Week 19 Performance.....The Correction or Carnage Continues

Depending upon your perspective you either look at the past few weeks market action as either a correction or carnage.  Although we were a buyer this week for both the DWCM fund and my personal account (more on that later) it is nearly impossible to gauge where the market is heading when it is influenced by so many outside factors.  The European crisis which never went away is back on the front page of the news.  Now you have the billion dollar trade that went wrong at JP Morgan that is also likely to spook the markets.

Although the DWCM Fund was down 0.7% this week we fared a little better than most of the major equity market indices.  However from our YTD performance top of 24.5% during the week ending April 8th we have seen a steady decline down to a YTD performance of 15.1% this week, almost a full 10 percentage points down.  You can take some solace in the fact that we are still outperforming the major equity markets by a wide margin (see data below).

If you recall our charter here with the DWCM fund we are focused on an absolute return and to beat the major equity market indices.  So far this year we are accomplishing both of those mandates despite the recent declines of the past 6 weeks.

We have talked about our belief that increased volatility and pressure to the down side was likely in our future as we could not reasonably continue the fast pace we saw in Q1.  We have stuck by our investment strategy which include the following:

1. Continue to hold names that we considered core to our long-term strategy as long as valuation makes sense
2. Adding to our core holdings during the past 6 weeks if we see value
3. Put new capital to work picking up new positions at a discounted value specifically in the Agriculture and Technology industries

This week we closed out our Chipotle Mexican Grill $CMG call position as we have seen this position far exceed our expectations and what we considered a sustainable value.  Our profit exceeded 100% and although we still like the company this to us was a classic case where the price just got to far ahead of value.

We add the following new positions to the Fund this week

• Monsanto $MON, Kinross Gold $KGC, Caribou Coffee $CBOU, PetMed Express PETS

This week as I noted above I added many positions that we hold in the DWCM Fund into my own personal account.  I am a firm believer that a fund or ETF manager should eat their own cooking.  Translation.....a fund manager should own a significant mount of the fund he/she manages in their own personal account.  Or in my situation since the DWCM Fund is not publicly traded I should own a material amount of the same individual positions in my own personal account.

The reason is not to pump up the prices of theses positions as that would be illegal.  I should have the same skin in the game as do my investors.  For example, I should not be holding positions within the DWCM Fund and shorting positions (betting that prices would be going down) in my personal account.  During the financial crisis this was exactly what was happening at some trading and investment houses on Wall Street and elsewhere around the country.

I have a fiduciary responsibility to clients and readers.  This is precisely why I note if I have a personal position in a stock that we own in the DWCM fund.

The Week Ahead
This week has a good deal of economic data hitting the markets.  Right now I think that the markets are more concerned with European issues and weather or not we will break some key technical levels in the major equity indices.  The markets are just as likely to be up 2% as they are to be down 2% in one day.  We are back to the "risk on or risk off" investment strategy where things either move in one extreme or another.

• Mon - N/A
• Tue -  Consumer Price Index,  Retail Sales,  Empire State Mfg Survey,  Housing Market Index
• Wed -  Housing Starts,  Industrial Production,  FOMC Minutes
• Thu -  Jobless Claims,  Philadelphia Fed Survey,  E-Commerce Retail Sales,  Leading Indicators,  Fed Balance Sheet,  Money Supply
• Fri - N/A

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.