Needless to say the month of May has gotten off to a rough
start. The DWCM fund was down 4.7% vs.
last week although the other major market indices did not fare any better, off
between 1.4% and 4.1%. The main rub for
us this week was once again Apple, down 6.3% for the week. However most other positions followed the market lead down as risk was definitely coming off of the table.
Our cash position now sits at 33.3% by far our lowest level since managing the fund over the past year plus. We made numerous acquisitions this week to the fund as names we had ranked high on our watchlist came down to what we considered good entry points.
We added the following positions this week
- Stock Positions - Ebix, Marvell Technology, Caribou Coffee, Fusion-IO
We increased our positions in the following companies
- Stock Positions - Potash, CME Group, and Mosaic
Obviously we are well off the highs for the year which brings us to a bit of a fork in the road. Do you ride the market out with the expectations that volatility will be increasing? Or do you lock in your yearly gains now and head for the sidelines?
We don't believe that it is a good idea to be totally out of the market. Trying to time the market usually never results in favorable performance but does often lead to under performance. This is where you have to have conviction in the companies that you own and are willing to ride out the volatility. We're not suggesting that it isn't a good idea to pull some positions back only that if there are positions you want to be in then stay in them.
With the DWCM fund we have gone a bit on the offensive obviously using our cash hoard to buy 4 new names and add to 3 exiting positions. Notice which industries those positions are in? Technology and Agriculture. Two areas that we have been highlighting as the places that we want to be in.
I believe that we are getting some balance in the fund which I have talked about the previous two weeks. Apple for the first time since mid 2011 is no longer our largest holding. The CME Group is now holds the top spot at 11.6% followed by Apple at 10.8% and then the Ag names Mosaic and Potash at 4.6% and 3.8% respectively.
One area of opportunity that we will look at this week in "insurance". Meaning buying some protective puts. Since we have put more money to work in the fund we want to hedge some potential increased volatility that we believe is heading our way at least through the summer. Buying some puts on the S&P 500 will help to protect the portfolio if the market continue to slide down.
The Week Ahead
Obviously the jobs report did not help matters on Friday this week. Both the ADP and Challenger jobs reports were weak earlier in the week although the initial claims on Thursday were 27k better than expected. Our take away from these numbers is that the economy remains in a weak recovery and the unemployment picture will likely remain choppy at best.
When you throw in the European crisis and a slowing China you have a sustainable wall of worry to look at. This wall of worry is precisely why I want to look at adding some insurance to the fund in the way of protective puts.
This week you have quite a bit of sentiment data both on the business and consumer side. Friday is likely to see the most action with both PPI and the consumer sentiment survey.
- Mon - Consumer Credit
- Tue - NFIB Small Business Optimism Index
- Wed - N/A
- Thu - Jobless Claims, Import and Export Prices
- Fri - Producer Price Index, Consumer Sentiment
DreamWorks Capital Management Update
REGISTER NOW for the quarterly seminar "401k & 403b Rollovers, You have Options" on Monday June 18th at The Community House located in Birmingham, MI. The event is free and you can register by calling TCH at 248-644-5832 or you can email me directly at pfenner@dwcmllc.com. We hope that you will consider this great event and learn more about the services we offer here at DWCM.
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