February 2013 Review

Portfolio Update 

There was a couple of changes to the portfolio during the month: 

- Puts/Hedges: A put position in EWG (Jan-14, $18 strike) was added to the portfolio.  

- Precious Metals:  About 40% of the position in Gold (GLD) was sold during the middle part of the month. 

- Currencies: The size of the Short Euro (EUO) position was increased by about 40% in the middle of the month.  Together with the change in the Gold position (see above) this reflected Our Man’s more bullish view on the US Dollar.

Performance Review  

February continued the portfolio’s recent trend of disappointing months, ending down -1.5% and leaving the portfolio -2.5 YTD.

Despite the positive equity markets, it has again been the equity-orientated books that have been the main driver’s of the disappointing performance.  The Value Equity book (-22bps) fell after THRX drifted lower though the major short-term newsflow, an FDA decision, is not expected until May.  Then Energy Efficiency book (-59bps) also hampered performance, falling on the back of a disappointing quarter for XIDE – while there continue to be positive medium and long-term trends for the company, they’ve largely been overshadowed by the disappointing short-term news that continues to come out.

The Other Equity book (-33bps) also contributed negatively, after the Italian equity markets (EWI) weakened significantly following the elections there.  The Italian election saw no party win a majority and the parties that stand against austerity do better than expected, all of which resulted in a lot of uncertainty…something that’s rarely looked upon favourably by the markets.    

The US Dollar continued to strengthen over the course of the month, which hurt the Precious Metals book (-69bps) but aided the Currencies book (+47bps) as the Euro showed signs of hitting an important peak against the dollar.  Elsewhere the Bonds Funds (-0bps), NCAV book (-6bps) and Puts/Hedges (-6bps) had a very limited impact on performance.

Portfolio (as at 2/28 - all delta and leverage adjusted, as appropriate) 

20.0% - Bond/Absolute Return Funds (DLTNX and HSTRX) 

7.1% - Precious Metals (GLD) 

5.7% - Value Idea Equities (THRX, and DRWI) 

3.2% - Other Equities (GREK, and EWI)  

2.3% - Energy Efficiency (AXPW, and XIDE) 

1.8% - NCAV Equities 

-0.0% - China-Related Thesis (no positions) 

-2.6% - Hedges/Put Options (premium of 11bps in XLP Jan-14 puts, 33bps in XLB Jan-14 puts and 15bps in EWG Jan-14 puts)  

-16.4% - Currencies (EUO – Short Euro)  

51.0% - 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.