Epiphany Investing

Searching Out the Optimal Portfolio of “Revelation” Stocks

Unruly Volatility Remains; Weekly Wrap up

Posted on | November 15, 2008 Time: 12:37 am |

Losing your bearings out there? Whether we think we have a working compass or not, stable markets are lost on the horizon. After rallying furiously into the close yesterday (and briefly breaching our lows for the year), major indexes gave up between 3 and 5% today, with notable under-performance from the NASDAQ on Friday.

Indeed, both of the broader indexes - S&P 500 and the Naz - did much worse than the (for some reason ubiquitous) DJIA on the week. Looking across the sectors, there was once again nowhere to hide:

In this Finviz.com chart above (click on image to view larger), the Consumer Cyclical stocks are blended into the general “Consumer Goods” stocks and into Services.

Services was a notably weak sector, with hotel, restaurant, and leisure stocks getting hammered throughout the week. I continue to remain wary of this group and would not be surprised if they were ultimately the worst sector of 2008 (minus financials).

Consumer Staples names like P&G, Clorox (CLX), and Colgate-Palmolive (CL) are the only thing propping up the Consumer Goods sector, as names like Macy’s (M), J.C. Penney (JCP), Nordstrom (JWN), and Best Buy (BBY) were absolutely destroyed this week. And those were the good operators…

Dog & Pony Show Continues

In Washington this week, we saw Congress roll itself out of bed to question rarely-seen hedge fund managers. Both the anger and the ignorance of Congress were on full display.

As I’ve stated before, I don’t see them approving the back half of the $700 billion TARP package prior to Jan. 21st. Unfortunately what we’ve got now is all we’ll have, and that includes the modest hopes some had for a quick infrastructure stimulus plan out of Congress.

Meanwhile the auto industry’s hopes for an immediate injection of capital ($50-$75B) seem to be dashing as Republican leaders aren’t likely to budge for the remainder of the lame duck session.

Parting Thoughts

Way too many of the holdings in the Secular Trends Portfolio have shown levels of volatility that seem both impossible and unsustainable. I will be reviewing the individual holdings throughout the weekend, but initial performance is essentially flat with the S&P 500 for the week. I’m seeing individual charts that blow my mind, like Freeport McMoRan (FCX) swinging 25% off the lows yesterday, yet still ending the week down 10%:

I’ve retained a few points of alpha since the portfolio was fully invested, but a few points - in this market - could be gone over a lunch break.

Ryan Barnes

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