D&D Note (3-30-2012)
Still sitting on the sidelines? Cash stuffed under the mattress? Well then you just missed out on the biggest quarterly gain in the markets since 1998. But is this rally for real? Have we come to far to fast? Why so little daily volume?
D&D’s strategy started the year with a heavy allocation in risk assets – meaning equities (stocks). As the year progressed we slowly, surgically began to ring the register and take gains on the riskier stocks and holding the more defensive. Then building a war chest of liquid cash to be put back to use after a correction.
But we still held some defensive positions to continue to take advantage of the gains (and of course holding Apple). Now D&D Investments is 60% cash and 40% net long.
Where has our money so far not been? In Financials. So far for the last few years Financials have just been too risky. However once we get a re-pricing of the market you will need to have some sort of position in the Financial sector. D&D still likes the regional banks globally.
In the last nine quarters on the first day we’ve seen an average 1.3% gain. So don’t be surprised to see an up day the first day of the quarter to make it 10 in a row. But the question is what will drive markets higher from there?
The bigger question is will the next earnings season be as robust as expected – or will we see write downs in earnings expectations?
Unfortunately if you haven’t put any money to work yet this year – we are now at a very risky point in the rally to try and chase gains. For new money its probably best to wait for a better entry point – unless you see certain companies on your shopping list have a big down (5-10%) then you can start a position but still don’t go all in.
Corrections are very hard to call and usually you can only get within one month – to two weeks from the top. The obvious risk in holding all the way to the top is that the market corrects before you have cashed out. Which is why its better to miss out on the very top than go over the top and crash.
So what’s on our shopping list heading into the new quarter? Here is a sneak peak:
– AAPL
– ABV
– EMC
– FHN
– FMX
– GARPY
– HAIN
– ROST
– JCYCF
– MO
– TSM
– WYNMF
Make sure you have your shopping list ready – April Showers will turn into April Sales.
Also, lets not forgot that Facebook stopped trading in the secondary market today – meaning the Facebook IPO should hit in May.
D&D Investments 
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