Tuesday, October 14, 2008

Hedged Growth Positive for Oct

Though just slightly positive at $2,300 on a $1M virtual portfolio this is a really significant accomplishment considering the nearly 15% loss in the S&P500 for the month to date. The portfolio has a long mandate with the 1/3 position in Net Payout Yield stocks so this portion of the portfolio has been negative. Boeing, Disney, and Home Depot though are the only stocks that have worst performances then the market. Fortunately though the portfolio has been very heavy in cash due to the environment providing a mostly neutral stance for the Growth and Short portions. The Short position of the SRS ultrashort real estate position has returned 40% to offset some of the losses. The biggest benefit is that the portfolio leaned in with more Growth on Friday afternoon with purchases of Apple and NYSE Euronext. These positions have averaged 20% gains since those purchases. Also the Morgan Stanley and Regions Financial bets have combined for breakeven performances after being down substantially coming into this week. Its helped that MS is up more then 100% this week.

Prior to the close I purchased a 2.4% position in ROM (ultra tech ETF). With the tech sector down substantially today, decided it was a good time to add more exposure. After the bell, Intel reported a so/so quarter which apparently was better then the greatly reduced expectations. INTC is up about 4.5% tomorrow so the addition of ROM might have been pretty timely.

The portfolio is now mostly long with the additions to the Growth portion the last few trading days. All of the short position is still in cash except for the SRS position. For now, I'm still positive on a long term bull market starting, but its still too early to tell whether we've got the reversal needed. Earnings will be bleak and expectations for Q4 need to drop. We're seeing with the INTC report that maybe those expectations for Q4 are closer to reality then we expected. As we get out of the landmines that will be inherent in this earnings period, the market might be able to catch a rally. Then the rally could lead to better economic results in Q4 which would solidify the rally. Its all a vicious cycle and hopefully its now started for the bulls though this portfolio seems capable of handling either market.

Edit 10:30am: Looks like the ROM trade hasn't worked out so well with the market selling off again yet the portfolio is outperforming by 3.5% so far today. Added UWM (ultra Russell 2000) on the pullback to 26.15. With an 8% drop, this is ideal time to add more Growth positions to ensure the portfolio is ready for a rebound. Added to Growth portfolio as well.

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