Is CAMAX shorting a leverage ETF (SSO)?

bee

This fund, CAMAX, has always intrigue me with its agressiveness and relative success. I have notice some shorting going on in the portfolio,



and would like any insight readers have on shorting as a strategy for a mutual fund or an overall portfolio.

CAMAX seens to be using SSO as it's largest short position (-5.38% of portfolio wt). I would imagine there is some secret sauce to this strategy which again certain fund managers (in this case, Brain Barish) implenent.

Finally, CAMAX recent lack of volitility and performance over the last two years is impressive when compared it to funds like YACKX:

MikeM

Umm, Bee, lack of volatility??? Volatility is typically measured by standard deviation, and CAMAX stdev is almost 3x higher than YACKX, 26 versus 9 over the last 3 years. It does have a winning upside/downside capture ratio, but boy are the ups and downs magnified.

Ted

@bee: Great, off the porch, alpha male fund. When Barish is hot, he's hot, when he's cold, he's cold.
Regards,
Ted

bee

Also noticed that CAMAX is no longer categorized as a Large Value by M*, but because of its non-US holdings, is now categorized as a World Stock fund.

Ted

@bee: From U.S. News & World Report (Copy & Paste)
Regards,
Ted
As of July 03, 2014, the fund has assets totaling almost $256.35 million invested in 31 different holdings. Its portfolio consists primarily of shares of large companies.

Relative to its large-cap value peers, this fund is aggressive in a number of ways. First, as of the end of January, the fund owned shares in just 29 companies. This concentrated, high-octane portfolio pushes the fund's performance, for better or worse, toward the extremes in any given year. The fund also has a fairly large part of its portfolio invested in small-cap names, which tend to be more volatile than their large-cap counterparts. And it is heavily invested in the technology sector, in which stocks are more commonly associated with fast growth than deep value. Meanwhile, the fund's turnover ratio exceeds 200 percent. This points to an opportunistic management team that is willing to trade quite frequently. Lately, this strategy has paid off extraordinarily well. The fund launched in 2007, and finished 2009 and 2010 in the top percentile of Morningstar's large-value category. Through the first quarter, the fund was once again in the top percentile of its group for 2011. Its returns over that three-month period beat the average for its Morningstar group by 13 percentage points. Its trailing three-year returns, as of the end of the first quarter, beat those of the S&P 500 by a whopping 18 percentage points per year.

Another distinguishing characteristic is the fund's exposure to international companies. One of its top holding, Flextronics International, is based in Singapore. Another big holding, Bombardier Inc., is based in Canada. As for U.S. companies, the fund's largest domestic positions are Apache and United States Steel Corporation. The fund has returned 50.79 percent over the past year and 11.34 percent over the past three years.

Investment Strategy

The fund follows an aggressive strategy. Management looks for companies whose prices are artificially low, often due to short-term losses of momentum. Management follows a highly compact strategy, which tends to push the fund's returns toward the extremes. The fund is heavily invested in foreign companies and, relative to its peers, in small-cap stocks. Management does quite a bit of trading, as is reflected in the fund's high turnover ratio. Meanwhile, when management doesn't see opportunities, it is willing to sit on a fairly substantial cash stake.

Gary

BEE -

Help me understand..

What do the numbers for Pro Shares ie - -5.38 100,000 100,000 - - -
represent in your post?

Or where can I find your reference??

Thanks
Gary

rjb112

Gary said:

BEE -
Help me understand..

What do the numbers for Pro Shares ie - -5.38 100,000 100,000 - - -
represent in your post?

Or where can I find your reference??

Thanks
Gary

Not Bee, but you can find his reference on Morningstar.com in the portfolio section, "holdings". The -5.38% refers to the portfolio weighting of that security, and then # of shares and # of share change

See below:

scott

MikeM said:

Umm, Bee, lack of volatility??? Volatility is typically measured by standard deviation, and CAMAX stdev is almost 3x higher than YACKX, 26 versus 9 over the last 3 years. It does have a winning upside/downside capture ratio, but boy are the ups and downs magnified.

I'd agree that over the long-term this fund has hot and cold periods, as well as above-average volatility. Still, not a bad fund for aggressive investors with a time horizon beyond short-term.

BobC

This is not a fund many people could stick with. Compared to some much lower-volatility funds like GSRLX, PRWCX, and OSTFX, the fund has not put up any better long-term numbers, except for the last 12 months. And that period has been a mostly strong bull market. Most investors would be wise to stick with less of a roller-coaster fund.

Gary

Trying to humor myself with M* presentations - which can be confusing, I would think that if CAMAX was short 100,000 shares of ProShares it would be designated as -100,000 shares. and change would be -100,000 shares. Unless their original position was 200,000 shares and now their position is now a 100,000 shares. In that case they were never short the ProShares etf.

But this is just me.
Gary

bee

Gary said:

Trying to humor myself with M* presentations - which can be confusing, I would think that if CAMAX was short 100,000 shares of ProShares it would be designated as -100,000 shares. and change would be -100,000 shares. Unless their original position was 200,000 shares and now their position is now a 100,000 shares. In that case they were never short the ProShares etf.

But this is just me.
Gary

I have never shorted a position, but my understanding is that you have to "own" the shares you wish to short. So the positive 100,000 shares makes sense. The negative portfolio wt (in this case -5.38%) is the clue that the position is being shorted.

Maybe others can explain this more clearly.

rjb112

bee said:

Gary said:

I have never shorted a position, but my understanding is that you have to "own" the shares you wish to short. So the positive 100,000 shares makes sense. The negative portfolio wt (in this case -5.38%) is the clue that the position is being shorted.

Maybe others can explain this more clearly.

I've also never shorted a position. My understanding is that you borrow the shares from your broker and then sell the borrowed shares. Your hope is to buy them back at a lower price in the future.

No doubt that the negative number, -5.38% is the clue that the position is being shorted. I have no opinion regarding whether the shares should show up as 100,000 or -100,000

I second the motion that perhaps others can shed light on this

scott

rjb112 said:

bee said:

Gary said:

I have never shorted a position, but my understanding is that you have to "own" the shares you wish to short. So the positive 100,000 shares makes sense. The negative portfolio wt (in this case -5.38%) is the clue that the position is being shorted.

Maybe others can explain this more clearly.

I've also never shorted a position. My understanding is that you borrow the shares from your broker and then sell the borrowed shares. Your hope is to buy them back at a lower price in the future.

No doubt that the negative number, -5.38% is the clue that the position is being shorted. I have no opinion regarding whether the shares should show up as 100,000 or -100,000

I second the motion that perhaps others can shed light on this

The bolded portion is correct. I've never shorted in terms of going through the process of shorting shares, but I've used various short products. Options seem to be becoming an increasingly popular alternative - if you short a stock, your potential loss is theoretically infinite. If you lose on an option, you're out the option premium.

The other thought I have regarding using ultrashorts is potentially using leverage to lessen outlay. Say someone wanted $50,000 in a 1x short S & P 500 fund. They instead use $25,000 in S & P 500 2x ultrashorts and then still have the other $25,000 they were going to use that can be invested in something else.

rjb112

scott said:

rjb112 said:

bee said:

Gary said:

The other thought I have regarding using ultrashorts is potentially using leverage to lessen outlay. Say someone wanted $50,000 in a 1x short S & P 500 fund. They instead use $25,000 in S & P 500 2x ultrashorts and then still have the other $25,000 they were going to use that can be invested in something else.

One big issue with using leverage to lessen outlay is that the majority of the leveraged short funds are exchange traded funds. These short etfs, or leveraged short etfs, are specifically designed for one day holding periods. If you hold them longer than one day, the math does not work out......they "reset" each day.

So let's say you make a brilliant call and decide to go 2x short the S&P 500 using a leveraged etf. Let's say that over the next 6 months, the S&P 500 drops 25%. You are expecting a 50% gain from your 2x leveraged etf, but it very well may have a performance that is far out of line from that. The math may not work out at all for holding periods longer than one day on these products.

It may be a very different story with traditional mutual funds that short or use leverage, but the etfs are designed mathematically for one day holds.

scott

I agree with you that these funds are designed to be trading vehicles. Some (such as some of the VIX products and commodity products) have been mediocre-to-terrible at tracking the underlying for any real length of time.