Epiphany Investing

Searching Out the Optimal Portfolio of “Revelation” Stocks

Model Portfolio makes up 2/3 of its Losses

Posted on | October 14, 2008 Time: 4:28 am |

I never meant for the Secular Trends Portfolio to be this volatile. I wanted a little extra Beta here and there, but with the VIX still trading above 50 - even after a 20% drop today - massive discrepencies in the perception of value exist, more so than I have ever witnessed.

On the bright side, after posting a humbling second week of returns, the portfolio was up over 13% today, making up over $100,000 of my initial $150k of losses. Some of the individual stocks’ gains meant more to me than others; volume was sporadic, weak in some names and strong in others. On a day like today when everything is riding higher, we desperately want to see above-average volume. That means the gains on holdings like NYSE Euronext (up 36% today), Goldman Sachs (up 27%), and Petrobras (up 22%) mean more to me because they came on high volume.

By contrast, these names were up big but volumes were thin:

  • NVIDIA - Up 18%
  • Peabody (BTU) - up 17%
  • Potash Corp (POT) - up 15%

I fully expect some of these to pull back on any weakness, but individual earnings patterns will begin to dominate the sectors starting later this week. After running in lockstep for the past few weeks, look for sector performance to diverge strongly in the next month.

Wildcards in the portfolio remain Alcoa and Freeport-McMoRan…they were both up big on big volumes today, but there are also many new shareholders in these names. I am preparing to be more nimble in my exit strategies for the commodity price-sensitive names.

I can leave Freeport as soon as next week and still receive the 4th quarter dividend, so whether it’s worth staying longer depends on the stability of the market over the remainder of the week. We won’t know until the credit markets start operating again just how effective the multi-trillion dollar global capital program will be in allaying fears.

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Category: Broad Markets, Performance, Secular Trends Portfolio
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