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September 24, 2008
Marketocracy Commentary: Shifting out of Cash
This is a commentary from Marketocracy on Chris Rees' 10STX model portfolio
In highly uncertain times like we have today, we prefer to follow the moves of the mFOLIO Masters and m100 members that have proven to be much better indicators of when it is a good time to be in or out of the market. mFOLIO Master, Christopher Rees (crees) is one of them.
Rees' model portfolio, 10STX has averaged a return of over 29% per year for almost 8 years and as of today is up 2% YTD and ahead of the market by 20% for the year. Perhaps even more impressive is the fact that he delivered those returns while maintaining an average of 21% of his portfolio in cash. You can see by the chart below that there are times when he is 100% invested and times when he is mostly in cash.
Last week, Chris went from 36% in cash on Monday, September 15th to just 14% on Friday, September 19th. When one of our best mFOLIO Masters moves from a defensive position to a more aggressive position and has demonstrated a great track record of making the right call over the last 8 years, we pay attention.
In the chart above, Chris' cumulative return for his 10STX model portfolio since inception of 10/12/00 is shown as the GREEN line with the cumulative return of the S&P 500 Index with dividends reinvested over the same time period shown as the BLACK line. The cumulative return values are listed on the far right vertical axis. The percentage of the portfolio in cash is shown in BLUE SHADE with the values shown on the far left vertical axis. The average cash position over the entire 8 years is shown as the ORANGE line.
March 13, 2007
Marketocracy Commentary: Managing the Portfolio's Cash Position
One of the portfolio management characteristics that we find useful is how cash is managed in a portfolio. It is one way that a manager can:
- Protect the downside from a sudden drop in the market
- Preserve buying power, so when the market drops the portfolio has cash to take advantage of buying opportunities
- Is an indication of bullishness or bearishness towards market and best idea stocks
The chart above is the percentage of Chris Rees' 10STX model portfolio that he held in cash since his inception in Oct. 2000. The first thing you should note is that his average cash position is 23%. So the phenomenal returns he has generated have not only been with a very diversified portfolio, but also with a portfolio that has had a large portion in cash. Chris' strategy is to first protect the downside and not lose money. You can see him implementing a portion of that strategy on this chart.
You can also see that there are several times when he protects the portfolio by moving into cash and there are a few times when he has the conviction and confidence to aggressively be fully invested but generally just for a short period. At the end of 2006 he was up to 42% in cash and then this year he invested more aggressively than his average. What you don't see is he protected the portfolio by building a 7% position in ProShares Short QQQ (amex: PSQ) - which goes up when Nasdaq goes down. So at the end of Feb.'07 as Nasdaq hit a 6-year high and then dropped 7.55% in a week during the Shanghai Index-sparked global sell-off, he sold his PSQ near the peak. He preserved buying power with his PSQ position and then bought into one of his best ideas when the market sold it off.
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