EVALS Q3 2010 Update

In an effort to update EVALS in a more timely fashion, I have attached a spreadsheet of the results of EVALS for the 3^rd quarter of 2010.

As shown in the graphic below, EVALS turned in a very strong quarter, topping the benchmark S&P 500 index by 4.0% in July, 1.8% in August and 3.1% in September. For the first three quarters of 2010, EVALS is beating the SPX by 10.2%. Going back to the August 21, 2008 inception, EVALS is still showing a small cumulative loss, yet is outperforming the SPX by 5.3% during that period.

Many of the same themes that were responsible for the mixed 2^nd quarter performance have shined since stocks bottomed at the end of June. Among the most profitable positions were short volatility, long emerging markets and long commodities.

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 here.

Disclosure(s): none

EVALS Q2 2010 Update

EVALS had a slightly disappointing second quarter of 2010, outperforming the S&P 500 index in April and June, but giving up 3.64% to the benchmark in May. The reason for not beating the benchmark in May was some short volatility exposure which fared poorly when the VIX posted its second highest spike ever, to 48.20 on May 21^st.

There was minimal turnover in EVALS during the period, with emerging markets and commodities continuing as two important long themes and short volatility – particularly on the heels of the big VIX spike – the dominant theme on the short side.

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.

I apologize for the delay in making this information available and will be sure to have the Q3 update posted before the end of October.

Disclosure(s): none

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

EVALS Q4 2009 Update

By topping the benchmark S&P 500 total return index (which includes dividends) for each of the last four months of the year, EVALS was able to exit the year with a 2.04% advantage over the benchmark.

In a nutshell, the full year consisted of two major directional calls by EVALS that effectively canceled each other out. First off, EVALS took a very large long position at the end of February, incurring some initial losses, but then crushing the benchmark in March, April in May. This advantage was neutralized when EVALS flipped to a short bias and was caught short when stocks spiked higher in July.

For the balance of the year, EVALS tracked the S&P 500 index much more closely, with the fourth quarter of 2009 reflecting the smallest divergence from the benchmark to date.

During the last three months, EVALS has been most heavily invested in Asian emerging markets, as well as oil and gas exploration companies and miners. There has also been smaller exposure to Latin America, U.S. financials, technology and lumber. A short volatility position, recently closed, was one of the big winners for the year.

EVALS enters 2010 with a long bias and overweight in emerging markets, commodity-related stocks, financials and technology. Of course, as new investment opportunities begin to appear in 2010 and are highlighted by volatility-based signals, EVALS will undoubtedly begin to metamorphose accordingly.

The graphic below shows the monthly performance for EVALS and the SPX since the August 21, 2008 inception. I will next update the performance for the first quarter of 2010 in early April.

Disclosure: none