As promised, a September update on the NCAV screen was run at the end of last week. It resulted in 3 new names finding their way into the Absolute Value bucket portfolio (for information on the this bucket, and how it works, read here), they are:
- LAB (LaBranche) which had a market cap $165mn (vs. a 65% NCAV of $173mn)
- NED (Noah Education Holdings) which had a market cap of $88mn (vs. a 65% NCAV of $91mn)
- IESC (Integrated Electrical Services Co) with a market cap of $50mn (vs 65% NCAV of $55.5mn)
Additionally, a number of the existing holdings (AVTR, BXG, LTON, TWMC and XIN) reappeared on the screen. As such, the final date when these names have to be sold has been extended (here are the rules on when NCAV names must be sold).
Finally, there was one bit of news on a name within the bucket; in early September, QXM was subject to a take-over offer from its majority shareholder Qiao Xing Universal Resources (XING) of $0.80 in cash and 1.9 shares in XING for each of share in QXM. This is potentially worth $3.65 (XING closed at $1.50 today plus the value of the $0.80 in cash) or about 10% above QXM’s closing price ($3.35). However, a special committee of QXM’s directors has asked for more time to analyze the offer; a number of the minority shareholders have said that the offer is too low (it is below the NAV/share and Cash/share of QXM as of their 6/30/10 financials). I am waiting to see what the Special Committee recommends (and whether the bid is raised) before taking any final action
Monday, September 27
Monday, September 13
One Year In......
(Apologies to all the people who're seeing this post again. I was trying to spruce up the blog while watching Monday Night Football, and somehow managed to delete the original post from the weekend. As such, here it is again with some bonus statistics thrown in!)
It’s strange to believe it, but this week saw the one year anniversary for the portfolio, which started on 7th September 2009, with this blog following with its first posts in October. As such, what better time for a small array of tit-bits related to the portfolio’s first year.
As you know the portfolio exactly reflects Our Man & Mrs OM's investments, and here's what the NAV (base = 100) looks like:
And for those who’re a little more mathematically orientated, here’s the key statistics (based on Yahoo’s S&P daily data):
Ptf’s Annualized Return: 11.1%
Ptf’s Standard Deviation (based on daily data): 7.4%
(a bonus statistic, for those reading this again; 54.1% of days have been positive. A second bonus statistic is that on those positive days the portfolio has an average return of +0.36%, which is a little better than the corresponding loss of -0.34% it's suffered on the average negative day).
Alpha (vs. S&P 500): 11.7%
Beta (vs. S&P 500): -0.10
Correlation (vs. S&P 500): -0.27
None of the S&P-related statistics above should be entirely surprising, given that the Long position in Treasury Bonds has been both the largest and the only one held since inception. The original thoughts behind it are still largely valid today, though Our Man was unquestionably early (and too large!).
It’s strange to believe it, but this week saw the one year anniversary for the portfolio, which started on 7th September 2009, with this blog following with its first posts in October. As such, what better time for a small array of tit-bits related to the portfolio’s first year.
As you know the portfolio exactly reflects Our Man & Mrs OM's investments, and here's what the NAV (base = 100) looks like:
And for those who’re a little more mathematically orientated, here’s the key statistics (based on Yahoo’s S&P daily data):
Ptf’s Annualized Return: 11.1%
Ptf’s Standard Deviation (based on daily data): 7.4%
(a bonus statistic, for those reading this again; 54.1% of days have been positive. A second bonus statistic is that on those positive days the portfolio has an average return of +0.36%, which is a little better than the corresponding loss of -0.34% it's suffered on the average negative day).
Alpha (vs. S&P 500): 11.7%
Beta (vs. S&P 500): -0.10
Correlation (vs. S&P 500): -0.27
None of the S&P-related statistics above should be entirely surprising, given that the Long position in Treasury Bonds has been both the largest and the only one held since inception. The original thoughts behind it are still largely valid today, though Our Man was unquestionably early (and too large!).
Wednesday, September 1
August Review
Performance Review
August proved a successful month, with the portfolio returning +3.36% (putting the YTD at +7.9%) after rebounding in the final couple of days of the month to recoup almost the entirety of the Friday 27th’s loss (at 135bips, this was the portfolio’s single worst day since inception). After last month, it was good to see the portfolio behave far more in line with expectations during August.
The Treasury positions, which I’ve expected to be the driver of returns until the equity markets are noticeably lower (or higher) was dominant contributor (+331bps), with the Bond Funds also making a healthy contribution (+37bps).
The Equity positions were not as successful, and combined to be a small detractor from performance. The Value Equity book (-68bps) almost entirely due to the position in THRX, which as a developmental drug company particularly suffered from the risk aversion during August to trade back down to the bottom of its recent range. The NCAV book (-26bps), which is populated with micro-cap names, also suffered heavily from the increased risk aversion. The Other Equity Book (-13bps) was a small negative contributor. Against these negative contributions from the Equity positions, the Hedges/Put Options (+77bps) managed to offset a decent proportion of these losses. The Short China thesis (-1bp) has fallen to such a small part of the portfolio, that it had no meaningful impact on returns. While I believe the thesis (Part A, Part B, Part C) holds the timing has so far been far too early, and the question is whether and when to add additional positions (with longer duration) to increase the exposure to the theme.
Portfolio
45.2% - Long Treasury Bonds (21.97% TLT and 23.23% in the Aug-29 Bond)
14.4% - Long Bond Funds (6.6% HSTRX, and 7.8% VBIIX)
4.3% - Value Idea Equities (2.6% THRX, and 1.7% DRWI)
2.9% - NCAV Equities
2.4% - Other Equities (1.4% NWS, 1.0% CMTL, and 0.0% SOAP)
-0.1% (delta-adjusted) - China-Related Thesis (5bps premium in FCX put, <1bps premium in EWA put)
-10.6% (delta-adjusted) - Hedges/Put Options (82bps premium in S&P 2010 puts, 120bps premium in S&P 2011 puts and 56bps premium in a GS put)
27.9% - Cash
And now for something completely different; Mrs. OM has kinds informed me that the link to the Magic of Procrastination, in yesterday’s suggestion of things to read, didn’t work. That’s been amended now, and here it is for those wanting to click straight through.
August proved a successful month, with the portfolio returning +3.36% (putting the YTD at +7.9%) after rebounding in the final couple of days of the month to recoup almost the entirety of the Friday 27th’s loss (at 135bips, this was the portfolio’s single worst day since inception). After last month, it was good to see the portfolio behave far more in line with expectations during August.
The Treasury positions, which I’ve expected to be the driver of returns until the equity markets are noticeably lower (or higher) was dominant contributor (+331bps), with the Bond Funds also making a healthy contribution (+37bps).
The Equity positions were not as successful, and combined to be a small detractor from performance. The Value Equity book (-68bps) almost entirely due to the position in THRX, which as a developmental drug company particularly suffered from the risk aversion during August to trade back down to the bottom of its recent range. The NCAV book (-26bps), which is populated with micro-cap names, also suffered heavily from the increased risk aversion. The Other Equity Book (-13bps) was a small negative contributor. Against these negative contributions from the Equity positions, the Hedges/Put Options (+77bps) managed to offset a decent proportion of these losses. The Short China thesis (-1bp) has fallen to such a small part of the portfolio, that it had no meaningful impact on returns. While I believe the thesis (Part A, Part B, Part C) holds the timing has so far been far too early, and the question is whether and when to add additional positions (with longer duration) to increase the exposure to the theme.
Portfolio
45.2% - Long Treasury Bonds (21.97% TLT and 23.23% in the Aug-29 Bond)
14.4% - Long Bond Funds (6.6% HSTRX, and 7.8% VBIIX)
4.3% - Value Idea Equities (2.6% THRX, and 1.7% DRWI)
2.9% - NCAV Equities
2.4% - Other Equities (1.4% NWS, 1.0% CMTL, and 0.0% SOAP)
-0.1% (delta-adjusted) - China-Related Thesis (5bps premium in FCX put, <1bps premium in EWA put)
-10.6% (delta-adjusted) - Hedges/Put Options (82bps premium in S&P 2010 puts, 120bps premium in S&P 2011 puts and 56bps premium in a GS put)
27.9% - Cash
And now for something completely different; Mrs. OM has kinds informed me that the link to the Magic of Procrastination, in yesterday’s suggestion of things to read, didn’t work. That’s been amended now, and here it is for those wanting to click straight through.
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