Editor’s note: As of 9/20/11 Lucas Krupinski no longer manages a Covestor model
Author: Lucas Krupinski
Disclaimer: Lucas owns ZROZ, ABX, DELL, GLRE, and FLY in his Covestor Small Cap Fundamentals model.
September 7, 2010: August was a lousy month for the markets, and my portfolio as well. My thesis remains the same though, but it’s going to take more than a month to come to fruition. Which, to me, is perfectly fine.
I’ll go over my short positions first:
I still believe that interest rates have nowhere to go but up, which is reflected in a new allocation to PIMCO 25-30 Year Zero Coupon Bond ETF (ZROZ). In essence, I don’t think that investors will continue to want to loan the Government money for 30 years and receive 3.79% (as of September 3, 2010).
I still believe that our economy will recover, and that while the rise in gold in the early part of the last decade was driven by the dilution of the dollar via deficit spending, the rise that continues through today is a mainly fear driven phenomenon. I could write my thesis about why gold isn’t all that it’s been hyped to be, since it’s such an emotional issue, I won’t bring that up. But I have increased my short exposure to Barrick Gold (ABX), and will continue to short it as it rises, or else short other gold producers as they do the same.
Dell, Inc. (DELL) is my new short position. As far as PC makers go, they seem to be trying to play catch-up on so many fronts. And their attempt to buy their way into the cloud computing space has so far been rebuffed by HP.
New Positions:
Meanwhile, I added a small allocation to Greenlight Reinsurance (GLRE), an insurance company whose investments are managed by David Einhorn, the hedge fund manager that famously foresaw the demise of Lehman, as well as the troubles that Moody’s faces today. Though he is admittedly bullish on gold, I believe that his other positions will shine in comparison.
I also added a position in Fly Leasing (FLY), an aircraft leasing company. Their dividend yield has been around 7%, as of September 7, 2010 and they’ve been a net repurchaser of their own shares. Airplanes are long-lived assets, so in today’s environment (which I anticipate to be inflationary at some point), it seems to me that it’s a great deal that they’re making capital outlays now, with the opportunity to repay them in tomorrow’s depreciated dollars. Obviously, if we enter a long spat of deflation, that hypothesis goes away, though.
