Macro Tsimmis

intelligently hedged investment

Nov 07 Intelledgement Speculative Opportunity Portfolio Report

Posted by intelledgement on Wed, 12 Dec 07

Position Purchased Shares Paid Cost Now Value Change ROI CAGR
TMY 03-Jan-07 300 3.30 998.00 1.77 531.00 -2.75% -46.79% -50.16%
FDG 20-Mar-07 44 22.68 1,005.92 34.09 1,577.75 -6.40% 56.85% 90.54%
ELN 04-Apr-07 129 13.90 1,801.10 23.03 2,970.87 -3.24% 64.94% 114.18%
VRTX 18-Apr-07 57 31.65 1,812.05 25.39 1,447.23 -21.49% -20.13% -30.46%
NBIX 22-May-07 158 11.33 1,798.14 13.02 2,057.16 40.76% 14.40% 29.18%
BQI 13-Jul-07 565 3.35 1,900.75 4.50 2,542.50 -17.10% 33.76% 113.60%
GSS 19-Jul-07 451 4.19 1,897.69 3.02 1,362.02 -16.11% -28.23% -59.51%
GSS 24-Aug-07 613 3.08 1,896.04 3.02 1,851.26 -16.11% -2.36% -8.52%
BZH 18-Sep-07 -178 11.18 -1,982.04 8.49 -1,511.22 24.40% 31.15% 288.44%
SLT 5-Oct-07 111 19.75 2,200.25 26.30 2,919.30 1.27% 32.68% 532.39%
WB 12-Nov-07 -59 40.63 -2,389.17 43.00 -2,574.76 n/a -7.21% -78.09%
BZP 19-Nov-07 245 9.77 2,401.65 11.40 2,793.00 n/a 16.30% 14,929.01%
cash -3,340.38 6,869.96
Overall 03-Jan-07 10,000.00 22,836.07 -4.82% 128.36% 148.73%
Global HF 03-Jan-07 10,000.00 11,047.50 -1.66% 10.47% 11.62%
NASDAQ 03-Jan-07 2,415.29 2,660.96 -6.93% 10.17% 11.28%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus value of dividends)
Change = Change since last report (blank for positions new since last report)
Return on Investment = on a percentage basis, the performance of this security to date
Compounded Annual Growth Rate = annualized ROI for this position (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2006 inclusively) provides a CAGR of around 15.4%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 11.0%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: Two of our three sales this month eliminated duplication between the spec port and the investment port. Now, the vast majority of our speculative positions—and all our our investment positions—are consistent with our macro analysis. E.g., positions in a specific E&P company for the spec fund and in the IFC ETF for the investment fund are both thematically consistent with our macro analysis that the relative value of energy is rising. However, one of the purposes of the spec fund is to push ourselves to gather more intelligence and learn new things and duplicating the same positions as we have in the investment fund does not advance the ball in that regard. While these sell decisions were based purely on ROI considerations, we were happy to get rid of the dupes and do not anticipate seeing such a situation arise again. Note: because we are short Wachovia (WB), we had to pay out the 64-cent dividend on 28 Nov, rather than collecting it as is normally the case with dividends.

News:

Comments: The hedgies won! The hedgies won! Yes, folks, the professional hedge fund managers finally recorded their first monthly victory of 2007—that is, the first month they have outperformed both ISOP and the NASDAQ—by virtue of managing to lose money slower than anyone else: only -2% compared to -5% for us and -7% for the NASDAQ. Way to go, pros! Ironically, it was also their worst month of the year, in terms of ROI…in fact, November was easily everyone’s worst month of the year.

Despite the Fed’s continued determination to lower interest rates and increase liquidity to counter the housing and credit crises, the US stock market shrank at the prospect of looming recession…or worse. There was really no good news whatsoever this month. For us, in fact, mostly there was bad news—Vertex ( VRTX, -21%) saw competitors to their prospective anti-hepatitis drug, telaprevir, wax stronger…Oilsands Quests (BQI, -17%) reported underwhelming reserve numbers and announced another dilutive offering of more shares…Golden Star (GSS, -16%) had another quarter of unanticipated operational challenges…Beazer Homes (BZH, +24%) had an even worse-than-expected quarter—which is saying a lot as folks expected a very bad quarter—but in this case as we are short the stock, bad news is good for us. Our star performer for the month was Neurocrine (NBIX, +41%) but most of the runup there was due to anticipation of FDA approval of their sleep drug, indiplon, next month, rather than any genuine good news. Our newest position in BPZ Resources (BZP, +16%) was up sharply for us in just 11 days but that was mostly a rebound from the bad news that they, too, plan a dilutive sale of additional shares.

Despite the sharp pullback, overall we are still way, way ahead: +128% so far in 2007 compared to +10.48% for the Greenwich Alternative Investment’s hedge fund index and +10.17% for the NASDAQ.

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