Week 11 2012 Performance.......March Madness in full affect with Big Bounce Up

If you are a sports fan this is arguably one of the best times of the year.  The NCAA basketball tournament is now in full swing, opening day for baseball is weeks away, and for those of us in the Midwest spring has sprung early with record breaking warm temperatures.

The temperatures were not the only thing that was heating up this week with the markets rebounding from last week and climbing higher by on average over 2%.  Tuesday was the biggest day of the week but overall the  $DJIA  has been up 8 straight days.

The DWCM fund bounced back big as well this week up 4.2% and is now clear of the 21% mark on a YTD basis.  Once again the leaders were Apple $AAPL and Chipotle Mexican Grill $CMG.  The agriculture names were also solid performers such as Mosaic $MOS and Potash $POT.  I have addressed this theme in a few posts this week with some of the hedge fund annual letters that I have read.  The ag names are definitely positions that I watch closely and look for pull backs to add to our current positions.

This week we reduced our position in Owen Illinois $OI by 50% as we look to exit this position all together.  I had originally bought OI early last year based on our stock analysis model and it was at the low end of it's trading range.  As sometimes happens, it blew through it's support level and I did not have a stop-loss position on so we basically went down with the ship on this position.  It has since rebounded in 2012 up almost 25% YTD.  Fundamentally the stock does not look at all attractive and with the recent run up it looks like a good time to exit.

We also sold out of our Crocs $CROX option position which were expiring on 03/17 along with option positions in McDonald's $MCD and Best Buy $BBY.  We will be taking a loss on all three positions.  MCD was a play on higher same store sales which the company did report last week but the stock price has somewhat broken down after hitting the $100 per share mark.  Best Buy I thought would move further down as it reported another weak quarter which it did but not far enough down to our put level of $22.  This is a classic example of getting the call right but missing on the timing.  With options you have to get both right in order to receive the payoff.

The Week Ahead


This week we will get a plethora of housing data.  I'm not expecting much change in the housing numbers as I see this part of the economy still trying to find a bottom.  I've heard through the various news sources that the spring selling season has been off to a good start but you just never know.  I still continue to believe in the remodeling recovery as people repair and either flip or rent houses.  Our option position in Lowe's $LOW has done extremely well.  Looking at a chart of LOW it has basically just gotten back to the level where it was 5 years ago!  Talk about mean reversion and allot of volatility.  Another data point that may slow any type of housing recovery are interest rates rising.  Although still at historical lows, the 30 year fixed rate is now above 4% if you can qualify for it given all of the tighter lending restrictions.

• Mon - Housing Market Index
• Tue - Housing Starts
• Wed - Exiting Homes Sales
• Thu - FHFA House Price Index, Fed Balance Sheet, money Supply
• Fri - New Home Sales

I'm still working on finding a venue for the first DWCM financial seminar focused on 401k/403b Rollovers.  This is a great opportunity to learn about what options you have regarding your 401k/403b from a previous employer, new employer, or what you can do with an exiting plan.  We'll also be touching on the various IRA options out there.  Overall it will be a great opportunity to find out about what DWCM can do for you in order to help you achieve your investment goals.

Have a great week!