06 September, 2020 Audacity Strategy

Audacity Strategy - September 2020 Update

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.

Performance Summary

Audacity Strategy performance

* Estimate based on Patton Funds calculations.

Note: the Year-to-Date return is back-tested through 3/31/2020

The Audacity Strategy closed the month of August little changed and is higher year-to-date by +18.4%. As I’ve highlighted in prior blogs, the performance of Audacity continues to be very much disconnected from the performance of the S&P 500 moving in opposite directions during 11 of the 21 trading days during the month. This is less than ideal during a month like August when the S&P 500 produced a strong return but is a great characteristic of Audacity long-term and especially during bear markets.

Year-to-Date Performance

The accompanying graph shows the performance of our Audacity Strategy compared to the S&P 500 year-to-date. As it illustrates, Audacity had a very strong start to the year up over +20% by mid-February. These gains evaporated in March with it down -24.8% year-to-date at the lows while the S&P 500 was off -31% at the same time.

Audacity Strategy vs S&P500 year to date performance

When the market started its remarkable recover in late March, Audacity surged as well then stalled while the S&P 500 continued higher. The first week of June was rough on Audacity when stocks like airlines and cruise line companies surge (Audacity was short such stocks creating losses). It recovered relatively quickly and moved back into positive territory year-to-date and repeated much the same, down then recovering, during the month of August.

As all investors know we have experienced a lot of volatility in both the market and Audacity Strategy in 2020. The following graph shows the volatility of Audacity during 2020. As the graph shows, it was actually trending lower during the first 6 weeks of the year then spiked higher in March to levels that compare to some of the most volatile periods in history. This volatility continued to inch higher through late May and has since fallen but remains about twice as high as it started the year.

Audacity Strategy volatility year to date

Position Changes

There was less trading in Audacity during the month of August compared to prior months. As the below table shows there were only three long positions that were closed (sold) and three new stocks added. Of note is the sell of Costco (COST), one of the best performing stocks during the March selloff, as our Strategy rotates into some stocks that have recovered the fastest since the March selloff such as Best Buy (BBY) more than doubling from the March lows.

New and closed long positions

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