by Sabrient - October 27th, 2010 2:48 pm
The roses in the window box
Have tilted to one side
Everything about the house
was born to grow and die
You’re a bluebird on a telegraph line
I hope your happy now
Well if the winds of change come down your way girl
You’ll make it back somehow
This song doesn’t say a lot in words but touches all of us in many ways. I [Scott] lost my grandmother this past weekend at 91. She was not cheated in years for sure but lived the last 22 years without her best friend, my grandfather, who was a Marine in WWII. He waited 22 long years but she has “made it back somehow”……”I hope your happy now”.
But this is an investment article, so what does all of this have to do with Dark Horse Hedge and TEO? We recommended a purchase of Telecom Argentina (TEO) on July 1, 2010 at $16.38 and have maintained that position as the stock has climbed steadily to close yesterday at $22.78.
This morning TEO has traded as high as $27.15 on the news of the death of political heavyweight and former President, Nestor Kirchner, who is now out of the 2011 presidential race. Kirchner was seen as unfriendly towards the markets.
Sincerely, for Argentina and from a market perspective there is nothing better than knowing that Kirchner will be out of the presidential race of next year. For years his confrontational, resentful style towards investors, companies and bond holdouts deprived Argentina of much-needed capital," said Roberto Sanchez-Dahl, who oversees $1.1 billion in emerging market debt for Pittsburgh-based Federated Investment Management. See Argentine assets rise on death of ex-President Kirchner, Reuters.
TEO was one of the first stocks recommended in the Dark Horse Hedge virtual portfolio and has been like a friend yielding us nearly 50% profit in almost 4 months. The momentum players have pushed the stock around today and while we continue to like TEO for the long term, we feel that it is time to play “Funeral for a Friend,” take advantage of the momentum to take our profits. Perhaps the winds of change will blow our way again and TEO will make it back to the DHH virtual portfolio somehow.
SELL TEO, at the market, Wednesday October 27, 2010.
by ilene - September 1st, 2010 2:23 pm
Housing-keeping note: Thanks to WordPress’s destruction of Phil’s Favorites site (and replacement with an invite to sign up for its service!), I’ve been relocating my blog to TypePad. Benefits: it looks better, is very user friendly and offers an easy way to search archives for any topic. One unique feature is that while exploring the internet, I can simply click on a button to post an excerpt of an interesting article with a link to the full article. That ability allows me to post links to articles that are worth reading when I do not have reprinting permission, such as articles from major news sources.
Is this the real life?
Is this just fantasy?
Caught in a landslide
No escape from reality
Open your eyes
Look up to the skies and see
I’m just a poor boy (Poor boy)
I need no sympathy
Because I’m easy come, easy go
Little high, little low
Any way the wind blows
Doesn’t really matter to me, to me
Ilene and I started the Dark Horse Hedge on July 1, 2010 with the goal of helping self-directed investors weather any storm, no matter which way the wind was blowing. Today completes the second month of publishing the Dark Horse Hedge and we thought it would be a good time to review.
by ilene - August 2nd, 2010 2:48 am
Hedging into the week of August 2nd, the Dark Horse Hedge (DHH) is in a BALANCED tilt (long to short ratio) with 8 LONG and 8 SHORT positions. We used Phil’s BUY/WRITE strategy to enter two of our LONG positions (IM and GCI) at a 10-20% discount to the market. As you can see from the chart, the SPX wandered between the 50 and 200 day moving averages (MAs) all week before whimpering towards the bottom of the channel Thursday and Friday. The 12-26-9 MACD which is the faster of the 2 technical direction signals we follow has flat-lined at just above +6 and the slower RSI 14-day still remains just below 50.
Without some impressive economic reports coming this week or much better than expected earnings reports, we believe the market will drift down towards and test the 50 day MA. If a bullish tone sets back in, it is doubtful that it could easily push through the 200 day MA. Resistance points as well as the 50 and 200 day MAs all which fit into a fairly narrow trading channel.
[chart from FreeStockCharts.com]
We are happy with the positions we put on in DHH’s first 30 days of existence and we look forward to capturing more profit as the companies report earnings this week. We will continue to take profits "after the news" and rotate into newer, fresher positions while keeping an eye on the overall market to adjust our tilt for maximum Alpha*, which is why we all write and read DHH.
Summary of DHH positions in the virtual portfolio
LONG: XRTX, WDC, GCI, IM, DLX, GME, FRZ, and TEO
by Sabrient - July 23rd, 2010 4:08 am
You can run, you can run, tell my friend-boy, Willie Brown.
You can run, tell my friend-boy, Willie Brown.
Lord, that I’m standin’ at the crossroad, babe, I believe I’m sinking down.
Crossroads, Robert Johnson
Heading into Friday July 23, 2010 the market is again at a technical crossroad with the SPX closing Thursday at 1093.7, above the 50-day Moving Average of 1085.5. The MACD 12-26-9 remains close but still under the (zero) signal line at -1.13, with the RSI 14-day at 45.26. There is lateral resistance at the 1096 level from the close last Thursday showing how the market has traveled a long way the past week to get nowhere.
Amazon.com Inc. (AMZN) fell short of analysts’ forecasts after Thursday’s close and was down 14% in after-hours trading, suggesting that the market may follow the pattern it has been in most of the summer.
Up 200, down 200, up 200, down 200 - wash out your savings, rinse and repeat! What a total sham of a market we have these days with machines running us up and down on virtually no news at all. Yesterday they would have you believe that Ben Bernanke caused a sell-off. How ridiculous is that? He didn’t say one thing that he didn’t already say in the Fed Minutes that were released on the 14th, which were the notes from the meeting of June 23rd so for analysts to get on TV and say “the markets were concerned by the Chairman’s comments” is beyond stupid – it’s criminal negligence. Phil’s Thrill-Ride Thursday.
[chart from freestockchart.com]
Thursday’s economic releases were less than encouraging with a jump in the number of people seeking unemployment benefits. Sales of previously owned homes fell, but the market shrugged it off as seasonal and rallied on the earnings of Caterpillar Inc., UPS Inc., and others that beat estimates. However, the…
by ilene - July 18th, 2010 10:57 pm
Friday gave us a real-time example of why we use Hysteresis* and confirmations from our technical signals, MACD 12-26-9 and RSI 14-day, to select and monitor the tilt (long-short ratio) of the Dark Horse Hedge’s portfolio.
The SHORT tilt Friday allowed us to make +1.37% from our 6 SHORT, 3 LONG positions while the S&P 500 gave back -2.88%. The economic data out Friday of course played a large roll in the failure of our indicators to turn from short to BALANCED. A sharp decline in the University of Michigan Consumer Index to 65 in July compared poorly with a June figure of 76 and Briefing.com’s estimate of 74.5. Google’s earnings miss didn’t help either as the S&P 500 fell through its short-term support area to close at 1064.88. The MACD reading is currently at -3.56 and RSI 14-day at 42.85 (bullish signal is above 50). The preponderance of evidence heading into the July 19 week is that the market needs to find support in the 1040 range.
Despite the poor economic data that pushed the market lower on Friday, 19 of 23 S&P 500 companies reporting thus far reported better than projected EPS, and 15 of them beat revenues as well.
Earnings reports will continue to flow in this week. In our portfolio Western Digital Corp (WDC, long position) reports profits on Tuesday while USG Corp (USG, short position) and Sun Trust Banks Inc (STI, short position) report their losses on July 22. We will continue to monitor the market action and look for guidance on entering new positions. Key support areas appear to be 1040, 1022 and then 995.
Dark Horse Hedge maintains 10% cash for swing trade opportunities and we are highlighting one for entry on Monday at the Open.
SHORT Terex Corp. (TEX) at the Open Monday.
TEX will report its latest loss figures on Tuesday, July 21. Twenty analysts project losses ranging from -$.15 to -$.44 with an average of -$.30. Looking back over the last four quarterly announcements, we see analysts often underestimate Terex’s losses. For example, in March 2010, analysts estimated -$.52 while the actual loss was $.64. In December 2009, analysts targeted -$.49 and TEX delivered -$.89. In September 2009, the loss was projected to be $.34 and the company came in at -$.77. In June 2009, investors were…
by ilene - July 1st, 2010 5:24 pm
The Dark Horse Hedge
Scott Brown, Managing Director – Retail Division at Sabrient, is launching a newsletter with Phil’s Stock World based on the highly successful and popular Investors’ (H)Edge product. The Dark Horse Hedge newsletter is a Long/Short retail portfolio taking advantage of technical market trends to tilt the balance of LONG vs. SHORT in bearish, bullish or range bound markets for added Alpha (the measure of return on a risk adjusted basis). Long and short equity positions taken in The Dark Horse Hedge portfolio will be chosen using to Sabrient’s rating system, which is primarily based on fundamental criteria. Because the stock positions will generally be held for intermediate to long periods, these positions are ideal for using with option strategies taught by Phil Davis, of Phil’s Stock World.
The Dark Horse Hedge (DHH) newsletter will follow a number of guidelines in an attempt to minimize systemic risk, or “Beta.” Beta is a measure of the volatility of a portfolio in comparison to the market as a whole. To keep beta low, the DHH portfolio will have both long and short positions. Consequently, dramatic moves in the market will always be in the direction of at least part of the portfolio.
Using Sabrient’s rating system, we will focus on being long high quality stocks, and short low quality stocks. Long positions should fare better than average during market selloffs. In contrast, the short positions, selected from the lowest ranking stocks, should perform well during selloffs. These stocks are also expected to underperform higher quality names in a stronger market. This strategy is designed to balance the goal of attaining Alpha with the desire to keep Beta relatively low.
We will follow this list of guidelines in building the DHH portfolio.
1. When fully invested, the Portfolio will have 24 positions. However the portfolio may not be fully invested.
2. Tilting (or weighing) of the portfolio will be based on the position of the SPX relative to its 50 and 200 day Moving Averages
- If the SPX is below both its 50