Ascendere Associates LLC

Innovative Long/Short Equity Research

Model Portfolio Daily Update: November 16, 2010
This daily update is a supplement to a monthly report dated October 31, 2010 that details the model portfolio strategies of Ascendere Associates LLC ("Ascendere"). The daily update alerts readers to portfolio changes, provides updated rolling price targets and stops, and reports daily returns and updates to month-to-date and year-to-date returns. None of the information in this report is representative of any investment management service we offer. A long-only model based on actual trade data is available via a separate service. Please see our disclosures and disclaimers at the back of this report.

New Actions Required:
None

Of Note:
The worst decliner today was TRW Automotive (TRW), down 5.69%, due in part to the decline in the market and more likely due in part to an announcement that its largest investor and part of management would together sell 10 million shares in a secondary offering, with the company receiving zero proceeds. Secondary offerings tend to come right before peaks in the market, so it is no wonder that investors are spooked. At the same time, we would note that the company itself is not raising money -- it is just the managers cashing in. In addition, we are just a few days away from the General Motors IPO -- one of the biggest IPOs in history. It makes sense that some investors will be reducing positions in one auto related stock and reallocate it into GM. We have no way of knowing if this is in fact what is going on, but it is something we would do. The second worst decline in our long models today was Freeport McMoRan (FCX), down 4.30%, but high volatility on the way up or down is normal for this stock. FCX in our opinion is the most attractive stock of any sector. An Energy and Material sector sell off may or may not continue, but demand for copper and gold will not dissipate overnight, and inflationary fears will always be lurking around the corner. Caterpillar's (CAT) announcement it intends to acquire Bucyrus (BUCY) at a large premium is just one more data point backing the FCX theme.

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

There is a wide amount of slippage between our theoretical long model portfolios that we write about here and our other model based on trade data -- probably a 1.5% difference right now. This is due to poor timing of buys on November 1 that seems to have been compounded since then. The recent market action has caused us to lose almost all the gains we had made for the MTD, and even though the S&P 500 is down for the MTD, we are still ahead slightly. The recent price action s is a reason why we have favored closing out our models once they reach a certain return during the month. Unfortunately this time around the portfolio target return was not achieved, which is why the models remain long. Today's sell off may or may not have much longer to go, though it is difficult for us to be overly worried about continued huge declines given the strength and momentum behind corporate profits.

Actions Taken for November to Date:
11/15/2010: We adjusted MTD returns for the short models to take into account a large dividend paid to GGP shareholders. 11/15/2010: A short position in Fortune Brands (FO) was assumed closed at $57.33 for a 6.01% loss after closing above its stop price of $58.23 the previous trading day. 11/11/2010: A short position in General Growth Properties (GGP) was assumed closed at $15.44 for a 8.1% gain and replaced with cash after closing below its target price of $15.48 the previous trading day. 11/10/2010: A long position in Fossil Inc. (FOSL) was assumed closed at $69.70 for an 18.2% gain and replaced with cash after closing above its price target of $66.92 the previous trading day. 11/10/2010: A short position in Range Resources Corp. (RRC) was assumed closed at $42.75 for a 14.3% loss and replaced with cash after closing above its stop price of $40.95 the previous trading day. 11/9/2010: A short position in MGM Mirage (MGM) was assumed closed at the end-of-day price of $13.00 for an 18.9% loss after closing above its stop price of $12.81 the previous trading day. 11/4/2010: A short position in EOG Resources, Inc. (EOG) was assumed closed at the closing price of $88.29 for a 7.8% gain and replaced with cash, after closing below its price target of $88.64 the previous trading day for an assumed 7.76% return. 10/31/2010: Model portfolios were rebalanced following the 10/31/2010 close.

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

Nostradamus Activity:
We have noted on numerous occasions that it is not uncommon for stocks that appear in our model portfolios or our weekly ranking updates to presage major ratings actions by sell side firms. See our "Nostradamus Report" for more details. Below is a non-comprehensive list of sell side actions on stocks that have been in our model portfolios since at least 10/31/2010: 11/11/2010: Williams-Sonoma (WSM) -- "Wells Fargo raised its Q3 estimates for Williams-Sonoma above consensus levels ahead of the company's Q3 results. The firm thinks the company will also beat Q4 consensus estimates and it believes the stock's valuation is favorable. The firm maintains an Outperform rating on the stock." -theflyonthewall.com 11/10/2010: Williams-Sonoma (WSM) -- ThinkEquity upgraded the stock based on a recovery in home-related purchases and raised price target to $40 from $33. Oppenheimer identified WSM as a top pick in the hardlines retail sector. 11/8/2010: Albemarle Corp. (ALB) --Zacks upgrades to a Strong Buy. 11/5/2010: American Express Corp. (AXP) -- Argus upgraded the stock and raised price target to $50 due to reduced loan losses and volume growth. See also our 10/25/10 article on Seeking Alpha, "Why American Express is Finally Worth a Look." 11/5/2010: TRW Automotive Holdings Corp. (TRW) -- Deutsche Bank raised its target to $57 from $52. 11/3/2010: TRW Automotive Holdings Corp. (TRW) -- S&P Equity raised its price target raised to $62 from $50. 11/3/2010: Union Pacific Corp (UNP) -- Deutsche Bank raised price target raised to $102 from $92. 11/2/2010: Fossil Inc. (FOSL) -- BB&T Capital Markets initiated with a Buy rating.

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

* 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 replicate these theoretical strategies are practically guaranteed to generate returns significantly lower returns relative to these models. The "Naive" Model is 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. The Core Model is 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. The 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. YTD returns are based in part on backtested returns. 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 ~2.36% since 12/31/2004. None of these models assume any kind of expenses.

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

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.

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

Daily Returns
The latest daily returns, and backtested daily returns, of all stocks and model portfolio strategies are available to paying subscribers on request. 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. Our portfolio targets and stops are available to paying subscribers.

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

Month to Date Returns

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

DISCLOSURES
Ascendere is in the business of providing equity research and related consulting services to investors and their advisors. The equity research it provides includes basic quantitative model portfolios and more detailed fundamental research with respect to individual stocks. In addition, the firm manages stock portfolios for itself and clients. Ascendere currently sources financial data from Capital IQ. 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. 4) Ascendere has not received compensation from 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.

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

DISCLAIMERS
This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial instruments. The report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual recipient. The information contained herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of Ascendere Associates may hold positions in the securities of the Companies. No warranty is made as to the accuracy of the information contained herein. This information is intended for the sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. Investing in stocks includes a high degree of risk, including the risk of total loss. For additional information on risks, disclosures, disclaimers and frequently asked questions, please see the back of any monthly report.

Ascendere Associates LLC J. Stephen Castellano

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November 16, 2010 steve@ascenderellc.com www.ascenderellc.com

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