A Peak Into One Of My Actual Accounts

If you missed my last live broadcast, be sure to check it out here… and as always, be sure to read my disclosures/disclosures below. Cheers!

 

For those interested in seeing the impact of hedging in action, see below. It’s the current positioning in one of my actual investment accounts.

Keep in mind, I have many accounts (multiple brokers, retirement accounts, etc), so this intentionally doesn’t give you insight into everything I own. For example, I have Smith Micro (SMSI) in at least three different accounts. Also, several of my largest holdings (GAIA, MRIN, TPCS, etc) are all in different accounts. In other words, showing you what I own (and how much is not the purpose of this exercise)!

It’s a retirement account for positions I intend to buy-and-hold. I started putting it to work when SMSI dropped to $1.50, back in March. In total, I bought 100,000 shares in this account at an average of $1.63 per share. Along the way, I also added some USATP and a long/short fund.

Now, here’s the key…

Near the market top, I took my own advice and added RWM (which shorts the Russell 2000) to the account as a hedge against my long positions. It was a big position, but that was necessary to cover ALL of my long positions.

Check out how things have played out:

Portfolio Sample

As you can see, SMSI is up, but not a lot. Meanwhile, USATP and the fund are both down. Adding it up, I have an overall LOSS of about $27,000 in my long positions here, which is about -3% in this account. Coincidentally, the S&P is also down 3% this year.

However, my short against the Russell (RWM) has built up a profit of $74,000. This gives the account an overall gain of roughly $47,000. That’s more than +5% (which is +7% annualized — remember, I launched this account in March).

Now, +7% doesn’t sound like much (indeed, my other accounts have done better in 2018). However, that’s 10 percentage points better than the S&P’s -3%. To illustrate how big a difference this is, consider the following:

Over time, the markets deliver about 7% annual returns. From age 25 through retirement, 7% annual returns will turn $20,000 into $300,000. Not bad… until you consider that those extra 10 percentage points (17% annually) will turn that same $50,000 into $10.7 MILLION.

It may sound crazy, but check the math for yourself.  #facts

 

The Bottom Line: You now have ten million reasons to learn more about hedging and other investment strategies as we head into 2019.

Stay tuned…

 

Happy Holidays & Best Wishes For A Prosperous New Year,

Mark G.

 

If you missed my last live broadcast, be sure to check it out here. Cheers!

 

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Disclosures / Disclaimers: I am long GAIA, MRIN, TPCS, SMSI, USATP, and RWM. However, this is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article.

I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.

I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter.  Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.

I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.

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15 thoughts on “A Peak Into One Of My Actual Accounts

  1. May i ask what you so with your 401k in this situation?
    Typically many of us have some form of the rus2k in our 401k, so shorting it is kinda betting against it..

    So if one was going to short like you mention, what would you do to your 401k funds?

    Like

    1. Correct. So, in those cases, I sell my mutual funds instead of shorting, since that’s betting against your own position.

      What I always say is this — when I’m worried about the market, that’s where I focus my selling/shorting. While I may take some profits or trim some losing stocks, I generally want to buy/hold what I like and sell/short what I don’t.

      As I’ve been saying for the past few months, I didn’t like the market or China, so that was the focus of my shorting (along with my individual shorts like MDXG, FUV, TLRY, NBEV, etc).

      Of course, it’s harder to make a call now. Personally, I’ve started to cover some shorts/hedges and buy beaten up stocks that I like. I’m no market timer, but I like the price I’m paying for names like SMSI and it feels like the market is due for a bounce now/soon.

      Put a lot of $$ to work in after hours.

      Cheers

      Like

  2. Mark,

    Love the play on words or maybe it was just a typo? I hope this wouldn’t be the peak of your portfolio, hopefully more of a trough if SMSI finally takes off?

    Like

    1. I never think of my portfolio in terms of peaks and troughs. I think of it as a series of opportunities, the prices of which are largely influenced by players who haven’t taken the time to read and understand the instruction manual.

      In other words, I buy stocks that are selling at an extreme discount to my DCF and/or risk-vs-reward calculations and short the ones that are selling at an extreme premium.

      The bad thing about the market players is that I never know when the market will price my assets as I believe they should be priced… but the beautiful thing is that they wouldn’t become so over- or undervalued in the first place if everyone knew what they were doing.

      😊

      BTW, here’s some weekend homework for everyone. This is the best 50 mins of anything I’ve seen this month. 💯

      Like

        1. Drat, my last post didn’t go through.

          I was saying that I don’t think about peaks or troughs, but rather long and short opportunities. If I like a stock, I buy it (and vice versa). If it gets cheaper, GREAT.

          This alleviates frustration, but also illuminates the need to guess when the market is going to go up or down. I tend to find more attractive shorts when the market is high and more tractive long as when the market is low, so the process of looking for longs AND shorts serves as a natural market timing tool.

          I don’t fall into the trap of expecting my stocks to achieve fair value quickly. I allocate my money with no expectations and scale up or down based on where I see the most value.

          Asked for the best 15 minutes I have seen, here is the link to Gundlach’s interview on CNBC last week. Absolutely brilliant (and not just because I agree with him and have been working my portfolio accordingly).

          p.s. now I see that my post actually did go through. You didn’t see the link?

          Liked by 1 person

  3. I love the lessons and food for thought Mark. Happy Holidays. Is there a place to access your updated SMSI model ? There have been developments in the last month that would change it . Thanks

    Like

  4. Hi Mark, thanks for the educational framework you provide. Once an investor decides to be short a position it seems difficult to decide what percent of the portfolio should be short/hedged? Can you give any insight as to tools that investors can use to establish what percent of their portfolio should be short/hedged? Happy Holidays!

    Like

    1. Ask during my next live video. That’s a tricky question to answer without delving into the area of providing advice/recommendations, which I don’t do under any circumstances due to legal reasons.

      I’m not a registered financial advisor.

      That being said, for my personal account the amount of hedges I put in place is determined by my perception of the risk of a market decline. That is largely influenced by my SPY risk/reward chart (which I often show in my videos), among other things.

      As you can see in my last video, SPY was very high when I became strongly negative back in September.

      Like

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