Sunday, November 16

October 2014 Review

Portfolio Update   
- Technical:  After September’s initial sell signal, the second trigger to sell (implying a correction is likely, i.e. 67%+) came during the first couple of days of October, and Our Man exited the Technical positions.  This move looked inspired for the vast majority of the month, though the sharpness & strength of the rally (higher highs and higher lows, every day with a monotonous regularity, to a level beyond expectations) increasingly raised the prospect of this being a ‘false sell’ signal as we reached month-end.

- Equity:  There were two small changes to the Equity portfolio; the first was that the position in TWTR was reduced slightly (this was the tail-end of the size reduction discussed last month, but which didn’t get filled during September).  Secondly, while most of the carnage in the Energy sector has been warranted (especially if Oil stays near $80), there are (hopefully) a few opportunities, and to this end Our Man started to dabble by taking a very small position in EOX.

Performance Review  
After a volatile month, the portfolio fell by 154bps putting the YTD performance at 3.8%

Despite the strong rally in the second half of the month, Our Man’s equity exposed buckets all suffered losses.   The International/Country bucket (-118bps) was by far the largest negative contributor, suffering heavily during the risk-off moves during the first half of the month when GREK (Greece) fell almost 20%, and failing to recover during the sharp rally in the second half of the month.

The Technical book (-29bps) was also a negative contributor, after the positions were closed out in the first couple of days of the month.  The Equities book (-42bps) was also a negative contributor, though more than 100% of the losses came from the positions in THRX and TBPH after the initial sales of their new products were at the low-end of expecations.  The Energy Efficiency (-9bps) was a small negative contributor as Exide continues to move through its bankruptcy process.  Finally, the Puts/Hedges book (-15bps) also lost money through both time decay and the underlyings moving slightly against it.

In the medium-term, the biggest news came from the Currency-related positions.  Our Man has been bullish the US Dollar for some time, believing that post-2011 we are in the start of a big US Dollar rally rather another of the many bear market rallies that have dominated memories since it mid-80s peak.  November saw some fundamental signs, that pointed to the increased possibility that this is coming to fruitition; while the US exited quantitative easing and the Fed now ostensibly discusses WHEN it might consider raising rates, Europe (where they are talking about starting some version of QE) and Japan (where on the final day in the month, they redoubled their QE efforts in the befuddling hope that doing more would make it would better) are headed in the opposite direction.  The Currency book (+71bps) unsurprisingly gained from the weakness in the Euro and Yen, throughout the month.  The China Thesis book (-14bps) posted a moderate loss, as the rise in Chinese A-shares (prior to them opening up a little more to foreign investors) did not offset the loss in the Short Australian Dollar position.  The Absolute/Bond Fund (+3bps) was a marginal gainer.

Portfolio (as at 10/31 - all delta and leverage adjusted, as appropriate) 
19.8% - Equities (EOX, RDY, TBPH, THRX, TTM, TWTR & VIPS) 
7.8% - International/Country (GREK & GVAL)
4.3% - Bond/Absolute Return Funds (DLTNX)
0.2% - Energy Efficiency (AXPW, and XIDE) 


-0.0% - Hedges/Put Options (premium of less than 5bps combined in EWZ Jan-15 puts and EWJ Jan-15 puts)


-12.6% - China-Related Thesis (CROC – Short Australian Dollar, partially offset by CAF – Long Chinese A-Shares) 


-49.6% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

27.9% - Cash 

Disclaimer:  For added clarity, Our Man is invested in all of the securities mentioned.  He also holds some cash and a few other securities (of negligible value).  You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.

Wednesday, October 8

September 2014 Review


Portfolio Update  
- Technical:  For the first time in a long-time (i.e. well before OM added the Technical book to the portfolio), the initial sell signal was triggered for all 3 of the indices in the Technical book.  This trigger indicates that the probability of a noticeable correction is elevated (i.e. 40-50% of it happening) and typically OM would reduce the position here (to c20%) but given it’s only marginally larger than the target positon and the cost of doing so, no changes were made.  Should a second trigger be seen (implying a correction is likely, i.e. 67%+) then the positions will be exited.

- Equity:  Given the initial sell-signal triggered in the Technical Book, OM thought this would be an opportune time to exit out of most of lower conviction equity names, comprising of DRWI and a number of the Internet positions (P, PNQI, QIWI and some of the TWTR) put on during Q2.  Of the Internet positions, only VIPS and (a reduced in size) TWTR remain.

Performance Review  
For the month the portfolio fell 74bps, leaving it up 5.5% YTD.

It was a very broad spread month, though unsurprisingly the losses were largely concentrated in the equity-related books.  The Equity book (-283bps) was the largest negative contributor, driven by the Theravance positions (THRX and TBPH) which cost c200bps – though there was no great news, the stocks are pretty speculative.  The Intenet names cost the fund about 52bps, but were strong contributors for the period they were in the portfolio.  The International/Country (-120bps) also suffered from the risk-off move during the month, with the position in GREK (Long Greek equity) driving the losses.  The Technical book (-20bps) also fell during the month.  The Puts/Hedges (+15bps) benefited from the falling market.  The Absolute/Bond Funds (-1bp) were largely unchanged and the Energy Efficiency (+10bps) names posted a small profit, after a corprate action (reverse stock split, increasing the likelihood of a full market listing) in Axion Power.

The winners were centred on the currency related books, which were driven by the strength of the US Dollar.  The Currencies book (+222bps) benefited pretty evenly from the rise in the Dollar against the Euro (on hopes of a Euro-version of QE) and Japan (where bad economic news, heightened hopes of further QE).  The China Thesis (+104bps) was also driven by the US Dollar exposure, and the Australian Dollar’s weakness against it.

Portfolio (as at 9/30 - all delta and leverage adjusted, as appropriate) 
21.9% - Technical (DDM, SSO and QLD)
19.5% - Equities (THRX, TBPH, TWTR, TTM, RDY, & VIPS) 
8.9% - International/Country (GREK & GVAL)
4.2% - Bond/Absolute Return Funds (DLTNX)
0.3% - Energy Efficiency (AXPW, and XIDE) 

-1.2% - Hedges/Put Options (premium of 18bps in EWZ Jan-15 puts, and 2bps in EWJ Jan-15 puts) 

 

-12.4% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares) 

-48.8% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

17.2% - Cash 

Disclaimer:  For added clarity, Our Man is invested in all of the securities mentioned.  He also holds some cash and a few other securities (of negligible value).  You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.

Wednesday, September 17

August 2014 Review

Portfolio Update  
- China Thesis:  With data out of China continuing to be tepid and signs that the US is at the beginning of the end of its monetary easing policy, OM scaled back up his Short Australian Dollar position (CROC) in the middle part of the month.

Performance Review  
Aided by buoyant Equity markets, and a strengthening US Dollar, August proved a very healthy month for the portfolio which rose 4.0%, putting the year-to-date performance at 6.3%.

As noted, the strong equity markets were very beneficial to the portfolio.  The Equities (+249bps) was the largest contributor to performance, with strong contributions from RDY and THRX (both Healthcare-related names), TTM (Jaguar/Land Rover sales continue to go well) and a number of the Internet names (especially TWTR).  Our Man is nearer exiting some of the positions in this book, mainly some of the Internet-related ones which were added after the large fall in the space in April/May.  The Technical book, through its leveraged index positions, added 89bps to performance.

The main economic event of the month was the annual conclave of Central Banker types at Jackson Hole, from where folks got the continued sense that the US is coming (albeit slowly and reluctantly) towards the end of its easing cycle, but where Mario Draghi (President of the European Central Bank) opened the door to further easing in Europe.  Coupled with further mediocre news on the Japanese economy, the result of all of this, was a bunch of Euro and Yen weakness and some Dollar-strength.  The Currencies book (+76bps) was a grateful beneficiary. 

Elsewhere, much ado about nothing.  Absolute Return/Bond Funds (+4bps) and the International/Country book (+9bps) helped performance, while the Puts/Hedges (-13bps, markets kept going up), Energy Efficiency (-2bps) and China Thesis (-13bps, mainly from the weakness in Chinese A-Shares) hurt.

Portfolio (as at 8/31 - all delta and leverage adjusted, as appropriate) 
32.7% - Equities (THRX, TBPH, PNQI, TWTR, TTM, RDY, VIPS, QIWI, P & DRWI) 
22.1% - Technical (DDM, SSO and QLD)
10.1% - International/Country (GREK & GVAL)
4.1% - Bond/Absolute Return Funds (DLTNX and HSTRX)
0.2% - Energy Efficiency (AXPW, and XIDE)

-0.2% - Hedges/Put Options (premium of 3bps in EWZ Jan-15 puts, and 2bps in EWJ Jan-15 puts)

-12.4% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares) 
-48.5% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

6.5% - Cash 

Disclaimer:  For added clarity, Our Man is invested in all of the securities mentioned.  He also holds some cash and a few other securities (of negligible value).  You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you

Sunday, August 17

July 2014 Review

Portfolio Update 
- International/Country:  Our Man exited his positions in both Italy (EWI) and Spain (EWP) during the second half of the month.  Both had been good performers for the portfolio in the 12-18months that we held them (especially EWP, which returned 50%+), so why sell?   It’s a combination of a couple of things; from those OM speaks to, opinion on Europe seems rather uniformly positive with too many folks claiming this is the start of a new bull market (sadly, bull markets rarely ever start when everyone proclaims them to be starting, see 2009) – this combined, with the deteriorating technical of markets across Europe (not just Spain/Italy, but France and Germany too amongst others), still mixed/mediocre macro and company news, and the increased nervousness OM has over the various larger issues in the world, made it seem like a good time to step away.

- Absolute Return/Bond Funds: Our Man closed out the small position in HSTRX.

Performance Review
The portfolio fell 2.02%, leaving it at +2.2% for the year. 


However, despite the magnitude of the loss it was actually a quiet month for the book.  The Equities book (-235bps) represented the key detractor from performance, and within that book it was the position in THRX (which cost c205bps) that drove performance.  THRX gave back much of recent gains on a mixture of negative press regarding uncertainty as to the speed of take-up and potential market size of its drugs which could impact the ability of the company to maintain (and increase) the dividend, and investors exiting the name following the recent spin-off.  The rest of the Equities book was largely flat, though DRWI (-25bps) continued to struggle following the recent fundraise, while the Internet-related names added this year posted a marginal positive contribution.

As noted, the majority of the books had limited impact on the portfolio.  The Absolute Return/Bond Funds (-1bps), Puts/Hedges (-9bps), Technical (-11bps) and Energy Efficiency (-3bps) all posted small losses, which were offset by the gain in China Thesis book (+35bps, on the back of strong Chinese A-share performance).  The International/Country book (-67bps) was a noticeable detractor as European markets weakened significantly, though the exiting of the positions in Spain/Italy during the middle of the month helped constrain the impact.  The weakness in Europe also saw the Euro weaken, which drove the positive performance in the Currencies book (+89bps).

Portfolio (as at 7/31 - all delta and leverage adjusted, as appropriate) 
31.6% - Equities (THRX, TBPH, PNQI, TWTR, TTM, RDY, VIPS, QIWI, P & DRWI) 
21.2% - Technical (DDM, SSO and QLD)
10.4% - International/Country (GREK & GVAL)
4.3% - Bond/Absolute Return Funds (DLTNX and HSTRX)
0.2% - Energy Efficiency (AXPW, and XIDE) 


-0.4% - Hedges/Put Options (premium of 17bps in EWZ Jan-15 puts, and 2bps in EWJ Jan-15 puts) 

2.0% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares) 

-48.9% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

14.2% - Cash 


Disclaimer:  For added clarity, Our Man is invested in all of the securities mentioned.  He also holds some cash and a few other securities (of negligible value).  You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.

Sunday, July 6

June 2014 Review

Portfolio Update
- None

Performance Review
June proved the first month in a while that the portfolio significantly outperformed the market, rising +5.11%, which puts the YTD performance at +4.3%. 

The entirety of the portfolio’s performance came from the Equity Book (+519bps), with winners being broad spread across the book.  As noted in recent months, THRX (Theravance) spun-off TBPH (Theravance BioPharma) – while the stock(s) had fallen into the spin-off (on limited news), they rallied strongly during June after it was completed (on limited news), more than recouping their losses and contributing 183bps and 91bps respectively to the portfolio.  The Internet-related names, which were added to the portfolio during the Mar-Apr pullback, added a combined 178bps as the sector continued to rally strongly, with TWTR (+88bps) leading the way.   Finally, the position in DRWI contributed 33bps, after the stock rallied after the company won a contract and raised guidance – perhaps, after a long period of disappointment, the company might finally be poised to take advantage of its technology.

Elsewhere, the portfolio largely broke-even – with markets rising, the Technical Book (+40bps) helped performance, and there were marginal contributions from the Absolute/Bond Funds (+3bps), Energy Efficiency (+2bps) and China Thesis (<+1bp).  Offsetting these were the International/Country book (-14bps, poor performance in the European periphery), Currencies (-26bps, weaker dollar) and the Puts/Hedges book (-12bps, rising markets and low volatility).

Portfolio (as at 6/30 - all delta and leverage adjusted, as appropriate) 
31.7% - Equities (THRX, PNQI, TWTR, TTM, RDY, VIPS, QIWI, P & DRWI) 
21.5% - Technical (DDM, SSO and QLD)
20.5% - International/Country (GREK, EWP, EWI & GVAL)
5.7% - Bond/Absolute Return Funds (DLTNX and HSTRX)
0.2% - Energy Efficiency (AXPW, and XIDE)

-1.3% - Hedges/Put Options (premium of 25bps in EWZ Jan-15 puts, and 4bps in EWJ Jan-15 puts)

1.5% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares) 
-48.8% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

3.5% - Cash 

Disclaimer:  For added clarity, Our Man is invested in all of the securities mentioned.  He also holds some cash and a few other securities (of negligible value).  You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.

Monday, June 23

Things from my Newsblur: June 2014 Edition

- Tickets for Restaurants
The in-depth story about why Alinea, Next and the Aviary moved to a ticketing system for their bookings as opposed to the standard restaurant reservation system (or using OpenTable).  While it’s long, it’s a great in-depth explanation that explores the qualitative reasons for making such a move and provides a lot of interesting data that helps show the impact of the move.   I won’t be surprise if a number of restaurants (especially higher-end ones) move to such a system in the coming years! (Nick Kokonas, Alinea)

Ever wondered about how lucrative (spoiler alert:  unless you make your LPs good money, it isn’t!) it is to run a small VC fund?  Well, in an extraordinarily transparent post, Charlie O’Donnell walks you through the economics of his small fund!   (Charlie O’Donnell, This is Going to be BIG)

Fred Wilson’s one of the best known and (with his partners) most successful venture capitalists on the East Coast (and I suspect the US & world).  He also writes a blog, where he posts every day which should be required reading for those budding entrepreneurs out there, those who work for/with them, and those that invest in them (and I guess, just folks who want to learn/know stuff).  Here’s the transcript (on his blog) of a recent interview he did with Business Insider (Alyson Shontell and Fred Wilson, Business Insider and A VC respectively).

Uber’s been in the news recently, with protests in Europe’s and the firm’s claims that the “median small business income” with Uber X in NYC is $90,000+.  Here, Justin Singer goes into the numbers and unsurprisingly finds that the numbers are rather generous (essentially it’s more of a revenue figure, than an income one), and leads to some more general questions about Uber’s future.  (Justin Singer, Justin-singer.org)

- An Oral History of Ghostbusters
Our Man’s mentioned that oral histories are all the rage, but after the recent one on Trading Places, how could he not indulge you with the one on Ghostbusters.  Is seemed like it was a mess to make, but a LOT of fun!  Anyways, who you gonna call?  (Justin Matloff, Esquire)

Unfortunately, the commonly told story behind its origination isn’t entirely (or at all) true!  (Mark Hay, Roads & Kingdoms)

It still boggles Our Man’s mind that when he was getting his MBA, Henry Singleton’s name never came up – given he was one of the great entrepreneurs, businessmen and capital allocators in the 20th century!  If you invested in Teledyne stock in 1966, you’d have had a 53x return on invested capital over the next 25yrs (vs. 6.7x for the S&P 500, and 9.0x for GE).  Here’s the closest thing to a case study on Singleton, and his conglomerate Teledyne.  (John Chew, CS Investing via Value Walk)

Saturday, June 14

May 2014 Review

Portfolio Update 
- Equity: The two changes to the portfolio both came in the Equity book, with OM adding to the positions in THRX and TWTR in the middle of the month.  THRX is splitting itself into 2 separate companies (a royalty management one and a pure biotech research one) in early June.  TWTR offered an interesting technical point; during May, its stock touched $29.51 putting it down around 61% from its post-IPO peak  ($74.73) in late-2013, a very similar amount to the level Facebook fell (from $45 to $17.55) post its IPO to its eventual trough in 2012.

Performance Review
May proved the first unabashedly positive month in a while for the portfolio, which rose 1.92% during the month to bring it’s YTD performance to -0.8%.


The portfolio was able to benefit from the rise of Equity markets, especially in the US, most obviously through the index-linked Technical book (+53bps).  The Equity book (+130bps) was also a strong contributor, driven by positions in THRX (+51bps), and the Internet-related positions which added +113bps (QIWI +86bps after some favorable rulings in Russia, and VIPS +33bps helped, while TWTR -36bps cost money despite rising in the latter part of the month), though this was partially offset by the position in RDY (-30bps).   European markets failed to perform as well as the US, in part due to the uncertainty in Ukraine, and the International/Country book cost -9bps.  Unsurprisingly, the Puts/Hedges book (-29bps) was a negative contributor.

The Currencies book (+34bps) performed well, driven by the Short Euro position (EUO +45bps) as speculation continued that in addition to the announced measures, the ECB would continue with further monetary easing.   

The rest of the portfolio has more limited exposure, but the books were small positive contributors; Absolute/Bond Funds (+6bps), China Thesis (+5bps) and Energy Efficiency (+1bp)

Portfolio (as at 5/31 - all delta and leverage adjusted, as appropriate) 
29.9% - Equities (THRX, PNQI, TTM, TWTR, RDY, QIWI, VIPS, P & DRWI)
21.3% - Technical (DDM, SSO and QLD)
21.2% - International/Country (GREK, EWP, EWI & GVAL)
5.8% - Bond/Absolute Return Funds (DLTNX and HSTRX)
0.2% - Energy Efficiency (AXPW, and XIDE) 
 

-2.9% - Hedges/Put Options (premium of 36bps in EWZ Jan-15 puts, and 6bps in EWJ Jan-15 puts) 
 

1.5% - China-Related Thesis (CROC – Short Australian Dollar, more than offset by CAF – Long Chinese A-Shares) 

-50.0% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)

3.5% - Cash 

Disclaimer:  For added clarity, Our Man is invested in all of the securities mentioned.  He also holds some cash and a few other securities (of negligible value).  You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.