Updating my Strategy
Half of the portfolio is ok: ETFC, DUG, Ultrashorts, QID
Half is not: MUR, Calls, Puts
I am going to continue my strategy of selling covered calls – that should generate ~1%+ yield per month on average.
The Ultrashorts really depend on a crash, which I think is imminent. So I am ok riding them out.
The Puts are not performing at all. And the performance really rides on them. The companies I chose are struggling, but the stock prices don’t reflect that. Take ZLC for example. They are pulling out Oscar Award quality accounting special effects. For example, they would have had a $0.60 EPS loss instead of $0.15, but they reversed vacation day accruals.
I am waiting on the Puts because I sincerely believe that these companies are running on fumes.
The Calls are where we face the toughest decision.
The fundamentals are sound – energy demand is strong. Even with oil at $100, these companies are much more profitable than they were last year. And even at $80. But the concern right now is not this quarter or next quarter, but next year. And the market is spooked.
Plus there are clear signs of commodity hedge funds selling. With just 3+ weeks left in the quarter, funds are not making profits and they have to re-position. A $3B commodity fund just went belly up (http://www.iht.com/articles/2008/09/03/business/03fund.php). And they probably were very leveraged, so that’s more like a $20B+ position being unwound. They were concentrated in ACI among others, which explains the sell-off there. They are liquidating positions and that is triggering automatic sell programs.
So the current atmosphere is working against my investment approach which is to buy undervalued growth stocks and sell overvalued dogs.
If anything, it looks like the market is running for safe haven: stocks that have been consistent in ability to deliver over a 5~10 year period.
So, to re-cap:
Short the market with Ultrashorts and QID
Stay the course with the puts because the accounting games are running out for AN, HOG & ZLC
Focus on ETFC as a winning long
Wait out the liquidation one more month. If no rebound post earnings, close out the calls and trim losses by year end
Half is not: MUR, Calls, Puts
I am going to continue my strategy of selling covered calls – that should generate ~1%+ yield per month on average.
The Ultrashorts really depend on a crash, which I think is imminent. So I am ok riding them out.
The Puts are not performing at all. And the performance really rides on them. The companies I chose are struggling, but the stock prices don’t reflect that. Take ZLC for example. They are pulling out Oscar Award quality accounting special effects. For example, they would have had a $0.60 EPS loss instead of $0.15, but they reversed vacation day accruals.
I am waiting on the Puts because I sincerely believe that these companies are running on fumes.
The Calls are where we face the toughest decision.
The fundamentals are sound – energy demand is strong. Even with oil at $100, these companies are much more profitable than they were last year. And even at $80. But the concern right now is not this quarter or next quarter, but next year. And the market is spooked.
Plus there are clear signs of commodity hedge funds selling. With just 3+ weeks left in the quarter, funds are not making profits and they have to re-position. A $3B commodity fund just went belly up (http://www.iht.com/articles/2008/09/03/business/03fund.php). And they probably were very leveraged, so that’s more like a $20B+ position being unwound. They were concentrated in ACI among others, which explains the sell-off there. They are liquidating positions and that is triggering automatic sell programs.
So the current atmosphere is working against my investment approach which is to buy undervalued growth stocks and sell overvalued dogs.
If anything, it looks like the market is running for safe haven: stocks that have been consistent in ability to deliver over a 5~10 year period.
So, to re-cap:
Short the market with Ultrashorts and QID
Stay the course with the puts because the accounting games are running out for AN, HOG & ZLC
Focus on ETFC as a winning long
Wait out the liquidation one more month. If no rebound post earnings, close out the calls and trim losses by year end
posted by Andrew at
8:49 AM
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