Portfolio Reshuffle: Freeport's Out, Some Pharma's Next

The next few trading sessions will constitute what is, for me, a rash of trading as I adjust the allocations within the Secular Trends Portfolio. For readers who have been wondering why it’s been so quiet around here, I offer my apologies for not being able to speak with you more frequently.

I took on some research work that prevented me from publishing research & investment advice here at Epiphany Investing. In this economy, I had to go with what paid the bills. While this is my labor of love, goodwill and passion are surprisingly not currencies accepted by most institutions.

But I am back with fervor, with much content to publish over the coming weeks. As to the Secular Trends Portfolio, there was little I wanted to change in the first place. That was the intent from the beginning - low turnover, big themes, long holding periods.

So far the fund’s performance (23% alpha and climbing) has backed me up, despite everyone and their uncle proclaiming that “buy and hold is dead”. I would counter, “only to those with fragile convictions“.

That said, my allocations have moved away from their intended targets as some stocks have performed marvelously while others have languished. Freeport (FCX) has certainly been one of the former, up over 200% from the lows of December when the company announced it was suspending the dividend. I noted at the time that it was likely to be the stock’s lows, and am thankful to have been correct and not dumped shares earlier when all the voices were crying that we’d never see $2.00 copper again.

FCX has now become more than 8% of the Secular Trends Portfolio, and while I continue to like the company’s exposure to a leading indicator (copper) and a natural inflation hedge (gold), 8% is simply too high and there are finally some other stocks that I find compelling enough to rotate in.

Blowing out the entire position (1540 shares) at $59.62, and booking a profit of 60%. I might be back, but for now the reflation trade (which I was insanely early on) has become to mainstream, which to me says that the kegs are nearly tapped and the smart folks have already had their glass of water, taken their aspirin, and gone to bed.

Next up will be some stern evaluations of my pharma exposure, more trimming, and some important additions to capitalize on what I see as Phase II of the new economic landscape.

My 100% transparent ledger will be re-posted later in the day, so that all can see that there are no shenanigans or cherry-picking going on here. The financial interwebs have far too much of that going around lately, and frankly I’m sick of it. Here at Epiphany Investing, I aim for simplicity, honestly, and transparency. Most other sites/blogs/compounds seem to only promote my ability to get a migraine or a seizure from flashes, pop-ups, and useless eye & ear candy.

Comments

[prudentinve...:]

Thanks for a very interesting piece. I too have been gradually exiting the reflation trade, and have cashed in most of my FCX at an average in the mid-50's, having purchased it at an average in the low-20's. Although I expect that current policies will result in stagflation, I am beginning to take the view that the reflation trade may be nearing its exhaustion. In this environment, a bird in hand is to be taken, however, I have only cashed in a small proportion of my USO/USL/OIL positions as I expect hydrocarbons shall continue to outperform paper in the next few months.

Jun 13 08:27 PM

[Chicken Trader:]

Ditto. Glad to see you're back to posting!

Jun 14 11:45 AM

[Ryan Barnes:]

Prudent - thx for the comments. I still like the reflation theme in certain areas (I think steel & aluminum have some room to run if the production cuts are to be believed). I also think the hydrocarbon trade is alive and well; for all the talk of alternative energy the fact remains that 98% of the world is still running on oil. My long term thesis here is simple. Someday when XOM announces that the last drop of oil in the world has been extracted, there will be some buyer in Namibia or Madagascar or Chile that will be thrilled to pay $200+ for it to stick in the 30-year old engine that for them is top-of-the-line equipment. I have long-term bets on PBR and even BTU as a measure of my conviction, and I'm looking to get into a services company with an eye on RIG or SLB. Best of luck in your investing efforts.

Jun 24 03:44 PM