As a reminder, if you are interested in this type of fund as a worthwhile consideration for future investment, please consider reading why this blog exists.
- [Jan 7, 2008: Reader Pledges Toward Mutual Fund Launch]
- [May 26, 2008: Frequently Asked Questions]
- Our story in Barron's [A New Kind of Fund Manager]
- [November 2009: General Updates, Questions]
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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
Under the new tracking system, our eleventh4 week period is now complete. (Data is through last Friday's closing prices)
(click to enlarge)
This was the first negative period for stocks since period 2 i.e. February. Most of the period was dominated by earnings news flow, and once again very low expectations were easily beaten as was the case 3 months earlier. The S&P 500 stalled at 1100, then had one of the few substantial selloffs since the March lows, and the first material selloff since July 2009. But just as with July, after breaking the 50 day moving average the S&P 500 rallied from out of the blue with 5 consecutive up sessions in the last week of the period, as someone was eager to buy ahead of both a Federal Reserve announcement AND a labor report. There was no specific sector that stood out but the inverse dollar trade once more was dominant - this has been a theme for quite a few periods in a row and might not change for a long time. Precious metals were a darling of this time frame. Small and mid caps lagged behind large caps for much (all?) of the period.
For the 11th four week period the fund returned +4.6%, versus the market's -0.5%, so an out performance of +5.1%.
On a cumulative basis the fund is now +69.5%, versus the Russell 1000's +15.6%, so an out performance of +53.9% for our year to date if you will. (thus far 44 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 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
The dollar remained the only thing that mattered. [The Inverse Relationship Between the Dollar and Stocks in 1 Chart] After jacking the prices of gold up in the previous period, Ben Bernanke's policies set to unleash oil in a similar breakout early in this period. In a general sense in weeks 1 & 2 the fund out performed the market by about 2.5%. The real magic was in week 3 when the market sold off strongly, including the large caps while the fund had been positioned in the highest cash exposure since inception during that week (and the week previous). As certain technical levels were broken, we were able to benefit with some short term put options, and shorting a broad index ETF. This allowed us to post positive ABSOLUTE performance while the market fell; a double bonus. Since the market remained below the 50 day moving average entering week 4 of the period, we remained high in cash and the fund went sideways as the market tacked on 3%, so this was our one lagging time frame for the 4 weeks. I would not of changed that strategy as the textbook would not of said a flurry of buying would of happened... in front of 2 major news events no less; but the textbook has become useless. Just follow the US dollar. Overall there was a lot of churning - up and down - but no progress; good for traders, not much there for investors.
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 began in our normal positioning stance - mostly long, 70%ish cash, 5% short. Monday we were stopped out of our Analog Devices (ADI) short which was 40% of our limited short exposure. One of our favorite positions, Starent Networks (STAR) was acquired by Cisco Systems - so we sold all of our position for a one day 18% jump; and 39% above our cost basis. We were stopped out of a long position in Perfect World (PWRD) as it broke support, but within days it recovered and we missed the rebound. It happens. We took profits in Blackstone Group (BX) as it jumped from $13s to $16s in just over a week. We sold out of E-House Holdings (EJ) due to a pending spin off IPO - this was pure luck but it worked out for us as the stock sold off hard going into the IPO in the following days; better lucky than good. Wednesday of that week, the upteempth double top breakout occurred, this time over S&P 1080... setting the stage to run another 20 S&P points in short order. I began selling the next day into the rally - many stocks had surged 20-30% in 5-7 days, ASIA, GFA, TQNT. I covered the remained of my Wynn Resorts (WYNN) short with a 12% loss. While everyone was drunk with Kool Aid, I mentioned the gap in the S&P 500 chart in the upper S&P 1070s could fill sooner rather than later; this set the stage for an excellent bear trade in the weeks to come. We restarted E-House Holdings (EJ) late in the week post IPO at a far lower price, and just above a resistance level so we could escape quickly if the stock broke down. I attempted a new short in Moody's (MCO) since at that point we had been exiting just about all our short exposure.
In week 2, we entered the week with a curtailed long exposure of only 13% while still short 6%; remainder in cash. We were quickly stopped out of our Moody's (MCO) short for a 8% loss as the destroy the dollar, everything must go up trade reached a fever pitch. After Atheros Connumications (ATHR) trounced analysts estimates, we increased our exposure; while cutting much of our Myriad Genetics (MYGN) stake - the stock was not participating in a large rally; warning sign. After the Brazilians, in a desperate attempt to keep Ben Bernanke's dollars from inflating every asset in their economy, slapped a 2% tax on outside investors, Gafisa (GFA) sold off. Since we had just taken profits the previous week we bought back a decent position. TriQuint Semiconductor (TQNT) reports - keep in mind we had taken profits the previous week - and it laid an egg. Mid week, I said S&P 1100 was the line in the sand... still looking for that gap to fill in the S&P 1070s. Within hours the FIRST nasty intraday reversal hit... a 1.5% selloff in the closing 45 minutes. A warning shot. After the Triquint results I sold all 3 of our RF semi positions Thursday morning on the open; still like the group but all 3 had bad charts at that time. Our exposure to the group was not too bad so we did not take a large hit; mostly we gave away a +11%ish unrealized gain in TriQuint. We were stopped out of 60% of our E-House Holdings (EJ) position that we had just restarted late the previous week, as it broke support. Unbelievably as we hit S&P 1100 the session before ... we filled the gap at S&P 1075 in a session and a half. The 20 day moving average was just below around 1070 so we said we'll assess based on what happens next - but we were buying some index calls and ETFs for a cursory bounce.
That was at 10 AM in the morning; within 4 hours the S&P 500 had bounced 15 point to 1090. I held overnight but wrote in premarket I'd be taking profits first thing at the open on Friday; I showed the whole strategy piece by piece in that post Friday morning. We were able to exit well into the 1090s for a beautiful 17-18 S&P points in under 24 hours. I also took profits in surging CNInsure (CISG) that morning as it appeared to be making a double top - that was the right call in retrospect. Late Friday we sold off AGAIN, marking the 2nd intraday reversal in 3 sessions; I said this was a change in character and we had to be careful.
In week 3, (in progress)
In week 4, (in progress)