Author: William Smith
Covestor Model: Price Volatility Volume
Disclosures: Long PUDA
Forgetting May…
May was about the worst month I can remember. Due primarily to Puda Coal (AMEX: PUDA) (thanks PUDA!), I ended up down about 8% in my Price Volatility Volume Covestor model. This was the first monthly loss in this model since inception.
To measure the impact of Puda Coal on the overall portfolio you simply need to look at the current position size. My Covestor model lists the current (6/2/11) position at under 5% of the portfolio.
Well, it started at 15%, which means that about 10% of the portfolio eroded due to this one position. And I lost how much for the month of May – 8%? Yep, without PUDA I would have eked out a small gain. Grrrr…
It’s hard to say what will happen with this now. PUDA may not be a complete loss. There are class-action suits being filed right and left, and the CEO has even feigned an offer to buy out all of the stock for $12 a share (I paid about $10). For now, however, trading has been halted for almost two months, and we have no choice but to treat it as a loss and move on.
On the heels of that disaster I’ve been gradually working my way back to whole. Volatility has been rather light, so trades have been rare. We are now completely in cash (aside from PUDA of course).
The market was hammered hard at the end of last week (5/31-6/3), following several courses of bad news in jobs and manufacturing reports. Simultaneously, the VIX spiked. If volatility hangs around, I expect to be back on the right track in June.
Good Trading…
Sources:
PUDA chart as of 6/13, StockCharts.com
