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An Update On "The Contrarian" 7/16/2016

|Includes: BHP, CLF, CNX, FCX, RIO, TECK, United States Steel Corporation (X)


I send the message below to all my followers on 7/13/2016, and I have had a couple good follow-up questions. Thus, I wanted to repost the message, and repost the Q&A as a way to provide an update on "The Contrarian". Here is the original message, with a couple minor updates.

Dear followers,

First, thank you for following my research. I am appreciative of the platform that Seeking Alpha provides, and the opportunity to interact with other investors, traders, and readers who are interested in investment research. As many of you are aware, I launched a premium research service, titled "The Contrarian" on December 7th, 2015, and I wanted to share an update.

Since launching, "The Contrarian", the four managed portfolios that have been featured in the research service have all materially outperformed their respective benchmarks and the broader market.

The "Bet The Farm" Portfolio, which is an options focused portfolio with 10-20 holdings, has returned 228.5% year-to-date through Friday, July 8th, 2016, outpacing SPY's gain of 5.4% in 2016 over the same time frame. There have been some misses in this portfolio, but the batting average has been high, and the magnitude of the gains of the winners has driven results. The outstanding performance numbers do not even include results from Monday, July 11th, and Tuesday, July 12th, which were two of the better performance days in the "Bet The Farm" Portfolio's entire history. While the past is no guarantee of future performance, I would point out that five new positions were taken June 27th, 2016, in the midst of "Brexit" fear, and these all have considerable potential, in my opinion, and there are several more opportunities on the radar in the near-term.

For those investors that steer clear of options, the "Best Ideas" Portfolio, which is a concentrated equity portfolio of roughly 20 positions, has gained 43.8% in 2016, through Friday, July 8th, which is also handily ahead of SPY's 5.4% gain. A number of new positions have been taken in the "Best Ideas" Portfolio in May of 2016, and in June of 2016, and I feel the wide dispersion of returns in the S&P 500 Index, and in the broader stock market, particularly in international stocks, has created an ongoing interesting opportunity set of under-owned, value-priced stocks, even with the S&P 500 Index reaching new all-time highs.

The two remaining portfolios are more conservative, yet their results clearly show that "The Contrarian" has been able to add "alpha". The "90/10" Portfolio, which has approximately 90% of its funds in cash, and 10% in equities, has still outperformed SPY, even with its 90% cash weighting, since inception. This portfolio demonstrates, in real-time, an extreme portfolio example, that was constructed to depict the historically high valuations that stocks and bonds are trading at now, for investors who plan to buy and hold for the next decade. Even though the S&P 500 Index could rise 20% from today's levels over the next year, and there are many under-priced stocks in out-of-favor industries and sectors, I firmly feel that a 90% cash portfolio, with the cash reinvested in short-term interest paying accounts, will outperform a traditional 60% stock/ 40% bond portfolio over the next decade, due to the historically high current valuations of the broad stock and bond markets.

The last portfolio, the Contrarian "All Weather" Portfolio, which is a long/short equity portfolio that has all of its individual long positions hedged by offsetting short positions in SPY, has gained 11.3% in 2016, outpacing SPY's 5.4% advance, even though the short sales have significantly held back portfolio performance. Said another way, the long positions have delivered strong returns, that would be even better without the offsetting short positions. Finally, on the portfolio front, in the third quarter of 2016, "The Contrarian" will launch a "Contrarian Income" Portfolio, as I continue to see interesting income opportunities in out-of-favor sectors like financials, MLPs (I oversaw an MLP Portfolio from 2006-2009), and commodities.

Subscribers to "The Contrarian" are able to see all of the historical trade recommendations, including when positions were opened, and when they were closed. Every Monday, I put together portfolio updates, and I send out trade alerts, via an article to subscribers, when new positions are taken. Additionally, there is proprietary research that I author for subscribers, including my commentary on shared industry research from peers that I have been in contact with during my nearly twenty-year investment career. In the months ahead, there will be some new additions for subscribers, including guest authors, as we seek to navigate one of the most dynamic, profitable investing years since 2009.

In conclusion, 2016 has seen the end of an investment era that existed from 2011-2015. I feel that the new market leaders have much more upside potential in the intermediate-term, as investors race the setting of the sun on the final innings of the current bull market. The second act of the reversal in 2016 will see opportunity in additional sectors, from my perspective, and subscribers are already positioning for this anticipated move. Bonds, stocks, and commodities will behave very differently in the years ahead, than they have since 2011, so investors should be prepared to manage their portfolios differently.

If you want a non-consensus view on the markets, that has the potential to improve your portfolio's performance, please consider joining "The Contrarian". I have provided a link to "The Contrarian" at the bottom of this email if you are interested in seeing what the service has to offer. For those who are hesitant because of the cost, please remember that I have run a money management business since 2009, and I charged my clients a much higher dollar amount, than what subscribers to "The Contrarian" are paying for the same research. Now clients received the benefit of me pulling the trigger on buy/sell decisions, and this is particularly valuable for option trades, but they would tell you that the cost that I am charging for this service is a fraction of what they paid for getting most, though not all, of the benefit of my research and portfolio decisions. To close, I hope to have a few new subscribers soon, and I wish everyone the best of luck for the remainder of 2016, and in the years ahead,

William "Travis" Koldus, CFA, CAIA

A couple of readers asked about the batting average of the "Bet The Farm" Portfolio, and here is my answer.

My definition would be the number of profitable investments, out of total investments. For example, in the "Bet The Farm" Portfolio through Friday, July 8th, 2016, four investments have been closed, with gains of 75%, 278%, 767%, and 208%.

16 positions remain open. Excluding the five new investment positions taken in late June (one of which has already doubled, three are marginally profitable or near break-even, and one is a moderate loser thus far) out of the remaining 11 that have had some time duration in the trade, three are likely total losses (two for the same security), one is a moderate loss (30%), one is near break-even or slightly profitable today, after the moves Monday and Tuesday, and the remaining 6 positions have unrealized gains ranging from roughly 80% to over 500%.

Thus, the batting average for the closed and seasoned positions (excluding the new positions under a month old) is 73%, meaning 11/15 investments have been profitable, and 67% have been significantly profitable. With the new group of five, and the move over the past several days, the batting average, average return, and total return for the "Bet The Farm" Portfolio should increase from already lofty levels.

Hopefully this answers your questions. Let me know if you have any more,

William "Travis" Koldus


Additional disclosure: Every investor's situation is different. Positions can change at any time without warning. Please do your own due diligence and consult with your financial advisor, if you have one, before making any investment decisions. The author is not acting in an investment adviser capacity. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies' SEC filings. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.