchange (ICE) was closed simply because I wanted to open spots for other positions in the fund; however the stock regained support by the end of the week as well showing some nice relative strength.
  • I began stakes in Polaris Industries (PII) and Valassis Communications (VCI) both on relative strength in their charts - the former name also announced they were moving hundreds of jobs to Mexico and away from America.
  • Thursday, I closed NetLogic Microsystems (NETL)as the stock had broken support and rallied into resistance.
  • I replaced NETL with Chinese chip market Spreadtrum Communications (SPRD) - just a starter stake.
  • Quality Systems (QSII) reported and missed, somehow the stock was only down 5% - but with the chart broken I decided to part ways and look to replace it with something else in the future.

On the short side:
  • Wednesday, I sold the majority of the remaining long dollar position in Powershares DB US Dollar Bullish (UUP).
  • Thursday on the swoosh up day, I attempted to short both Ross Stories (ROST) and Steve Madden (SHOO) - 2 retailers. I was stopped out of the Steve Madden position within hours for a minor loss.

Week 2: Entered the week: Cash 83%, Long 14%, Short 3%

Four day week with Memorial Day Monday.  Markets rallied on President Obama's pledge that we'd see a great jobs report, instead we were crushed Friday as only census jobs showed up.  More immense volatility as we bounced between 1100 and 1060, a 40 point range.

On the long side:

  • I bought back some Tibco Software (TIBX) and F5 Networks (FFIV) but less than 1% into each. 
  • I closed home builder Lennar (LEN) as it had a nice run in April but had not been performing lately as it is becoming obvious that the housing market is not doing very well.  I was hoping for a seasonal play but the window of opportunity was short.
  • Friday, I closed Capital One Financial (COF) for similar reasons to Lennar in terms of technical set up.
  • Thursday I said keep an eye out on natural gas with the 2 choices to play being the gas itself via ETF, or companies that produce the gas.  Friday I decided to buy First Trust ISE Revere Natural Gas (FCG) which focuses on the companies. 

On the short side:

  • Wednesday when the S&P 500 surged 3% on Prez Obama's promise of a "strong" jobs report, we were stopped out of our Ross Stores (ROST) short for a 2% loss. 
  • Friday, I bought some June 108 SPY puts when the S&P 500 broke 1080 as an intraday hedge versus my long book... I took one third off the table for decent profit when the S&P hit 1072ish but said if the market broke down below 1068 or so I'd add those back.  Instead I ended up buying some June 107 SPY puts when the market weakened, and sold 90% of both positions in the closing moments of the day to avoid any weekend headline risk.

Week 3: Entered the week: Cash 85%, Long 13%, Short 2%

The market looked poor entering the week - the only question was would the S&P 500 bounce off 1040s or break through.  In retrospect it ended up being a bounce, and from there a hotshot rally that more or less continued through the end of the period.

On the long side:

  • Early in the week I cut back Tibco Software (TIBX) and F5 Networks (FFIV) as they both broke support, once again marking a short term reversal.
  • I closed TriQuint Semiconductor (TQNT) which was simply not performing.
  • I created a starter position in (CRM) when it fell to initial support, as I create a wing of the portfolio where valuation means nothing.
  • Wednesday, I put on some modest index long positions expecting a bounce - but was shaken out by the late day reversal.
  • I closed SL Green (SLG) and Riverbed Technology (RVBD) as the stocks had rebounded a bit from their worst levels but there were many other stocks with far better conditions in their charts.

On the short side:
  • Tuesday, I sold all my SPY 107 puts and 2/3rds of my SPY 106 puts as the market went down into the 1040s, for a nice profit. I sold the rest as the market began to bounce over 1050.
  • I shorted Irish airline Ryanair (RYAAY) with a simple technical set up - the stock is near the 200 day moving average. 

Week 4: Entered the week: Cash 85%, Long 11%, Short 4%  

A continued bounce - the 200 day simple moving average was 1108 so traders were looking for that to break.  Despite a late day reversal Monday, premarket magic took the S&P 500 up 0.8% in premarket (on no news) Tuesday which provided the juice to get us through the 200 day.  Wed-Fri were snoozers as the market consolidated the huge 8% move in the previous 7 sessions.  As the market broke over the 200 day I went more net long.

On the long side:

  • Tuesday, I added to First Trust Reverse Natural Gas (FCG) - My call on natural gas was very prescient but my choice of instrument underperformed.
  • Wednesday, I added a 2% allocation back to F5 Networks (FFIV).
  • Wednesday, I closed ETFS Physical Palladium (PALL) - it has become a hedge fund play thing that trades no different than an "Ultra Long" S&P 500instrument.  When risk is "on" everyone piles in, when risk is "off" everyone piles out. 
  • I restarted a 2.1% position in Sandisk (SNDK) which had a "Barron's bump" Monday, but I liked the chart in the intermediate term. 
  • I restarted a 2% position in NetLogic Microsystems (NETL) as the networking space - shunned just 2 weeks ago - is now the favorite.  I went with a name that was in an earlier stage of breaking out hoping we can still catch some waves.
  • I added another 1.1% allocation to Powershares DB Double Gold (DGP) as the commodity broke out to a new yearly high.

On the short side:

  • Monday the premarket magic hit and I wanted to get short as the S&P 500 headed to the 200 day moving average creating some hedges in case there was a rejection.  I shorted Hartford Financial Services (HIG) and Netease (NTES).
  • Ryanair Holdings (RYAAY) which had been shorted the previous week right at its 200 day moving average, crossed above so my stop loss of 2% hit.
  • Three additional limit short orders hit: Energizer Holdings (ENR), Pitney Bowes (PBI), and Green Mountain Roasters (GMCR).
  • Tuesday morning after seeing a "FAST MONEY" clip where Joe Terranova said coffee was rising so the "logical" way to play was to buy Green Mountain Roasters - which made little sense to me - I decided to cover first thing in the morning since this sort of 'logic' by masses of people is not what I wanted to get in front.  We got out with a 2% loss, the stock actually surged some 7%ish that day.
  • Late Tuesday, I shorted Celanese (CE). This was covered for a quick 5% gain Thursday morning.  When the stock bounced Friday, I reshorted it..
  • Wednesday, I shorted Discover Financial Services (DFS).


[May 26, 2010: 2010 Fund Performance Period 5]
[Apr 28, 2010: 2010 Fund Performance Period 4]
[Apr 1, 2010: 2010 Fund Performance Period 3]
[Mar 2, 2010: 2010 Fund Performance Period 2]
[Feb 2, 2010: 2010 Fund Performance Period 1]
[Jan 7, 2010: 2009 Fund Performance - Final Edition]

For previous years please see tab 'Performance / Portfolio' (we were using other tracking mechanisms at the time)  

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