Bookkeeping: Weekly Changes to Fund Positions Year 2, Week 4

Submitted By Trader Mark
Year 2, Week 4 Major Position Changes

Fund positions of 1.0% or greater can be found each week in the right margin of the blog, under the label cloud and recent comments areas; I highlight weekly the larger position changes.

Being a long only fund, via Marketocracy rules, the only hedges to the downside I have are cash or buying short ETFs. I cannot short individual equities.

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash (1 position + cash): 34.0% (vs 33.7% last week)
56 long bias: 44.2% (vs 51.8% last week)
9 short bias: 21.8% (vs 14.5% last week)

65 positions (vs 69 last week)
Additions: Alliance Data Systems (ADS)
Removals: WuXi PharmaTech (WX), Zhonpin (HOGS), Petrobras (PBR), XTO Energy (XTO), Amylin Pharma (AMLN)

Top 10 positions = 26.6% of fund (vs 23.8% last week)
29 of the 65 positions are at least 1% of the fund's overall holdings (45%)

Major changes and weekly thoughts
There is nothing really new to report here; the market continues to churn in a narrow band - we cannot break (in the general market) above the 50 day moving average to the upside and we seem to have a floor on the downside. My anticipation has been that one of these floors would break so I press the fund's short exposure each time we test the lower band and it blows up in my face as we lose money when the market puts on one of it's 200 day gains. So you know what that means. The next time the market hits the bottom of its range will be the one time we LIGHTEN up our short exposure and that ONE time is when the floor will break. That's just the market for you. But for now we just have to assume we are stuck in this range and someone will be buying the bottom of the range. But the band gets narrower and narrower and the fact that this "rebound" unlike the April/May variety we were not even able to shake free of the 50 day moving average and test the 200 day is concerning. As is all the economic news - well I should qualify that. When we get 20 bad reports, everyone clings to the 1 good one and says "see, we told you everything will be fine". So that's the mindset for now, as it has been in the past on the equity side. Until the bad news overwhelms and then we go through one of our major selloffs. That's been the pattern for a year now as "hope" and "facts" fight it out. My other concern is abject lack of leadership. It changes from day to day, and in 3 day spurts but no one is taking the mantle - healthcare is the closest but even that has sold off quite heavily the past 2 weeks. If you are going to sell me a market lead by financials, housing, and retail I've got some serious doubts. Maybe in late 2009 (even though I think that is too early) but certainly not now.

I continue to find this market of late impossible to make money in with our timeline. You have be in and out of positions in 48-72 hour windows, because what is favored today is sold off in 4 days. And vice versa. I showed on one of the big up days this week what stocks were going up in the S&P 500 [20% of the S&P 500 is Up 3%+ Today] I took the time to chart the vast majority of these stocks and it's broken chart after broken chart - this was simply a lot of stocks in oversold condition bouncing back to get back to a resistance area. Before they are to be sold off again (see Friday) But it creates the illusion of "progress". Here are 2 examples of the type of stocks bouncing this week - about 90% of the stocks look the same - again, it is simply churn. Both in the markets and individual stocks.


On the other hand, "safe" stocks like Dell (DELL) are only safe until they actually report facts. [Dell: Dear Mr Institutional Investor - We're Not so Safe Either] So it's simply a spot where gains are very difficult to achieve and instead of being churned constantly I'd rather wait out in high cash allocation and wait for some easier pitches. I'd much rather prefer a significant leg down here to create a new washout low and then go from there but this market is simply creating the most frustration for the most participants. Case in point are people trying to create a sustainable move in natural gas this past week on Gustav - that lasted all of 36 hours - and if you were in the positions 24 hours too long you gave back all your gains, if not lost money. Again - simply not an investor's market right now. We'll see if things change once the power players come back from the Hamptons this week. On the economic front all eyes are on the monthly unemployment report Friday which we've hashed out as a very corrupted piece of data yet the lemmings act in lockstep each time it comes out. Even funnier is watching them react to the ADP report 24 hours earlier, which has been completely opposite to the government report but people desperate to trade on any news still react to that data point just the same.

For the fund we pared down holdings - cutting 4 long held positions along with 1 we just began recently.

The larger weekly changes (chronologically) to the fund below:
  1. Monday we were locked out of Marketocracy.com as the system was down, hence no transactions. A-Power Energy Generation Systems (APWR) did report a solid number but despite a very exciting future and lots of good news on the conference call was summarily punished - the stock fell all the way down to its 200 day moving average of $18 but did bounce off it. However, as a target of the naked short sellers this one could trade in limbo until they let up. I added a bit Tuesday morning since I was locked out Monday, but sold some on the bounce. We want to see this north of the 50 day moving average, $23 and falling fast, to get excited.
  2. Tuesday, we closed out a long standing position WuXi PharmaTech (WX), a company I like for the long run in the healthcare contract research organization space. However, it's been abandoned by the Street and could have an uglier chart than most financial stocks. One day this stock will get back in favor, and we'll return - the confusing earnings report last time around probably did not help matters .
  3. Very similar reasoning to close out a long standing position in Zhongpin (HOGS) - this has been a stock trading in a range for a year now, aside from trading it there seems little price appreciation despite earnings exploding upward. 100% growth for 11 P/E but no one wants it.
  4. I cut back some solar exposure after a nice 2 week run as the charts were starting to look iffy, just to lock in some profits in case the market retreated - we did reverse some of this later in the week as the stocks bounced nicely. Also we cut some on Wednesday.
  5. We closed another long held position in Petrobras (PBR) on the Gustav hype - another range bound stock and at this point holding 1 commodity stock is no different from another so there is no reason to hold so many. We've liquidated many of the past 3 weeks, hoping our "sacrifice" will finally lift the group but each sacrifice goes unanswered. Technically the stock is below both the 50 and 200 day moving averages and looks listless - just marking time.
  6. Wednesday, we closed our last natural gas stock, XTO Energy (XTO) for the same reasons as Petrobras; I am hoping at some point people begin to discern between coal and fertilizer - in which prices have not faltered one iota versus oil and natural gas but those hopes have gone unanswered as we've been saying for months - to hedge funds it's all "one big trade" so the specifics of each subsector of commodities or global growth do not matter. The chart looks similar to Petrobras, except with a lot more volatility.
  7. Lennar (LEN), or proxy for housing had a nice run here, so we took our gains in 2 pieces, both Wednesday, and Thursday. Now we hope for a pullback and we'll repeat this trade again in a few weeks/months if all holds true.
  8. Thursday, it looked like China Medical (CMED) had formed some sort of bottom as it settled right around its 50/200 day moving average in the mid $45s for about 3 weeks, so we increased our stake as the "coast" seemed "to be clear". This is a low risk entry point as there is a very easy spot to cut back in case we are wrong on this call. The fundamentals of this company continue to improve but their convertible debt offering absolutely killed the stock.
  9. I've been worried about a "sell the news" reaction in the solar stocks coming into this week as many have had very big runs for a few weeks, and we got that in both Solarfun Power (SOLF) and Energy Conversion Devices (ENER). I had some fortunate timing on ENER, selling it on the opening Thursday @ $82 post earnings - and then was able to buy it back in the $74s not 24 hours later. The valuation strikes me as extreme but charts are the thing nowadays. I have stocks trading at 10% the valuation in this space that no one wants to touch - what can you do.
  10. We closed a very short duration position in Amylin Pharam (AMLN) - I am torn on this one as I think this price is a compelling valuation; the analyst community also is torn. But I'll give up potential gain for simplicity in life at this point. Since we could escape with just a small loss we'll take it - luckily we cut back when the stock was approaching resistance and just will chalk it up to good fortune.
  11. Friday, just following our gameplan, we cut back Research in Motion (RIMM) when it broke support. Our strategy here is not foolproof - but it is consistent.
  12. Looking for something relatively boring, but unique we began a position in Alliance Data Systems (ADS) - this is a broken deal stock with a huge buyback in progress which should lead to significantly higher earnings per share. If the P/E multiple stays consistent that alone should lead to a higher price. I also believe with an activist hedge fund involved we might yet see another deal but that's just speculation on my part.
The above do not include the majority of my trades in my Ultrashorts which I am trading quite often as the market ebbs and flows

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