Wednesday, April 4, 2012

Review of my 1qtr Trading in 2012

The key to the first quarter this year is that the market has been up, and up as hard as it's ever been, and if you've been caught underweight equities, then you've missed the so called easy part of the rally - where you can literally sit back, throw darts at any beta names leverage up a little and be guaranteed to outperform the market (maybe not on a risk adjusted basis).

Key Stats
Return for 1qtr: 19.92%
Sharpe: 3.78
Return for SPX: 12%
Long Holdings: SBT, BPTY, BHP, SODA, AMZN, BCN, CFU, COK, WPL, ABG, HPQ, GDX
Short: LULU, IBM

My biggest mistake the past quarter has not been in my entry or market timing - as I was cautiously long in November 2011 (a little early) and somewhat right to load up on my positions in the first week of this year.
The two mistakes I made were
1/ I was overweight ASX equities when the US and Euro markets were rallying on the back of the subsiding risk levels in the sovereign financial crisis.  I did somewhat mitigate this error by switching part of my portfolio more towards US equities.
2/ I had strong beta names in my US allocation such as WYNN, GS, AIG but after some quick outperformance I rotated out of these names into more risky names such as SODA, CPST, HPQ - stocks that had been somewhat underperforming - and remains a drag on my portfolio going into 2nd qtr.



Some Highlights
1/ Intermediate positions in Macau closed and profitable - After going through a large drawdown in Macau in 2011, the sector finally recovered with a vengeance, and all my positions were covered.
2/ I dodged a very large bullet in Natural gas long position - I was thinking the turning point was ahead, with an entry approximately 2.40 of the underlying - getting killed on the contango yield and price going nowhere, and continued negative press about the fracking process I decided to close the position and has continued it's death spiral, below the break even cost for producers of 2.4 to about 2.20 recently.