ALL BLOG CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. ANY REFERENCE TO OR MENTION OF INDIVIDUAL STOCKS, INDEXES, OR OTHER SECURITIES ARE NOT RECOMMENDATIONS AND ARE SPECIFICALLY NOT REFERENCED AS PAST RECOMMENDATIONS OF PATTON WEALTH ADVISORS. ALL GRAPHS, CHARTS, AND TABLES ARE PROVIDED FOR ILLUSTRATION PURPOSES ONLY. EXPRESSIONS OF OPINION ARE ALSO NOT RECOMMENDATIONS AND ARE SUBJECT TO CHANGE WITHOUT NOTICE IN REACTION TO SHIFTING MARKET, ECONOMIC, OR POLITICAL CONDITIONS. IT IS COMMON FOR US TO USE A FUND AS A PROXY FOR AN INDEX OR ASSET CLASS. FOR MORE DETAILS SEE OUR FULL DISCLOSURE HERE.
The following is to provide some insight and perspective on the performance of the Patton Flex Fund for March and more. For more information on the strategy of the Fund, visit our website here.
The Flex Fund 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.
* Compounded annually net of all fees.
Note: individual investor performance may differ.
The Flex Strategy closed the month of October down -2.9% while the S&P 500 coincidently delivered a similar return down -2.7%. In spite of this similar return for the month, the Flex and S&P continue to deliver distinctly different performance behavior moving in opposite directions 7 of the month’s 22 trading days. Furthermore, the Flex held onto its year-to-date performance lead over the S&P 500.
As would be expected during a month when the S&P 500 is down, the long positions in the Flex were also down but did perform relatively better than the S&P 500 losing just -2.1%. This is a relatively positive result while the disappointment was on the short side. In a down month, we generally expect our short positions to be profitable (they go down in price and we profit) but that was not the case in October as the short positions, on average, gained +0.8% resulting in the Flex losing the same amount.
Example of a Winning Short
As noted above, our short positions generally moved higher costing us return in October but that certainly was not the case for all positions. Novavax, Inc. (NVAX), a biotech company with little sales and never profitable, was an example of a profitable short. As illustrated in the accompanying graph, the stock fell from $108 at the start of the month to $81 by the end.
Example of a Losing Short
Tapestry, Inc. (TPR), the retailer of brands such as Coach, Kate Spade, and more, saw its stock rally in October as highlighted in the accompanying graph resulting in a loss for the Flex. This stock’s rally was fueled by signs that the economy is continuing to recover and shoppers will return to stores. The Flex exited this position on October 23rd.
Positioned for Market Gains
Our Flex Strategy is neutral during the months of June through October meanings that we have similar exposure on both the long and short side of the portfolio. During these months the direction of the market has nearly no direct impact on the performance of the Flex.
Starting in November the Flex tilts to a long-bias during which time we have more money invested in long positions than shorts. Although the market’s direction will NOT entirely dictate the performance of the Flex, it certainly has more impact. The Flex is designed this way because decades of market history suggests the market’s performance tends to be strongest during the months of November through May and our goal is to capture more of these gains.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Any specific securities or investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own situation before making any investment decision including whether to retain an investment adviser.
All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. This content was created as of the specific date indicated and reflects the author’s views as of that date. Supporting documentation for any claims or statistical information is available upon request.
Past performance is no guarantee of future results. Any comments about the performance of securities, markets, or indexes and any opinions presented are not to be viewed as indicators of future performance.
Investing involves risk including loss of principal.
Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. For more information on specific indexes please see full disclosure here.
Any charts, tables, forecasts, etc. contained herein are for illustrative purposes only, may be based upon proprietary research, and are developed through analysis of historical public data.
All corporate names shown above are for illustrative purposes only and are NOT recommendations.
International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.
Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk.