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Villi Grdovich's  Instablog

Villi Grdovich
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Villi Grdovich is a professional investor with a strong interest in fundamental and quantitative financial analysis. An engineer by training, he has 25 years experience in finance, firstly in project finance with an Australian bank, and then as an analyst and portfolio manager with a major fund... More
  • High Beta Stocks Still Exist

    June certainly proved to be a frustrating month.

    By any reading, the stock market in June 2013 has been influenced by comments emanating from the Federal Reserve, and by expectations of either a slow down in Chinese economic activity, if not a melt down in their financial system.

    While I share these concerns, the fact is that the general market indicators do not indicate a problem. My non-propriety "Indicator" remained, and remains bullish on equities, staying positive in the period.

    (click to enlarge)

    While experiencing what felt like a bout of "Turmoil" in the period, the mathematical indicators of "Market Turmoil" remained subdued, suggesting that the June commentary about a possible systemic downturn was not warranted.

    (click to enlarge)

    From my perspective, my April 12 portfolio failed to keep up with SPDR S&P 500 Trust ETF (SPY). Worse, this portfolio was severely whipsawed in the period, so while Ducommun (DCO), Gamestop (GME) and IDT Corp (IDT) which I recommended in my Instablog of April 23, has returned 9%,36% and 45% respectively, the fact is that after precipitous falls in the period, DCO and GME were liquidated prior to their recovery.

    Readers may recall that the idea behind these selections was one of returns being generated as a result of special/recovery situations rather than expectations of good business operations. With that in mind, I assumed that very large falls in the share price of DCO and GME reflected the possibility that the special situations had failed to develop. I was wrong, but here we have yet another investing nuance which I had not appreciated then as much as I do now. In terms of strategy, the results proved disappointing with just one clear cut success from 13 selections, and 3 successes if one had the stomach for severe draw downs.

    In the current period, my analysis indicates that the Bank, Specialty Chemicals and Publishing sectors are showing interesting characteristics. In the interests of diversification, I have selected the following portfolio comprising the more attractive stocks from these sectors, and some additional stocks which add to a greater level of consistent alpha generation in the period.

     

    STOCK

    SECTOR

     

    CAP

    AF

    Astoria Financial

    Banks

     

    1.15B

    WBS

    Webster Financial

    Banks

     

    2.41B

    MWW

    Monster Worldwide

    Business Training

     

    0.64B

    AVX

    Avx Corp

    Electrical Components

     

    2.18B

    WMK

    Weiss Markets

    Food Retailers & Wholesalers

     

    1.31B

    SCS

    Steelcase

    Furnishings

     

    1.94B

    NP

    Neenah Paper

    Paper

     

    .58B

    FDS

    FactSet Research

    Publishing

     

    4.66B

    GCI

    Gannett Co

    Publishing

     

    6.10B

    WLK

    Westlake Chemical

    Specialty Chemicals

     

    6.73B

    For the record, this portfolio is compared to the April 23 recommendations.

    (click to enlarge)

    Disclaimer:

    The content in this document is provided as general information only and should not be taken as investment advice. The contents in this explanatory paper shall not be construed as a recommendation to buy or sell any security or financial product, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author. The author may or may not have a position in any security referenced herein. Any action that you take as a result of information or analysis on this site is ultimately your responsibility.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: long-ideas
    Jul 15 3:40 PM | Link | Comment!
  • 30 June Finally

    For the period 17 August 2012 to 30 June 2013, the portfolio based on identifying "High Beta" stocks outperformed the SPY by around 4%, but May/June proved unkind months delivering a relative loss. The story unfolds in the following graph.

    (click to enlarge)

    To recap, due to increasing volatility in my "High Beta" watch list, usually a sign of bad things to come, I went to SPLV (safety) while holding DCO, GME and IDT. DCO and GME were hard hit on adverse results while IDT sailed on nicely. The desire for safety actually proved counter-productive with SPLV subsequently suffering a downturn while DCO and GME recovered.

    I put a ruler under the year, going to cash while seeing what 1 July brings.

    Jul 01 3:04 AM | Link | Comment!
  • Portfolio Review

    In my Instablog of 23 April, I mention buying DCO, GME, IDT, VZ.

    We can't run away from history, which is that after very good results from these stocks, DCO and GME suffered serious collapses in share price...Too quickly to get out. For the record, the time is now and tonight, we are liquidating positions in DCO and GME.

    The rationale for these stocks was basically to bet on stocks which had underperformed, but which might now do better. I think this is still a reasonable strategy, and more about that soon.

    May 28 7:26 AM | Link | Comment!
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