Energy collapse. Financials recovery. Those were the two themes that pushed REAP to a 4.1% monthly absolute gain in July, and it’s 4.6% lead increase over the S&P500 (after adjustment for the switch to make the S&P500 total return the benchmark instead of the index price as done up until now). Natural gas did a spectacular face-plant, oil pulled back 16% or so from it’s high, and grains took a hit as well, boosting the heavily weighted short ETFs. After regulators banned naked short selling (shorting without borrowing the securities) on the highly distressed financials, the ensuing spectacular short-covering rally delivered some contribution from the long side, especially the heavily-weighted ProShared Ultra Financials (UYG) 2x leveraged long ETF.
The nature of stocks is that they tend to make sharp quantum moves – often related to earnings releases and other events. For a long while they meander, and then suddenly boom – either sharply up or sharply down. This is why it is important to stay fully invested, so you don’t miss these major price events, that give good opportunities to either buy on the downdraft or sell on the updraft. I’ve noticed that REAP has advanced on the S&P500 in the same kind of quantum fashion – big jump in May after a huge move in Credo Petroleum and some tech stock spikes, and now in July with the sudden downdraft in commodities and surge in financials. REAP’s equity also tends to advance on trend reversals, since it acquires “inventory” against the trend and pays off as that inventory gains value, often quickly, on the reversal. That happened in both energy and financials this month.
The month also featured a big increase in trading activity, with 13 signals/trades vs the previous high of 9 and low of 7 in other months. In one week alone – the one that I was on vacation in North Carolina – there were 7, with 3 days featuring two each. There was a brief window of opportunity yesterday for two more, but I missed them because I had been in meetings. It could have been 15!
To facilitate one of the trades, I swapped Broadcom and Formfactor between groups 1 and 2. Today I swapped them back again to better balance the equity between the same two groups. It did not create any trading signals.
The other item of note for July, discussed in the previous post, was my changing the benchmark to the S&P500’s total return from the measurement dates. Because I re-invest dividends, I need to reflect dividend re-investment in the benchmark as well.
Here’s where we are at the end of July …
| PORTFOLIO SUMMARY | 31-Jul-08 | ||||
| (in $C, adjusted for $US exchange rates) | |||||
| PORTFOLIO | S&P500 | S&P500 | SP500 $C | REAP | vs S&P |
| Tot Retrn | |||||
| Reference Date | Start | Last | % | % | Var. |
| Inception MAR 07 | 1406.2 | 1267.4 | -21.4% | -23.1% | -1.7% |
| Re-start OCT 07 | 1526.7 | 1267.4 | -12.5% | -10.8% | 1.7% |
| 2008 Year to Date | 1468.4 | 1267.4 | -9.2% | -1.3% | 7.8% |
| Discretionary Trading P&L (included in above results) | -5.3% | ||||
| Dividend Yield (current) | 0.84% | ||||
| Canadian dollar | Last | Inceptn | Var. | Restart | Var. |
| 0.9761 | 0.8547 | -14.2% | 1.0069 | 3.1% | |
| Currency Mix | |||||
| Canadian Investments/Cash | 30.2% | ||||
| US Investments | 64.5% | ||||
| Other (country ETFs) | 5.3% | ||||
| Market Bias | Long | 57.4% | |||
| Cash | 0.6% | ||||
| Net Short | 21.0% | ||||
| Net Long | 78.4% | ||||
| Theme Mix | |||||
| Energy / Commodity | 15.0% | ||||
| Short Commodities | 13.0% | ||||
| Environment / Infrastructure | 8.8% | ||||
| Financial | 9.4% | ||||
| Health Care | 10.2% | ||||
| Technology | 17.7% | ||||
| Short Equities | 8.1% | ||||
| Transportation | 8.4% | ||||
| Hospitality | 3.6% | ||||
| Asia | 5.3% | ||||
| Cash | 0.6% | ||||
| Portfolio Notes | |||||
| Inception date is when I started tracking portfolio performance in | |||||
| this blog. I track it to reflect total performance after initial mistakes | |||||
| and discretionary trading losses. A more accurate representation | |||||
| of REAP’s “pure” performance is as of 10 Oct 07, when I | |||||
| re-established it after selling out the portfolio twice due to | |||||
| sub-prime systemic concerns. | |||||
| *** S&P Comparison is total return to reflect dividend re-investment | |||||
| CANADIAN MARKET HOLDINGS | |||||
| Stock | Sym | Cost | Last | Gain % | Weight |
| Husky Energy | HSE | $42.12 | $45.34 | 7.64% | 3.4% |
| HBP NGas Sht ETF | HND | $10.76 | $13.87 | 28.85% | 2.1% |
| HBP Gold Sht ETF | HGD | $9.98 | $10.27 | 2.94% | 3.9% |
| ING Canada | IIC | $41.12 | $40.39 | -1.78% | 2.4% |
| HBP Ag Grains Bull+ ETF | HAU | $16.07 | $15.50 | -3.57% | 2.0% |
| HBP Oil Sht ETF | HOD | $11.13 | $8.72 | -21.68% | 4.1% |
| IGM Financ’l | IGM | $42.08 | $42.74 | 1.57% | 2.6% |
| HBP Ag Bear+ ETF | HAD | $22.35 | $22.85 | 2.25% | 2.9% |
| Precsn Drilling | PD.UN | $17.65 | $22.92 | 29.86% | 3.6% |
| HBP NGas ETF | HNU | $27.24 | $20.70 | -24.01% | 2.7% |
| US MARKET HOLDINGS | $C Adj | ||||
| Stock | Sym | Cost | Last | Gain % | Weight |
| Broadcom | BRCM | $25.99 | $24.29 | -4.26% | 3.3% |
| Gen & Wyom | GWR | $25.56 | $40.47 | 62.24% | 4.4% |
| PrSh S&P Sh ETF | SDS | $63.30 | $67.47 | 9.20% | 2.0% |
| PrSh Ultra Financ’l | UYG | $25.16 | $21.79 | -11.26% | 4.4% |
| ISh Australia ETF | EWA | $26.59 | $24.88 | -4.15% | 2.5% |
| Formfactor | FORM | $28.51 | $17.40 | -37.48% | 4.6% |
| Harley Davidson | HOG | $49.90 | $37.84 | -22.31% | 4.0% |
| Roch. Medical | ROCM | $12.37 | $11.47 | -5.01% | 2.7% |
| Forest Labs | FRX | $35.70 | $35.51 | 1.89% | 4.4% |
| Nvidia | NVDA | $23.05 | $11.44 | -49.16% | 3.3% |
| PrSh Rus2000 Sh ETF | SKK | $81.18 | $70.57 | -10.94% | 2.4% |
| Buff Wld Wings | BWLD | $29.29 | $32.93 | 15.18% | 3.6% |
| Cree Inc | CREE | $24.35 | $19.40 | -18.37% | 4.0% |
| PrSh Dow Sh ETF | DXD | $54.46 | $63.73 | 19.88% | 1.1% |
| iSh Asia ex-Japn | EPP | $45.20 | $43.25 | -1.97% | 2.8% |
| Credo Petrlm | CRED | $11.49 | $10.16 | -9.40% | 3.3% |
| Q-Logic | QLGC | $15.95 | $18.84 | 21.00% | 6.4% |
| PrSh NASD Sht ETF | QID | $45.37 | $43.94 | -0.77% | 2.6% |
| PrSh Ultra Health ETF | RXL | $56.38 | $58.69 | 6.63% | 3.1% |
| Sun Hydr’lics | SNHY | $24.85 | $41.20 | 69.87% | 1.7% |
| Trina Solar | TSL | $35.67 | $27.52 | -20.96% | 3.0% |
| END OF PORTFOLIO UPDATE | |||||
Going forward, I see August delivering maybe 8-10 trades from the remnants of the Q2 earnings season and a possible snap-back rally and/or further declines in commodities. Weather could also be a factor as we are well into hurricane season, and equities may be able to muster a sizable rally here. There will be fewer earnings surprises, the financial clean-up continues, and I heard an interesting little tid-bit on the financials news this morning – that California’s house sales have ticked up in both of the last two months. Granted, a large portion of them have been foreclosure sales, but inventory is starting to get soaked up, so who knows?
Cheers,
Allocator
a.k.a. George Parkanyi
gparkanyi@hotmail.com
Copyright 2008 – all rights reserved
