Author: Czar Reyes

Covestor model: Abandon Stock Aggressive

Disclosures: None 

Abandon Stock Aggressive gained 3.72% in June 2011, compared to the S&P500’s  loss of 1.83% and the Russell 2000’s loss of 2.46%. I was able to outperform the S&P 500 by 5.55% and the Russell smallcap index by 6.18%.

No trades were executed in the month of June, as I had already allocated more than enough to long term investments that I term “abandon stocks,” and found only limited opportunities in risk arbitrage. The model fund as of 7/15 is using approximately 45% leverage, mostly for “abandon stock” positions and a smaller portion for merger arbitrage positions. I use margin aggressively in this model and I am willing to use up to 80% margin as long as I find opportunities that are logical and backed by math and statistics.

Merger arbitrage is a perfect candidate for efficient use of margin, as I see it. You can expect more arbitrage play this month, as I revamp my rules and risk tolerance on some of my arbitrage candidates.

Great market speculator Jesse Livermore once said (I paraphrase):  “It never was my thinking that made the big money for me. It always was my sitting.”  This is exactly what I did last month and it served me well.