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David Gerstenhaber started Argonaut Capital Management in 1993 and has since then built the fund by looking for returns through a top-down macro-economic approach. With that said, the fund seems to either be doing really badly or has been increasing its cash position because the quarter ending 2012 found it holdings valued at only $114 million, down from its September 30th value of $435 million. Either way, a lot can be learned by looking at different investment strategies and below we will take a look at Argonaut's top 5 sellouts in the fourth quarter of 2012.


(Click to enlarge)

First up is kind of a complicated trade as there were several options involved. The largest sale for Argonaut in the fourth quarter of 2012 was in SPDR S&P 500 ETF Trust Shares (NYSEARCA:SPY). As seen above, the fund sold out completely of a small portion of the shares that represented 1% of the holdings at the end of September, in addition to $112 million in puts and close to $100 million in calls. From this, we can assume that the play was built with the intention to make money when SPY went up because of the much larger holdings of call options in September (two times more than puts) and the remaining calls held at the close of 2012. In December, these holdings of SPY Calls represented 84% of the portfolio indicating a strong bullish sentiment towards the S&P 500. Luckily for Argonaut, this bet appears to have been a good one so far, SPY has gained close to 10% since the start of 2013.

Argonaut's second largest sale at the end of 2012 was of its $39 million position in ishares Russell 2000 Trust (NYSEARCA:IWM). Looking at the graph below, my money is on Argonaut wishing it hadn't made the trade because YTD, these shares are up 11%. IWM seeks to return value to its holders that corresponds to the rise in price of the stocks that make up the Russell 2000, it currently pays a 1.8% dividend.

Third on the chopping block was Gerstenhaber's $29 million investment in Powershares QQQ (NASDAQ:QQQ). This investment seeks to return value to its holders that corresponds to the return of the Nasdaq-100 index. When sold, this position was coming off of its 52-week highs of $70 per share. From there it fell to as low as $62 per share but is up 5% YTD and currently trades at $68.63 per share. QQQ pays investors a 1.2% dividend.

Coming in fourth for Argonaut's largest sell in the fourth quarter of 2012 was its $17 million investment in an iSHARES TR FTSE CHINA 25 CALLs (NYSEARCA:FXI). As indicated below, these shares steadily rose over the fourth quarter topping off at $42 per share at the end of January. This would lead me to believe the calls were sold at a good time because they currently trade 11% lower, at $37.34. FXI tracks the movement of 25 Chinese companies and it currently pays a 2.51% dividend, which of course would not be payable on a call like the ones Argonaut previously owned.

Source: Big Sells By Gerstenhaber And Argonaut Capital