Brutal sector rotation

Investment Analysis Clubs Saul’s Investing Discussions
#1

This sector rotation has been and continues to be brutal on my portfolio:

After about of month of outperforming the indices most every day, things quickly reversed last week. My underperformance over the past week was amplified by my long call positions on SHOP, NVDA, SQ, ANET and NTNX. Fortunately, most of my short put positions that were used to fund the purchases of the long call positions were previously exported worthless or closed out. I still have some short puts on SHOP, ANET and UBNT. I had previously (before the reversal) sold LGIH to buy more fast growing tech companies. I was already heavily invested in smaller fast growing tech. SHOP, NVDA, SQ, ANET, TLND, NTNX, WIX, and HUBS make up about 93% of my portfolio. My smallest 2 positions (NKTR and JUNO) would out my 10 positions. I also have about 4% in cash. Since my portfolio is so tech heavy, I really have nothing to sell to move into more of the companies that have declined so much. I understand and previously understood that my portfolio has higher volatility because a) it’s very concentrated, and b) it’s almost all tech. Other than closing my NTNX Dec2017 $35 short puts and selling 15% of my SQ position at about $39.75, I have made no adjustments and just watched my ~15% gain over the past 6 weeks evaporate in about 1 week.

So what am I doing? I’m watching and waiting for a bottom. I’d like to add to ANET and buy back the 15% of SQ shares that I sold. If the prices get low enough then I may begin adding some short put positions again.

Chris

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#2

Chris:

I too, have a highly skewed portfolio to tech and watched it get hammered the last week or so. However, I had that type of portfolio most of the year and watched it go over 85% up for the year. I was considering lightening my load on SQ because it was going up so fast, but the market beat me to the punch.

I still like all those stocks we both have, and will sit tight. I don’t see anything better, or I would trade out. NVDA, SQ, SHOP, CGNX, ANET and NTNX are all good companies growing like mad. They didn’t all of a sudden turn to crap, so the story did not change.

I am sitting tight. The prices for the companies may have gotten ahead of themselves, but the story is still good, the growth is there, and 2 years from now we will be happy with our choices.

WinlockDon

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#3

I did the same thing WinlockDon. I don’t see anything out there that I feel I need to add to my portfolio and I like all the companies I own shares in despite any pullback in share price so I too will sit tight.

Peace,
Dana

#4

I was considering lightening my load on SQ because it was going up so fast, but the market beat me to the punch.

I still like all those stocks we both have, and will sit tight. I don’t see anything better, or I would trade out. NVDA, SQ, SHOP, CGNX, ANET and NTNX are all good companies growing like mad.

They didn’t all of a sudden turn to crap, so the story did not change.

Unless, the market is telling you through price discover that the story is changing, OR/AND that valuations are changing.

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