PORTFOLIO UPDATE: CHANGES GALORE AND DETAILS GALORE
During the trading day, I tweeted the following: Dramatic changes to the structure of the portfolio, no doubt. Market neutral exposure, which has been the standard since October 10th, has been replaced with a 75% exposure to equities. 25% remains in cash. Should the market continue its strength, the remaining amount of cash will have a home over the next couple of weeks. As it stands, the portfolio consists of WMIH, PTGI, SPNS, PXLW, PRXI and UPIP. No, I did not intentionally choose companies that had symbols containing the letter "P", as unbelievable as that may seem to some of you. Here is some brief detail into the reasoning behind today's additions. Looking at things on a micro level here: PTGI - Restructured, post-BK company here. Company essentially has very little sell side coverage. Very under the radar. Free cash flow machine. Continues to pay down debt, increase operating efficiency and expand margins. Revenues have been somewhat soft sequentially. It is trading at a ridiculously low 3.5 times EBITDA. Unless there is an utter collapse at the company, there is very little downside in the stock at these prices. I bought into PTGI in January of this year and sold in April for a near 40% gain. The company has only become leaner since I sold in the $17 range in April. Paying $11 and change for the company down here is a gift. SPNS - I'm at a complete loss for words as to why the market is overlooking this company. Been adding all week. Their earnings are terrific. The CEO raised guidance when they reported earnings earlier this month. Here are some highlights: - Revenues up 67% YOY - Net income up 86% YOY - Profit margin up 200 basis points YOY - Raised guidance to $113 million in revenue for the year. Cash position has increased over $10 million YOY. All of this and the company is trading almost exactly where it was one year ago. PRXI - Same reasons as I had in the recent research report. Adding, as well. As I do at the end of every month, I will be posting my letter to investors on the site that will detail all the positions in the...
PORTFOLIO UPDATE
During the trading day, I tweeted the following: The research report for PRXI can be found here: http://www.zenpenny.com/prxi-a-simple-situation-equaling-a-simple-opportunity/ PRXI is a small position. I classify a small position as being less than 10% of the portfolio overall. I would be happy to add to it once my trend indicators start perking up a bit and if the stock shows some strength over the intermediate term. After this addition to the portfolio, current holdings now include: PRXI, WMIH, SPNS, PXLW, UPIP and...
QUICK THOUGHTS
Looking at futures tonight wading through a rather bidless environment. Down some 66 points on Dow Futures 10pm PST. Any weakness witnessed tomorrow needs to be reversed by late day. I am willing to give the market until Wednesday, at the absolute latest, to begin showing its horns. My primary concern with respect to further weakness is in the S&P 500 and its decreasing proximity to its generational trajectory. It will act as an attraction point the closer the market gets, until it simply can't resist. I went over this concern in the weekly chart review on Sunday. That trajectory has a price target of 1320. Again, the market has until Wednesday to get its act together. Weakness past Wednesday deserves some very serious questions going forward. Clock is ticking. The past 30 days may be the least amount of activity I have had in a 30 day period since as far back as I can remember. I have had one small addition to an existing long position. Other than that, I have been doing absolutely nothing, other than sitting on a market neutral portfolio. I remain hedged via TZA, holding a substantial amount of cash and several small-cap long positions. In other words, nothing has changed since I posted my last portfolio update way back on October 10th. Tomorrow should be far more interesting than today was. I'll have more in the morning, if...
PORTFOLIO UPDATE: HITTING THE EMERGENCY BUTTON…..TWICE
During the trading day, I tweeted the following: Any good risk manager (and that is what any of you who have interest in the markets are) should have multiple layers of risk control. I often find that instead of focusing on these layers, investors will focus too much on reward. There are all kinds of contingencies and plans made for rewarding trades, but very few, other than your run of the mill stop protection, for the risk. True professionals, who outperform over the long-term, are risk managers. All others are reward managers. The market will quickly call you out for what you are if you play the game on a consistent basis. I used to be a reward manager. I am very familiar with the practice of focusing squarely on reward and accepting drawdowns as a necessary part of the game. The primary issue with being a reward manager is that you can have multiple years of winning streaks, but it will only take one small miscalculation to take back all those years and then some. You can never slip. Keep in mind, that the financial markets, at some point or another, will create an abusive environment for every strategy ever developed by man or machine. The reward manager, therefore, won't survive over the long-term by design. The risk manager, on the other hand, controls the environment by having multiple layers of risk control, as I mentioned earlier. When one defensive wall fails, the other springs up to stop the onslaught. The risk manager realizes that the key to prospering in the game is to remain viable. You remain viable by never suffering a drawdown that will be too cumbersome for your strategy to overcome. The risk manager is good enough at their craft to know that large sums of money can be made when the environment is favorable. There is no need to risk the entire portfolio in an environment that is questionable when patience is the only thing required to reach a point when a significant streak of profitability can occur. I have mentioned my tactical asset allocation strategy that utilizes a short, intermediate and long-term trend following/reversal system to dictate my long exposure to the market many times. What I haven't mentioned is the other layers I utilize to control risk. One of those layers is a mandatory performance stop that slices positions in half when a certain performance threshold is breached. For me, that threshold is a 5% performance decline during any month. I haven't had to mention this risk control measure because I haven't suffered anything close to a 5% down month at anytime...
PORTFOLIO UPDATE: CASH IS BECOMING KING
During the trading day, I tweeted the following: A pretty active day of liquidations relative to last few months when I was actively building positions. There is clear reasoning behind this that I hope I have communicated effectively over the past several days. The market simply isn't behaving properly, contrary to what I expected after this sixth break of the generational trajectory. It is disappointing, frankly. This doesn't mean that I cut and run like a badger being smoked out of his hole. Just as I was systematic and deliberate in my entry, the exit strategy is very much systematic and deliberate in nature. In other words, you won't find me in 100% cash by the end of this week simply because I have a potpourri of warning signs being sprinkled onto my general, overall bullish thesis. I have, however, started the liquidation process, building up to more than 30% cash today. I am also fairly close to initiating a TZA hedge that will command a 25% overall portfolio allocation, with a notional value that will effectively put me into a net neutral position. As for the reasons that I cut SPRT and ATNY specifically, here is the individual reasoning: - SPRT - I have had immense success trading in 2012. This is now my third round turn in the stock since the original research report published in January. I have had gains of 21%, 15% and now 35%. My average hold time has been two months for the stock. I will be looking for an area to reinitiate the position if I am lucky enough to be given a favorable point. - ATNY - A complete disappointment. The restructuring that I was counting on being completed in an efficient manner, as detailed in the research report, seems to have run over in more than one way. It doesn't help that the budgetary situation with the US government has made defense spending one giant question mark. It is simply a bad combination of events for ATNY. While I believe that company is an extreme value here, I have experienced more than one value trap in my career. There is no such thing as a value unless it is going up in price. Lost about 25% on this investment. Moving on. The holdings as of the close today are as follows: PXLW, WMIH, SPNS, UPIP and 30%+...
PORTFOLIO UPDATE
During the trading day I tweeted the following: The research report for UPIP is available by clicking here. The current portfolio now consists of UPIP, SPNS, SPRT, PXLW, WMIH, ATNY. 100% invested and 100%...
PORTFOLIO UPDATE
During the trading day Friday, I tweeted the following: I initiated BWC on August 22nd. I would have liked to hold onto the stock, however, I am making room for a new portfolio holding that I am currently in the process of accumulating. I will be releasing the research report on the position tomorrow...
NO REST FOR THE WEARY
Now that the market has gone into "play dead so I can slather another coating of horned defecation on the bears" mode, I feel it is a good time to review the status of the portfolio and the contents within. September has been another kind month to the portfolios. With a near double digit return that now puts the year to date return close to 55%, it would be easy to become complacent, lackadaisical or some other variation of plain lazy. I, however, have eaten arsenic laced concrete far too many times in my career to relax when I am ahead. It becomes a question of consistency rather than the sheer power of your gains during any time period. For the sake of consistency, it is a best practice to mark to market your gains on a weekly or monthly basis so as to not become complacent when you are sitting on large cushion. A 20% drawdown is a 20% drawdown whether it starts from being flat on the year or up 80%. In either case, it is something that should be controlled or else you can find yourself sitting on a much larger problem in a relatively short period of time. The market is a fickle lover. Here is a rundown of each individual holding: SPRT has carried the portfolio in September. It is up more than 40% for the month and looks set to continue the trend higher. As a result of the addition I made to the position earlier this month and the recent decline in PXLW, SPRT is now the largest position in the portfolio. PXLW is suffering a fairly standard, low-volume pullback that doesn't concern me at all at the moment. Of course, I would have preferred a consolidation at higher levels, but this pullback is nothing out of the ordinary from a price or volume perspective. I'm holding comfortably. WMIH, as I mentioned in the research report, is a very long-term holding in the portfolios. It is not a question of whether a positive outcome will play out here. For me it is a question of how long it will take to play out. I believe we will see some concrete positive evidence of the direction WMIH will take before year end. At the latest, it will be Q1 of 2013. I continue to see it as the opportunity with the most potential in the portfolios. Price action has been as expected. SPNS is caught in a lack of liquidity land with a large seller holding down the price. I expect SPNS to have a very rapid appreciation when this seller moves out of the...
PORTFOLIO UPDATE
During the trading day, I tweeted the following: This was an addition to SPRT. The original position was taken on August 7th between 3-3.10. Following this buy, I am now 100% invested and hope to stay that way for sometime to come. The completed portfolio consists of the following: BWC, SPNS, SPRT, PXLW, WMIH, ATNY A concentrated and well-researched portfolio that has all the potential to run from...
PORTFOLIO UPDATE
During the trading day, I tweeted the following: This is a small position, bringing my net long exposure up to 95% with a 5% cash position. The research report for BWC is here. Since I don't utilize leverage, I am close to maxing out on the long-side here, which reflects both the strength of my mechanical trend indicators and my technical readings. The current portfolio, as it stands, in no particular order: BWC, SPNS, SPRT, PXLW, WMIH, ATNY I will more than likely be putting the remaining 5% to work in one of the current positions. Undecided...