Thursday, June 01, 2006

Portfolio May 2006

The month of May was clearly one of transition. My portfolio moved from being almost fully invested and heavily concentrated in commodity stocks to being almost fully hedged. To someone who’s not a day trader, it was like coming to a full stop from running full bore ahead. I’m fairly happy with the results though, even a little proud. Despite the heavy bleeding in the commodities, I was able to limit the damage to my actively managed portfolio to -1.52% for the month. My asset allocation portfolio, which remains almost fully invested and fully long, declined -4.06%, more than the general market because of the small cap, emerging market and commodity exposure. The combined portfolio declined 2.68%.

Long positions closed

  • 5/8 EGO 1200 sh @ $5.30
  • 5/11 TRE 800 sh @ $8.45, NG 500 sh @ $15.51, SSRI 300 sh @ $22.75, NTO 1000 sh @ $5.86, N 100 sh @ $63.91
  • 5/15 CHK 200 sh @ $30.83, DVN 100 sh @ $ 58.00, IUCPF 1000 sh @ $5.29
  • 5/22 FXI 200 sh @ $72.52, BHP 200 sh @ $39.93 (probably the worst move of the bunch), GVA 100 sh @ $41.93

Short positions opened

  • 5/9 IWM Jan 80 puts 10 contracts @ $5.10
  • 5/11 EEM Dec 110 puts 3 contracts @ $10.30
  • 5/19 CFC short 400 sh @ $38.965
  • 5/22 UCPIX ~$14k
  • 5/24 USPIX ~$15k

Timing is everything. Everything I did on or before May 11 looked brilliant in retrospect. Later actions had more to do with risk management consistent with my view that the top of the current cyclic bull had been reached. My current strategy is one of cross-hedging where the remaining long positions in commodities are counterbalanced by shorts in the housing sector, puts and bear funds targeting the Russell 2000 and the Nasdaq 100. This approach can backfire; for example, if the risk premium in oil were to be removed thus igniting a rally in the general stock market. However, I think the more likely longer term outcome is continued appreciation of commodity prices and a stalled domestic stock market triggered by a collapse in the housing market. In the mean time, I’m protected in the (unlikely) event of a broad sell-off.

Following are the usual summary table, month end holdings and allocations. The information about my personal portfolio is not investment advice by any means. The usual disclaimers apply.

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