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PERSPECTIVE IS ALL
We begin today’s portfolio review with some wisdom from the legend himself, Stanley Druckenmiller.
His philosophy on diversification, knowing when you’re hot or cold, and being a good technician as you are a fundamentalist has shaped a lot of the development I’ve had as an investor myself.
One thing should be clear to you, and it is that trading/investing is no different than any other business, you have:
Inventory (generated ideas)
KPIs (which we’ll cover today)
Costs (mostly found in losses)
Customer concentration
That last part is important because is essentially what you have seen in the Offside portfolio.
Software names like Adobe, Workday, and Microsoft looked fantastic as both a fundamental and a technical story.
And they delivered over 80% of our total returns since I started this newsletter.
The other dozen or so trades and ideas have done just okay, with 10% gains and some 3% losses thereabout.
Nothing compared to our software gains which stood in the 40-70% range!
As you will see in our KPI section, the Offside portfolio has doubled the S&P 500 over the past three months while carrying 5.31% volatility (versus the market’s VIX of 16.8%), effectively nearly tripling the market’s Sharpe Ratio.
All this to say, there are typically two phases to this business, which you will usually hover back and forth through your career in markets:
You will be hot, in tune with the markets, and driving 80% of your returns from a couple of ideas
You will turn cold, out of sync with the markets, and 80% of your ideas will deliver mediocre returns and even accumulate losses
Knowing where you are between these two is your main job as a trader/investor.
Failing to recognize when you’re hot makes you leave money on the table.
Refusing to see you’ve gone cold is how small losses become career-ending ones.
After our hot run in June, July, and most of August…
I am here to show you, through KPIs and methods learned during my time at Goldman, how that hot run has now gone cold.
More importantly,
What I plan to do about it, still beating the market while only taking those “bunts” and wait for the home runs to start showing up again like they did in software.
Because going cold doesn’t mean you stop playing.
It means you stop swinging like you’re hot.
Let’s get into it.
Offside Portfolio: September Review.
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