What to Do After A Bad Day? by David Merkel, CFA of the Aleph Bog

I didn’t feel well today, but my broad market portfolio did better than me. I probably could not have picked a worse day to do my reshaping, but here are the results:

Sales:

  • Aspen Insurance Holdings Limited (NYSE:AHL)
  • Flagstone Reinsurance Holdings SA (NYSE:FSR)
  • Redwood Trust, Inc. (NYSE:RWT)
  • Mylan Inc (NASDAQ:MYL)
  • Lafarge S.A. (ADR) (OTCMKTS:LFRGY) (EPA:LG)

Purchases:

  • Reinsurance Group of America Inc (NYSE:RGA) (old friend, cheap price)
  • Honda Motor Co Ltd (ADR) (NYSE:HMC) (TYO:7267)

Rebalancing Buys:

  • Valero Energy Corporation (NYSE:VLO)
  • ConocoPhillips (NYSE:COP)
  • Vishay Intertechnology (NYSE:VSH)

Rebalancing Sale:

  • Deerfield Capital

I’m not done. My moves today raised cash from 5% to 10%, and trimmed positions from 36 to 33. I have room for two more ideas, and am working on where to place cash. My timing of buys and sells today was good — not that that is a key competency of mine by any means.

Aside from the sale of the reinsurers, which were just cheap placeholders, the other positions were not as relatively cheap as they once were. RGA and Honda are quality companies selling at bargain prices. If I had more names like those, I would buy them all day long.

Away from my broad market portfolio, I raised my equity exposure in my mutual funds fractionally today. Time to rebalance.

PS — I can’t remember another day quite like this, where the late negative to positive move was so pronounced.

Full disclosure: long DFR RGA HMC VLO COP VSH