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 December 2019
Being the first trading day of December, it is time to rebalance our long short portfolio. Beginning with the long component, whereby we need to ‘rotate’ two of the three ETFS which we hold. For today, we recommend that members sell their positions in EWJ and EFA, and replace these with XLF and SPY. QQQ remains held within the portfolio.
To the short stock component, and for the month of December, there are only four stocks in total which qualify, meaning that our overall short exposure will reduce from six to four. Of the stocks, we currently hold three, meaning that we need to close out three short positions today. To do so, we will buy back BIDU, AMG, and SPG. The new short position to be added is FANG.
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 historical performance page.
|Stock code||Stock name||Country code||Long short||Qty||Entry date||Entry price||Current price||Current value||Return percentage|
|-27||4 Sep 19||$185.84||$181.64||$-4,904.28||2.26%|
Alliance Data Systems Corp
|-41||4 Sep 19||$122.89||$105.38||$-4,320.58||14.25%|
Diamondback Energy Inc
|-64||2 Dec 19||$77.34||$83.78||$-5,361.92||(8.33%)|
Invesco QQQ Trust Series 1 ETF
|84||1 Nov 19||$197.08||$204.04||$17,139.36||3.53%|
SPDR S&P 500 Trust ETF
|53||2 Dec 19||$314.31||$313.87||$16,635.11||(0.14%)|
Ulta Beauty Inc
|-21||1 Nov 19||$233.15||$252.61||$-5,304.81||(8.35%)|
Financial Select Sector SPDR ETF
|552||2 Dec 19||$30.15||$30.29||$16,720.08||0.46%|
* 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.
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