All blog content is for information purposes. Any reference to indivisual stocks, indexes, or other securities as well as all graphs and tables are not recommendation but only referenced for illustration purposes.
The following is to provide some insight and perspective on the performance of the Audacity Strategy for March and more. For more information on the strategy, visit our website here.
The Audacity Strategy is most often recommended as only one component of a Super-Diversified Portfolio. Therefore the information in this blog only pertains to one component of a Super-Diversified portfolio. For more on Super-Diversification, visit our website here.
* Estimate based on Patton Funds calculations.
Note: the Year-to-Date return is back-tested through 3/31/2020
Audacity added to its March gains in April but did lag well behind the S&P 500’s biggest gain in 30+ years. The underperformance of Audacity during the month was almost entirely the result of the short positions.
The accompany graph shows the allocation of the short positions as of the end of April with energy stocks making up 25.6% of the total. These energy stocks have been very profitable to be short in 2020 but on average rallied +30.8% in April, costing Aduacity -7.7% of return alone for the month, as investors were clearly bottom fishing in some of the most beaten up stocks. Some of the biggest movers are shown in the below table.
Shorts Outperformed Longs
The average short position rallied +26.2% in April, causing loses (shorts going higher cause loses), while the average long position gained only +15.9%. Audacity produced a gain in spite of this due to the long-bias (more longs than shorts) in place. Only 3 of the 50 short positions generated a profit while 67 of the 76 longs did so.
The performance of Audacity continues to be relatively uncorrelated to the S&P 500 (not moving up and down at the same way at the same time). The below graph shows some select dates from April when the performance between the two was significantly different.
As the graph shows, on the 1st and the 15th the S&P 500 fell sharply while Audacity was nearly unchanged while on the 17th and 27th the S&P 500 surged higher and Audacity was down fractionally. This performance behavior is exactly what we want and expect from Audacity and will contributed significantly to its long-term expected success.
Healthcare Stocks Added to Longs
The Healthcare sector has been one of the best performers in 2020 down just -1.3% for the year. Audacity added 4 new long positions in the healthcare sector increasing the long allocation to this sector from 6.3% at the end of March to 17.5% at the end of April.