April 2013 Review

Portfolio Update 

There were numerous changes to the portfolio during April, which are recapped here.

Performance Review 

April was a relatively volatile month for the portfolio, though it ended up positive (+0.27%) but still remains negative year-to-date (-2.1%).

The major drivers of performance were the Value Equities (+223bps), Energy Efficiency (-112bps) and Currencies (-66bps) books.  The USD weakened against the Euro during the month, which drove the loss in the Currencies book but Our Man believes that this is a counter-trend rally in what will be a longer downtrend.  The Energy Efficiency book’s losses came almost entirely from the position in XIDE, which cost over 100bps in April.  The stock fell heavily on 2 major negative pieces of news; the stock fell heavily on news it had hired Lazard to look into a restructuring plan and then fell further when the firm had to close its Vernon recycling plant after it failed to meet health-risk standards.  These losses were more than offset by the sharp rise in THRX, which accounted for almost the entire gain in the Value Equities bucket.  The stock rallied after an FDA Advisory Committee recommended the approval of one of its core drugs.  The rally continued after the company announced plans to split itself into 2, a patent/royalty management company and a drug discovery company; with GlaxoSmithKline being a key partner, and large stakeholder, in THRX this helped reignite speculation that GlaxoSmithKline may be a bidder for the royalty management company.

Elsewhere, the portfolio saw much smaller winners and losers.  The Absolute Return Funds (-13bps) were a negative contributor, as was the NCAV book (-9bps) despite the rising market.  The sharp rise in the market during the second half of April also negatively impacted the Puts/Hedges book (-20bps) and though the Precious Metals book (-18bps) cost money in the first few days of the month, the decision to exit Gold proved to be one that prevented larger losses.  The other good decision in the portfolio update was to size-up the position in Greece (GREK), which rallied strongly late in the month and helped the Other Equities book (+41bps) contribute strongly.

Portfolio (as at 4/30 - all delta and leverage adjusted, as appropriate) 

18.2% - Bond/Absolute Return Funds (DLTNX and HSTRX) 

7.7% - Value Idea Equities (THRX, and DRWI) 

6.7% - Other Equities (GREK, and EWI)  

1.0% - NCAV Equities 

0.7% - Energy Efficiency (AXPW, and XIDE) 

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

-2.1% - Hedges/Put Options (premium of 5bps in XLP Jan-14 puts, 36bps in XLB Jan-14 puts and 10bps in EWG Jan-14 puts) 

-23.3% - Currencies (EUO – Short Euro)

53.6% - 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.