Over the past few years, I've been hamstrung to a certain extent by an oversized position that those of you have been browsing this forum from time to time and following me on Twitter are probably all too familiar with. As a result, I had been unable, for a much more prolonged period than I originally anticipated, to capitalize on other opportunities.
The resolution came during the final months of last year, allowing the rest of the markets to open up to us. The timing couldn't have been better, as I am of the opinion that this is one of the better environments for experienced investors to extract alpha from the market since the mid to late 90s.
Since we are now running at full speed again, I am going to be introducing things like this performance heat map as a means of keeping track of where we are so that all the names we are juggling don't get lost in the daily shuffle.
It should be noted, that the performance heatmap is month to date, excluding today's trading. The heatmap contains not just current positions, but positions that have been closed out during the month, as well. Basically, anything that we touched during the month is listed here.
Quite a number of changes took place today that should be noted before continuing.
I shifted to a net short position in the portfolios, by initiating short positions in UTX, LNC and ULTA. This is in addition to MCO, C and NVDA that I shorted yesterday. I also liquidated long exposure in ALL, PAYC, SNAP to name a few. Our tech exposure has been cut down to zero more or less. It's defensive long names and core long, deep value holdings from here until further notice.
Here is the performance heat map for the month. Each symbol listed is how much of a contribution to overall performance the position has made:
All of the trading positions I take on are for incremental gains only. The deep value plays are for the homeruns. In a properly functioning portfolio, the trading positions will mitigate downside in the deep value plays when they are underperforming and will enhance the gains of the deep value plays when the value side is performing.
Since we already have the homeruns covered, it would be idiotic of me to swing for the fences in our trading positions. Trades are for the purpose of singles and doubles only. Ideally, a loss on a trade never exceeds 1% of total assets, preferably much less.
As the year progresses, this is going to be a good way of keeping progress given the numerous names I will be trading in 2019.
My only concern at this point is how to gain alpha now. Not next week, next month or next year, but now. Our short positions taken over the past two days are simply vehicles to gain alpha now. They are not expressive of my view on the markets several months out, which is bullish, by the way. They are not expressive of my view of the individual company fundamentals. They are simply trading vehicles to achieve our objective of allowing the cash hammer to chip away at the market in order to achieve performance.
That's it for tonight.
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