New York (HedgeCo.net) – The last two months have been somewhat tough for the overall market. With May 27 as a starting date and continuing through July 27, the S&P 500 has only been in positive territory for four days. The index was down as much as 3.62% from May 27 through July 8, but then bounced back. After the bounce there was another batch of down days and for the two-month period the S&P was down 2.63%. During this two-month stretch, of the ten main sectors, only three were able to gain ground. Of the seven that lost ground, the industrial sector was the third worst performing sector with only energy and materials performing worse. Using the Industrial Select Sector SPDR (NYSE: XLI), the sector lost 6.6% during the two-month period in question. While this wasn’t good news for anyone invested in the XLI, it was good news for the HedgeCoVest Industrial Short-Only model.
The model gained 10.3% from May 27 through July 27, creating a gain 50% greater than the loss experienced by the XLI. From the beginning of the year through the close on July 27, the model gained 5.44%.
The snapshot of the model shows a gain of 5.28% over the 30 days back from July 29 and it shows the maximum drawdown to date was 7.47%. The -0.96 correlation shows an almost perfect inverse relationship with the S&P 500. The portfolio consisted of 24 positions at the time the snapshot was taken, for a moderately active model.
The current allocation snapshot shows a diversified portfolio with short positions in nine different sub-sectors. The highest percentage allocation is to Transportation at 30% and the second highest bearish allocation is in Diversified Machinery at 21%.
The Industrial Short-Only Model is one of the 15 composite models offered on the HedgeCoVest platform and the portfolio is comprised of the trades from the short positions of the Fund Manager models. The process of taking the highest conviction trades from the Fund Manager models has paid off for the Industrial Short-Only model as evidenced by the performance over the last two months. With the -0.96 correlation to the S&P, this model is a great model for an investor that is looking for a hedge against an overall market decline.