Saltydog’s Richard Webb updates us on its cautious portfolio, the Tugboat.
As momentum investors, we are always seeking patterns in the markets. The picture right now is quite clear. Over the last four weeks, the only sector to have gained is the ‘Absolute Returns’ sector (remember, we’re only looking at the top funds in each sector – plenty of ‘absolute-return’ funds have turned out to deliver anything but). All others are now negative. The good news is that by monitoring the trends, we’ve been able to react.
Week by week, the downward trend has become stronger. We’ve responded by raising our cash holding from less than 25% to more than 70% of the total portfolio. Last week we talked about the emotional difficulties involved in selling in a falling market and realising a loss. But the benefits of acting quickly are now clear to see. In a month where the FTSE 100 has fallen by 10%, we have limited our losses, and increased our outperformance against our benchmark. We’ve made no changes this week.The 20th-century author William Arthur Ward said: “The pessimist complains about the wind; the optimist expects the wind to change; the realist adjusts the sails”. In the last four weeks we have put away the spinnaker, trimmed the sails, and are now safely in port awaiting fairer weather.
Assuming that the American recovery continues, and quantitative easing is reduced or pulled, both stock and bond markets are likely to be in for more turmoil. It looks as though we are going into a period where finding positive returns could be a significant challenge. But as private investors, there’s no need to be invested all the time, and if no obvious gains can be made there’s nothing wrong with staying clear of the markets and preserving your capital – it gives you the ability to reinvest when the next good buying opportunity appears.
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| Saltydog Group | Fund | % | Last week |
|---|---|---|---|
| Safe Haven | Cash | 72% | 72% |
| Slow Ahead | CF Odey UK Absolute Return | 21% | 21% |
| Steady As She Goes | PFS Chelverton UK Equity Inc | 7% | 7% |