Although it was another rough week for the DWCM Fund down 2.9%, we were still better than all four of the major benchmarks. At this point we are clinging onto our positive YTD performance of 11.7%. When do you ever refer to clinging onto a double digit positive performance? Now!
Some market observers are calling this the worst market they have seen in years. They must have short-term memory loss as 2007 to 2009 was not that far away. At least back then you knew more specifics as why we were crashing aka the housing bubble, Lehman going down, etc. Although you might not have been privy to all of the specific details you could tell something bad was going on.
Today we are at the mercy of our European brethren dealing with their own financial crisis. We are certainly back to the days when our markets are taking their cues directly from the events taking place in Greece, Spain, Portugal, or name any Euro member at this point.
Most of the major market indices have been down 11 of the past 12 trading sessions. Hindsight being 20/20 the time to exit would have been the beginning of April. It looks to me like the "sell in May, go away" crowd came a little early this year.
Good or bad this is why I love doing what I do managing investments. Your results are always on the scoreboard and there is nowhere to hide. No one can time the markets with any certainty. This is why if you are involved in investing in the stock markets or any investment period you must understand what you own and why you own it.
Even though your investment could be taking a hit it helps to avoid panic selling. If the uncertainty causes you to not be able to sleep at night then it's time to look at other investment options outside of the equity markets. Knowing your risk tolerance is just as important as knowing what and why you own an investment.
This week we again paired back our gains in our Apple long call position. We still have plenty of exposure to Apple on the long side with a few other call positions. But right now I wanted to start building back up the cash position in case things continue to get worse. We also sold out of our Penn Virginia $PVA long position. We added to our current K12 $LRN and also started a position in network security provider Fortinet $FTNT.
Our cash position representing 36% of the total DWCM Fund is still lower than we would like to be. However we are not seeing much else in our Fund that we would like to exit out of. We are looking at scaling back our CME Group $CME position only because it represents such a big portion of the overall Fund.
We have updated our watchlist which you can access here. We are continuing to look for good value despite the rough trading waters we are currently in.
The Week Ahead
It will be both interesting and telling to see how Facebook performs in the first few days of market action this upcoming week. Will the underwriters continue to come in and support the stock at the IPO price of $38 as they did on Friday? Any weakness here will likely carry through to the rest of the equity markets.
This week has a good deal of economic data packed into it. From home sales and durable goods orders to regional fed reports and consumer sentiment.
- Mon - Chicago Fed National Activity Index
- Tue - Existing Home Sales, Richmond Fed Manufacturing Index
- Wed - New Home Sales, FHFA House Price Index
- Thu - Durable Goods Orders, Jobless Claims, Bloomberg Consumer Comfort Index
- Fri - Consumer Sentiment
The equity markets could swing to another 1,000 point loss just as easily as it could swing to a 1,000 point gain. Prior to this pullback everyone was waiting for a pullback and now we have one. Now consensus is building that we are now on the oversold side of things. The pendulum swings violently from one direction to another in the short-term.
Again I re-emphasize that in choppy markets such as these it is crucial to understand what and and why you own an investment. Most of the issues we are talking about are short-term related with the exception of Europe. There it depends upon what solution they come up with to save themselves. But have confidence and conviction in what you own or pair back some positions in order to sleep at night.
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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