Musings On The Quarter That Was

It is the end of the quarter today and I have been spending some time today reflecting on what I have done right and wrong. It was a very successful quarter for me so there has been more right than wrong. I wrongly turned cautious when the S&P 500 reached 1340 but have traded my hedges well so that the cost has been modest. I'm not convinced that given the input I had at the time that I did anything wrong. I generally miss the end of rallies but I rarely get caught long at the top. That is a trade off I am willing to make.

More than market timing, my stock selection has been the reason for my success this year. My largest sector weighting coming into the year was software. My largest core positions in software were CA and BMC. They rallied 35% and 20% respectively before I sold out of them completely. I replaced them with Symantec, Comverse and Amdocs, which have done well since.

I have never done a scientific study of my returns but I believe the vast majority of my returns in recent years (post 2008-2009 bear market) have been generated through individual stock selection rather than through predicting the market. It certainly did not hurt that I was in a position to buy the past two Summers as I turned cautious ahead of the big drops, although I was early turning cautious both times. But I believe stock selection has been much more important.

I spend a lot more time on the blog discussing the market rather than my individual positions. The reason is that there is simply more to say on a daily basis. Once I write up a stock idea, there is not much to say unless there has been a major change in the price or the fundamentals. However, most of my day is spent searching for individual ideas and that is where I believe most of my returns are generated.

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