This week however things could begin to get a little more volatile especially for those companies that begin reporting their quarterly earnings and calendar full year performances. We really like to use MSN Earnings Calendar function which can help you find out when specific companies report or to get a look at a total week's worth of reports.
Even though equity markets weren't as high as the first trading week of the year, gains were still positive. Last year the DWCM Fund was hot hot hot in Q1 thanks to Apple's huge performance. This year while we remain in positive territory, the gains have not been as large and we are actually trailing the four major benchmarks that we track against.
The under-performance can be broken down in a few different views. First as we just mention, Apple which is our largest holding, has lagged the markets down 2.2% while the overall equity markets have been up over 3%. Second, our portfolio positioning is more defensive than it was last year. Our cash position is much higher and our current selection of stocks have a defensive tilt to them. Finally, our short position in a group of home builders has continued to be under pressure as the housing segment delivers decent number, and our short position in Netflix has been disappointing as the stock has rallied higher and rewarded riskier names.
We plan on sticking by Apple and would look to add to our position down around the $500 level. However, any drop below $500 would be detrimental to the stock and additional losses could ensue as this is a key technical level.
We want to get through this next fiscal debate in Washington before choosing to unwind any of our short positions. We set up these positions as an additional defensive barrier to any declines in the markets due to going off the Fiscal Cliff. That situation has since stabilized for now, but as the next date of Fiscal austerity comes closer so too will increased volatility.
Overall, the market feels a little overheated from the big gains that we have seen on the last day of 2012 and the first two weeks of 2013. Much of our open orders continue to sit as prices have moved higher. As we state time and time again, we are not in a hurry to chase market performance to the upside. We can and have the ability to be patient in the short-term which could also result in some short-term under-performance which we are okay with. Recall that our first objective is capital preservation and then long-term capital appreciation.
The Week Ahead
There will be a slightly heavier load of economic data being release this week along with a plethora of Fed speeches including Bernanke to start the week. Look for markets to feed off of earnings report that begin to get into full swing.
Being in Metro Detroit, the North American International Auto Show kicks off in full gear on Monday. There are a reported 50 new vehicle launches at the show this year although be careful what constitutes a new launch. Most launches aren't a complete makeover of a vehicle, instead they are likely to be minor or subtle changes to the exiting line.
- Mon - Ben Bernanke Speaks
- Tue - Producer Price Index, Retail Sales, Empire State Mfg Survey, Business Inventories
- Wed - Consumer Price Index, Housing Market Index
- Thu - Housing Starts, Jobless Claims, Philadelphia Fed Survey,
- Fri - Consumer Sentiment (p)
Have a great week!
DreamWorks Capital Management
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