Author: Don Peters
Covestor model: QFT Long Short
Disclosures: None
As I mentioned in my last update, I regularly analyze my strategy and execution. I recently identified a weakness common to both my long and short strategies and have made an adjustment to address it. The differences are relatively minor in terms of stock selection, but will shorten the average hold time for new trades to about a month on the long side and closer to one week on the short side.
I was recently asked my thoughts on where the market is headed. My view on this is frankly “don’t know, don’t care.” At least, this is my view in terms of my portfolio. I do care about the U.S. and world economies and therefore the stock market as potentially a leading indicator. In any case, trying to make sense of the various factors affecting the stock market, including the impact of the end of QE2, the debt ceiling limit and when or whether it will be raised, problems and bailouts in Greece, rising and now falling oil prices, etc. is well beyond my capabilities. No one can predict the future. If I were smart enough or lucky enough to guess the future, that would do little to qualify me to be able to do it again when different factors affect the market. I strive to achieve portfolio gains consistently, so I focus on strategies that are repeatable.
For anyone looking for insights into where the market is headed, I suggest you review the track records of numerous market “gurus” who have spent a great deal of effort attempting to do so. CXO Advisory monitors the market outlook opinion of approximately 60 gurus and finds the average accuracy rating is just 48% as of 7/7/11 (see here for sources and methodology). You would be better off identifying future market direction by flipping a coin than listening to most of these well-known market “gurus.”
Now, this does not mean that there are not opportunities for profit. It’s been said that the stock market is really not a stock market, so much as a market of (individual) stocks. I position my portfolio around specific opportunities, and I regularly find opportunities on both the long and short side, regardless of market direction.
Further, by positioning my portfolio both long and short, I am hedged against significant market moves that may overwhelm the factors affecting individual stocks, causing most to rise or fall. This is key to my effort to achieve consistency and I believe it is a more reliable approach than trying to predict the many fluctuations of the stock market.
Sources:
CXO sources and methodology: http://www.cxoadvisory.com/gurus/
