Ascendere Long/Short Strategy Daily Update. For Wednesday, July 7, 2010 our selected basket of 40 'high-quality' stocks rose 3.05% and our selected basket of 37 'low-quality' stocks rose 3.11%. This compares to a rise of 3.13% in the S&P 500.
For the MTD, the 'high-quality' stock basket is up 2.76%, ahead of the S&P 500 (ex dividends) at 2.87%. The 'low-quality' stock basket is up even more for the MTD at 3.37%.
From these baskets of stocks we select the optimal combination for our model portfolio strategies. This report refers to model portfolios last rebalanced as of the close of June 30, 2010. Commentary on weekly rebalanced portfolio models will be forthcoming.
Market Neutral Model Portfolio. A Market Neutral Model Portfolio created from our base quality models declined -0.98% today with 15 stocks in the long model up 1.85% and 14 stocks in the short model up 2.83%.
For the MTD, the overall model portfolio is now down -0.50%, with the long portfolio up 1.84% and the short portfolio down -2.34%.
Unleveraged Strategy: Long Stocks and Inverse ETFs. Our long stock and inverse ETF model is currently 0% long stocks and 100% long inverse ETFs*. As a result, this model declined -2.03% overall for the day and is now down -1.82% MTD versus 2.87% for the S&P 500, excluding dividends.
Leveraged Strategy: Long and Short Stocks. Our 2x Leveraged Long/Short Model Portfolio, which is based on the stocks in our Market Neutral model, is currently 0% long and -200% short. As a result, the overall portfolio declined -5.66% overall for the day.
This model portfolio is now down -4.73% MTD versus up 2.87% for the S&P 500, excluding dividends. The Leveraged Long portfolio is flat for the month and the Leveraged Short portfolio is down -4.73%.
'High-Quality' Long Stocks Performance. The best daily performers in 'high-quality' model portfolios included Gannett Co., Inc. (GCI) up 7.84%, Micron Technology Inc. (MU) up 6.47%, and BT Group plc (BT) up 6.34%.
The worst daily performers in 'high-quality' model portfolios included Family Dollar Stores Inc. (FDO) down -8.06%, Dollar Tree Inc. (DLTR) down -3.07%, and Credicorp Ltd. (BAP) down -1.07%.
'Low-Quality' Short Stocks Performance. The best daily performers in 'low-quality' model portfolios included Enerplus Fund Resources (NYSE:ERF) Brasil Foods S.A. (BRFS) up 0.90%, and Sterlite Industries India Ltd. (SLT) up 1.01%.
The worst daily performers in 'low-quality' model portfolios included Mosaic Co. (MOS) up 9.23%, Comerica Incorporated (CMA) up 6.66%, and The Bank of New York Mellon Corporation (BK) up 6.39%.
Our Long/Short indicator is still net short. This indicator tends to work well in trending markets and less so in sharply choppy markets.
About the Model Portfolio Strategies. Ascendere Associates runs three model portfolios based combining optimal baskets of "high-quality" and "low-quality" stocks, which are determined by proprietary and third-party factors, such as from ValuEngine.
The strategies include a Market Neutral strategy, Unleveraged Stock and Inverse ETF strategy, and a Leveraged Long/Short strategy. Long and short weights are determined by a simple, proprietary technical indicator. We began managing an account for ourselves in June 2010 using the unleveraged strategy as a guide.
Investors focusing on daily performance could find monitoring our model portfolio useful as a proxy for what is working in the market in general as viewed through the lens of "high-quality" versus "low-quality" stocks, and use our stock ideas as the basis of further stock-specific research or with their own market-timing strategies.
In addition to providing equity research and financial modeling consulting services, we offer a 4-week subscription to our reports in pdf format for a $100 introductory price. A subscription includes a list of month-end stock ideas. Individual reports are also available for purchase. Please contact us directly for more information.