Professional Documents
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Of Note:
Our 25-stock theoretical long portfolio published on December 31 presaged 45 major positive upgrades by more than 20 sell side firms. In other words, within a single day on
December 31 our firm issued a report with more actionable relevance, value and foresight than a disparate team of 20+ sell side analysts and their ~40+ associates produced
over the course of the entire month of January.
Despite our prescient stock picking it only finished up 1.59% for the month versus 2.28% for the S&P 500. TRW Automotive (TRW) was our best performing holding, up 13.21%
and Westlake Chemical Corp. (WLK) was our worst at -10.93%.
Separately, we are assuming today's closing prices were obtained for the newly rebalanced portfolio models, which were published yesterday. Our long models now assume 32
stock positions versus 25 last month. We will begin tracking returns of the 32-stock portfolio on February 1 (see our previously issued monthly report for details).
Taking a wild guess -- The S&P 500 will close up ~0.93% on February 1, 2011
On average, going back to early 2005, stocks in our long models have closed roughly 0.40% higher on average on the first trading day of the month. But for 2010, the average
first day of the month gain was 1.42% for our theoretical long model and 0.93% for the S&P 500. These first day surges are probably created by the simple back office mechanics
As a result of these increasingly volatile though positive first-day-of-the-month returns, last month we started publishing our rebalancing actions a day prior to the end of the
month in an attempt to offer our clients a chance to reduce slippage relative to the theoretical model, and to be in better position to take advantage of a seemingly increasing
likelihood that the first-day-of-the-month surges in stock prices continues.
EBIT 4 $ 69 $ 70 $ 1
High $ 71 $ (2)
Low $ 67 $ 3
Shares Outsanding 85 85 -
1/28/2011: A short position in Tidewater Inc. (TDW) was assumed closed at $57.98 for a 7.69% loss after closing above its stop price of $57.58 the prior trading day.
1/28/2011: A short position in ProLogis (PLD) was assumed closed at $15.21 for a 5.33% loss after closing above its stop price of $15.63 the prior trading day.
1/26/2011: A short position in Harley-Davidson Inc. (HOG) was assumed closed at $39.36 after closing above its stop price of $37.43 the prior trading day for a 13.53% loss.
1/18/2011: A long position in Lear Corp. (LEA) was assumed closed at $109.30 after closing above its price target of $108.53 the previous trading day for a 10.73% return.
1/18/2011: A long position in TRW Automotive Holdings Corp. (TRW) was assumed closed at $60.68 after closing above its price target of $60.20 the previous trading day for a
15.14% return.
1/11/2011: A short position in Packaging Corp. of America (PKG) was assumed closed at $28.07 after closing above its stop price of $27.55 the previous day for an 8.63% loss.
1/27/2011 -- TRW Automotive (TRW) -- Goldman Sachs upgraded to Buy from Neutral and its price target was also raised to $77 from $60, based on valuation, above average
growth, and low expectations .
1/27/2011 -- RPC, Inc. (RES) -- Gabelli upgraded the stock to Buy from Hold.
1/27/2011 -- East West Bancorp (EWBC) -- Cantor Fitzgerald increased its price target on the stock to $26 from $22.
1/27/2011 -- United Continental Holdings (UAL) -- was upgraded to Buy from Hold at Dahlman Rose.
1/26/2011 -- East West Bancorp Inc. (EWBC) -- Credit Suisse raised its price target to $22 from $20, RBC raised its price target to $23 from $20, Sandler O'Neil raised its target to
$23 from $20 and Citigroup raised it to $22 from $20.
1/26/2011 -- United Continental Holdings, Inc. (UAL) -- Morgan Stanley lists the stock as a long Research Tactical idea.
1/25/2011 -- Lam Research Corp. (LRCX) --UBS raises LRCX price target to $60 from $59, and raises targets for AMAT, KLAC, NLVS, VSEA and TER as well.
1/25/2011 -- LyondellBasell Industries NV (LYB) -- UBS initiates with a Buy rating and $42 price target.
1/25/2011 -- Huntsman Corporation (HUH) -- UBS initiates the stock with a Buy rating and $21 price target.
1/24/2011 -- Waddell & Reed Financial, Inc. (WDR) -- Bank of America/Merrill Lynch upgraded the stock to Buy from Neutral and its price target was raised to $44 from $35.
According to TheFlyOnTheWall.com, "the firm believes the company's operating leverage is accelerating and that it should benefit from a rotation into equities."
1/21/2011 -- Parker-Hannifin Corp (PH) -- Citigroup raises target to $100 from $94, citing recent sell off as a buying opportunity.
1/20/2011 -- Macy's, Inc. (M) -- Credit Suisse names the stock its top pick for 2011 after previously upgrading on 1/11.
1/20/2011 -- TRW Automotive Holdings Corp. (TRW) -- Soleil raised its price target to $71 from $59 "to reflect higher build assumptions and new business wins."
1/19/2011 -- Avnet Inc. (AVT) -- UBS raises price target to $42 from $40.
1/19/2011 -- Waddell & Reed Financial, Inc. (WDR) -- Stifel Nicolaus raises rating to Buy from Hold
1/18/2011 -- Avnet Inc. (AVT) -- Longbow upgrades to Buy from Neutral with a $41 price target.
1/14/2011 -- Freeport McMoRan Copper & Gold (FCX) -- Dahlman Rose raises price target to $160 from $125.
1/14/2011 -- Lam Research Corp. (LRCX) -- Bank of America/Merrill Lynch raises price target to $50 from $40.
1/13/2011 -- Parker Hannifin Corp (PH) -- JP Morgan upgrades the stock to Overweight from Neutral.
1/13/2011 -- Huntsman (HUN) -- Jefferies raises price target to $21 from $18 maintaining Buy rating.
1/13/2011 -- Albemarle Corp. (ALB) -- Jefferies raises price target to $75 from $61 and maintains Buy rating.
1/12/2011 --Albemarle Corp. (ALB) -- named a long Tactical Research Idea by Morgan Stanley.
1/12/2011 -- Lear Corp. (LEA) -- Credit Suisse raises Lear target price to $142 from $133 and maintains Outperform rating.
1/12/2011 -- PNC Financial Services Group Inc (PNC) --Wells Fargo upgrades bank sector to Overweight from Neutral and names PNC Financial one of five bank stocks (BAC,
JPM, GS, CMA, PNC) as a top idea for 2011.
1/11/2011 -- Waddell & Reed Financial, Inc. (WDR) -- Barclays raises price target to $43 from $41.
1/11/2011 -- T. Rowe Price Group, Inc. (TROW) -- Barclays raises price target to $71 from $69.
1/11/2011 -- Macy's, Inc. (M) -- Credit Suisse upgrades to Outperform from Neutral and raised its price target to $27 from $25. The analyst expects shareholders to benefit from
the ongoing pay down of debt.
1/10/2011 -- Freeport McMoRan Copper & Gold (FCX) -- Stifel Nicolaus upgraded the stock to Buy from Hold based on expected leverage to rising commodity prices.
1/10/2011 -- United Continental (UAL) -- Soleil raised estimates and its price target for UAL to $35 from $33.
1/10/2011 -- LyondellBasell (LYB) -- BWS Financial raised its price target for LYB to $40 from $35. Also, FMR Corp. reported a 10.18% passive stake in the company.
1/10/2011 -- Lam Research (LRCX) -- Morgan Stanley added the name as a long Research Tactical Idea.
1/10/2011 -- Lear Corp. (LEA) -- Barclays upgraded the stock to Overweight from Equal weight, and increased its stock price target to $123 from $94.
1/10/2011 -- Parker-Hannifin Corporation (PH) -- Goldman Sachs upgrades stock to Buy from Neutral and raises stock price target to $105 from $92.
1/10/2011 -- Dover Corporation (DOV) -- Goldman Sachs increased its price target to $72 from $65, removed the stock from the Conviction Buy List and kept it rated Buy.
1/7/2011 -- T. Rowe Price Group, Inc. (TROW) -- Deutsche Bank raises price target to $65 from $58.
1/7/2011 -- East West Bancorp Inc. (EWBC) -- Goldman Sachs initiated with a Buy rating and $24.50 price target.
1/7/2011 -- Freeport McMoRan Copper & Gold Inc. (FCX) -- Canaccord upgrades to Buy from Hold, raising target to $135 from $98.
1/6/2011 -- PNC Financial Services Group Inc (PNC) -- UBS names the stock a short-term Buy.
1/6/2011 -- PNC Financial Services Group Inc (PNC) -- Nomura initiated coverage of the stock with a Buy rating and $73 target.
S&P 500 Index, ex dividends 0.77% 0.77% 2.28% 2.28% 22.07% 0.06
* This table represents a theoretical model, and is presented for informational purposes only. This table is not representative of any actual portfolio and is not to be construed as any advertisement of any investment
service. The figures above are gross returns of various models and do not assume any kind of cost. Real portfolios that attempt to exactly replicate these theoretical strategies are guaranteed to generate relatively
lower returns.
"Naive" Model. So named because it excludes risk management and other refinements and is intended to show the returns due to fundamental factors alone, which include operating momentum, relative value,
fundamental quality and analyst revision momentum. Typically the Naive Model comprises of approximately 80-100 stocks.
Core Model. A refined version of the Naive Model and uses stock-specific price targets and stops. Over the backtest, the number of stocks in the Core Model has comprised on average approximately 22 stocks in the
long portfolio and 15 stocks in the short portfolio.
Opportunistic Model. Uses the same stocks and stock-specific price targets and stops of the Core Model, but it additionally applies target and stop loss rules to the long and short portfolios. This model is usually
dollar neutral, but when target or stops are reached this model could change to 100% long or short or to 100% cash at any given time.
Return of Stocks in the Long Portfolio - Return of Stocks in the Short Portfolio = Return of Overall Portfolio. Cumulative and YTD returns are based in part on backtested returns and returns collected in real time.
Cumulative returns include a backtest to 12/31/2004. Returns of the Naive Model have been tracked in real time since December 31, 2009. Returns of the Core Model has been tracked in real time since July 31, 2010.
Returns of the Opportunistic Model have been tracked in real time since August 31, 2010. Cumulative returns and the Sharpe Ratios are calculated from the 12/31/2004 "inception." The risk free rate used in the
calculation is the 90-day T-bill, which has averaged ~2.28% since 12/31/2004. The returns above do not include estimated expenses.
Most of the time, our models assume investors are long "high-quality" stocks and short "low-quality" stocks. Therefore, we would prefer to see "high-quality"
stocks moving up for the day and "low-quality" stocks moving down.
The stock picking methodology among our Core and Opportunistic Models are the same.
Our Opportunistic Model differs from our Core Model in that it incorporates portfolio-based risk-management strategies, which are continually under
refinement.
Core & Opportunistic Short Model Daily Opportunistic Portfolio Stop Date 10/8/2010 6.26%
1/28/2011 to 1/31/2011
Target/ Date+1
Sector Company Ticker 1/28/2011 1/31/2011 Performance Price Target Stop Target Stop Date Sell Price Return
Financials ProLogis PLD 15.21 14.92 -1.91% 1/27/2011 $ 15.21 5.33%
Information Technology Alliance Data Systems Corporation ADS 71.25 70.74 -0.72% $ 66.86 $ 75.20
Materials Cemex S.A.B. de C.V. CX 9.47 9.47 0.00% 1/28/2011 $ 9.47 -11.58%
Industrials Bucyrus International Inc. BUCY 90.68 90.76 0.09% $ 75.57 $ 103.23
Consumer Discretionary Harley-Davidson Inc. HOG 39.37 39.65 0.71% 1/25/2011 $ 39.36 13.53%
Materials Packaging Corp. of America PKG 28.02 28.25 0.82% 1/10/2011 $ 28.07 8.63%
Energy Pride International Inc. PDE 32.21 32.50 0.90% $ 30.47 $ 35.53
Energy Compagnie Générale de Géophysique-Veritas
CGV 30.16 30.45 0.96% $ 26.62 $ 34.56
Energy Tidewater Inc. TDW 57.98 59.49 2.60% 1/27/2011 $ 57.98 7.69%
Energy Weatherford International Ltd. WFT 22.97 23.72 3.27% $ 20.64 $ 24.96
Energy Range Resources Corp. RRC 47.66 49.87 4.64% 1/31/2011 $ 49.87 10.87%
Core & Opportunistic Short Model MTD Opportunistic Portfolio Stop Date 10/8/2010 6.26%
12/31/2010 to 1/31/2011
Target/ Date+1
Sector Company Ticker 12/31/2010 1/31/2011 Performance Price Target Stop Target Stop Date Sell Price Return
Materials Cemex S.A.B. de C.V. CX 10.71 9.47 -11.58% 1/28/2011 $ 9.47 -11.58%
Energy Pride International Inc. PDE 33.00 32.50 -1.52% $ 30.47 $ 35.53
Energy Compagnie Générale de Géophysique-Veritas
CGV 30.59 30.45 -0.46% $ 26.62 $ 34.56
Information Technology Alliance Data Systems Corporation ADS 71.03 70.74 -0.41% $ 66.86 $ 75.20
Industrials Bucyrus International Inc. BUCY 89.40 90.76 1.52% $ 75.57 $ 103.23
Financials ProLogis PLD 14.44 14.92 3.32% 1/27/2011 $ 15.21 5.33%
Energy Weatherford International Ltd. WFT 22.80 23.72 4.04% $ 20.64 $ 24.96
Materials Packaging Corp. of America PKG 25.84 28.25 9.33% 1/10/2011 $ 28.07 8.63%
Energy Tidewater Inc. TDW 53.84 59.49 10.49% 1/27/2011 $ 57.98 7.69%
Energy Range Resources Corp. RRC 44.98 49.87 10.87% 1/31/2011 $ 49.87 10.87%
Consumer Discretionary Harley-Davidson Inc. HOG 34.67 39.65 14.36% 1/25/2011 $ 39.36 13.53%
Ascendere does not rate stocks on any scale, but does offer individual stock commentary and valuation opinions. With regard to Ascendere's portfolio
strategies, "long" or "high-quality" baskets should generally be considered buys, unless otherwise noted. Stocks in our "short" or "low-quality" baskets should
generally be considered sells, unless otherwise noted. While exceptions may occasionally occur, typically stocks in the high-quality basket are expected to
outperform the S&P 500 over a month's time and stocks in the low-quality basket are expected to underperform. A more relevant benchmark would comprise
of all stocks and ADRs that trade on major U.S. stock exchanges with a market cap above $2 billion.
Ascendere adheres to professional standards and abides by codes of ethics that put the interests of clients ahead of its own. The following are specific
disclosures made by Ascendere:
1) Ascendere may have a financial interest in the companies referred to in this report ("the Companies"). The research analyst covering the Companies
and members of the analyst's immediate family have a financial interest in one or more of the Companies.
2) Ascendere generates revenue from research subscription revenue and portfolio management fees. At any given time it may be long or short any of
the Companies.
3) Ascendere does not make a market in the securities of any of the Companies.
5) Ascendere has not managed or co-managed a public offering for any of the Companies.
6) Neither Ascendere nor any of its officers or any family member of the covering analyst serve as an officer, director or advisory board member of any
of the Companies.
7) Neither Ascendere nor any of its officers or any family member of the covering analyst beneficially own 1% or more of any class of securities of any of
the Companies.
8) The covering analyst certifies that this report accurately reflects such analyst's personal views.