The US Long/Short combines two momentum strategies, one identifying the weakest performing stocks from the S&P 500 and Nasdaq 100 and the other selecting the top three global stock ETFs. The strategy can move between 100% long and 100% short exposure depending on market conditions and can, therefore, profit in both bull and bear markets.
Latest Update – 2 November 2020
Being the first trading day of November, it is time to rebalance our US long short portfolio. Regarding the ‘long’ ETF component of the portfolio, which as a reminder holds the top three momentum ETFs, just the one change is required. VTI has dropped out of the top three, thus must be sold, and will be replaced by EWJ, the iShares MSCI Japan ETF.
To the ‘short’ stock component, and for this month, there are five stocks in total that qualify to be held for November. All of these stocks we currently hold. So the action for today is to close out the two other short positions we hold which no longer qualify. As such, we recommend that members close out their short positions in Boston Properties (BXP) and M&T Bank Corp (MTB).
As a reminder, this strategy rebalances on the 1st of each month (or the next business day if the 1st is a non-trading day). For specific details of closed trades, please see our closed trades page.
For historical trade updates please click here.
|Stock code||Stock name||Country code||Long short||Qty||Entry date||Entry price||Current price||Current value||Return percentage|
|-33||1 Oct 20|
|-30||1 Oct 20|
Cboe Global Markets Inc
|-56||1 Oct 20|
Essex Property Trust
|-21||1 Jul 20|
iShares MSCI Japan ETF
|286||2 Nov 20|
Huntington Ingalls Industries Inc
|-35||1 Oct 20|
iShares Russell 2000 ETF
|111||1 Oct 20|
Invesco QQQ Trust Series 1 ETF
|76||1 May 20|
* Quantities are based on investing US$5,000 per stock on the entry date for the short positions and US$16,666 per stock on the entry date for the long positions.
** All dollar values are in US dollars, and therefore returns are calculated as a US dollar return. Depending on whether or not you use hedging to manage your currency, exposure will determine whether you need to adjust returns to account for exchange rate effects.
US Long/Short Strategy
Long/Short strategies are generally considered to be market neutral and should, therefore, be capable of performing regardless of broader market conditions. This fact can make them a good portfolio for diversifying other ‘long only’ assets.
How To Follow This Strategy
Rivkin’s strategies are designed to be as easy as possible for investors to follow. To follow the US Long/Short strategy first requires that investors can short sell stocks. This can be done in a variety of different ways, but we recommend contracts for difference (CFDs) as a cheap and comfortable option to achieve this. Once this is in place, investors need to buy the long positions and short sell the short positions in the above table. The short positions have a portfolio weight of 10% each while the long positions are each 33.3% of the portfolio. Weights can drift over time as stock prices move, but we only recommend re-balancing stock weights if they stray too far from the target weight. The stock volumes shown in this table are based on a $5,000 investment per stock. Being a US strategy, this is priced in US dollars and therefore, to get the Australian dollar value, the current exchange rate should be applied.
Once per month, the list of stocks will be updated in what we call a ‘re-balance’. This means investors will need to look at the new list and sell any stocks that are no longer on the list. After these stocks are sold, the new stocks from the current table can be bought.
About The Strategy
The US Long/Short strategy was developed by Rivkin during 2018 and was rolled out the same year. Extensive back-testing was done to create and refine the strategy, and it is this back-testing that we rely on to give us increased confidence about future expectations. Please click here to find out more about the strategy.
Quantities and calculations in this post use the Rivkin Model and might differ from yours. This post does not constitute an invitation to buy or sell any securities. Before conducting any transaction, make sure you fully understand the terms of the product and the relevant risk factors involved. You can seek professional advice to determine the appropriateness and cost of any transaction from the broker you use.
CFDs are leveraged products. Trading CFDs carries significant risk and is not suitable for all investors. You may lose more than you invest, and you do not own, or have any interest in, the underlining asset. Please make sure you fully understand the risks involved before entering any transaction
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