EVALS Q1 2010 Update

EVALS had a very successful first quarter of 2010, topping the S&P 500 index by 3.97%. During the January to February correction, EVALS underperformed on a relative basis, but EVALS was a strong performer for the balance of the quarter, beating the SPX by 2.7% in February and again in March.

The performance of EVALS was helped by long positions in emerging markets (particularly Indonesia and Singapore) and commodities (metals and lumber) as well as a short position in volatility. Sector performance was enhanced by a long position in banking.

For the last few quarters, holding periods in the various EVALS ETFs have continued to increase, largely due to the presence of several strong trends. EVALS has done a good job of riding these trends, but the timing has not always been ideal, as illustrated by the exit of a long position in lumber during the first half of February, just before lumber jumped 22% in two months. Another consequence of the strong trends has been longer holding periods and fewer transactions.

All in all, the year is off to a solid start, with EVALS now beating the SPX in six of the last seven months.

I expect the second quarter will provide a new set of challenges to the investor, with EVALS beginning to reposition its holdings to better meet some of those challenges. As a general rule of thumb, the more volatility increases, the more the more trading should pick up and the portfolio should morph in the coming months.

The graphic below shows the monthly performance for EVALS and the SPX since the August 21, 2008 inception. Note that detailed monthly performance data for 2008 and 2009 can be found in previous posts, such as EVALS Q4 2009 Update. Also, I will next update the performance for the second quarter of 2010 in early July.

Disclosure(s): none