EOQ thoughts: A handful of retailers I'm short, since I'm reviewing sector exposure right now anyway:
SHLD BBY AMZN JWN WSM FDO ROST BJ JCP DDS ETH GPS PETM
and restaurants:
CKR EAT BJRI DRI DPZ CAKE PZZA
Was short IHP, but keep getting the shares taken away. Dunno if you'd include them as retail or not, but also short the auto retailers via KMX and AN.
I will tell you that my strategy is based on sector targeting, and up until recently I tended to go after the stocks that bounced within the weakest sectors. That comes from getting burned in the 2000 bear by shorting into weakness. My belief is that the sectors I'm targeting are hosed, regardless of all the excuses granted to individual companies.
It also comes from my approach to risk management. The weak stocks in a weak sector may go down the fastest, but they are also the most susceptible to severe bounces. The stronger stocks won't go down as fast, but I can pretty much rest assured they won't bounce much either. When it comes down to it, the total return I can achieve is mainly a product of the exposure level I can stomach over the long haul, and that is set by risk/reward ratios. A stock with 60% reward but 30% risk is actually not as good for me as a stock with 30% reward but only 10% risk - because I can maintain much higher exposure in the latter case.
My biggest sector exposure remains FINANCE, all sorts of Wall Street IBs and brokerages. I also have lots of exposure to banks and other credit issuers. I seriously do not understand how CORS is hanging in there, but I guess it's just a matter of time til the bad news takes them under. You want to be short banks that are in trouble, and aren't "too big to fail". For some reason I ended up short lots of WFC which may be a mistake. I want exposure to home equity lending, and I thought I was getting it there. But auto, credit cards, condo, FL, and CA-heavy lenders are on the menu. I'm hoping I've picked several GTZs in there. Again, don't know why I've got WFC when there's stuff like COF, ACF, CORS, DSL, and FED out there...
Also short a bunch of stuff related to REAL ESTATE. I know the lower interest rates are supposed to help, and I know the news is terrible and *everybody* has sold - BUT - I think there are tons of parties thinking they're going to catch the bottom here, and I think they're going to end up bloodied. This is a downturn unlike any we've seen since the Depression, and to think it is wise holding any homebuilder here at a 1.2 multiple of book value is just crazy. RYL has been going up for six months now - that could be a really low risk entry. In related vein, I'm short construction suppliers like MHK and title insurance cos. I'm also starting to step into commercial REITs. I was late there, but I wanted to make absolutely certain I wasn't early given their fat divvies. I think it's especially good timing on these given the bounces they've had.
Short a bunch of emerging markets stuff: India, China, Korea, Russia, Mexico, Indonesia. Stayed away from more heavily resource economies like Brazil. Throw Spain into the mix, too, on their RE bubble.
Short a smattering of other sectors: trucking, biotech, autos, RVs. And all that still left me missing out on the fun when there were 200+ stocks on the new lows list every day, so I started picking up positions in stocks on the new lows list that looked like they could fall a lot further. Usually they have low PE but high PB - price to book. When earnings go away, they collapse.
My overall portfolio beta is now up from -0.5 to about -2.0. Boosted it a bunch last week through ill-timed sales on hedges. Some of the sales are now looking a little better, but most were pretty dismal as I let myself get carried away with the BSC news, thinking the mark-to-reality was on. Everywhere I look, virtually everywhere, there remains a stunning lack of respect for the gravity of the situation in which we find ourselves. However, I'm encouraged by the corrective look of most bounces I've looked at, and if that read is right, many sectors are just about to enter the recognition wave. That would make the next two quarters brutal for anyone long. I should know pretty soon in that regard. We all know that Q3 tends to be the roughest for stocks, and the beginning of the year the best. Perhaps that seasonality will hold true this year.
There you have it. My quarter end thinking. Worth what you paid for it. <g>
`BC |
