Investor's Hedge Portfolio: Staying Balanced in an Unbalanced World

Editor’s note: The Investor’s (H)Edge Portfolio, managed by David Brown, is a long/short, absolute-return portfolio of 13 Longs and 13 Shorts.  Each week David reviews one long position and one short position and either renews or replaces the stocks, based primarily on the stocks’ scores in the Sabrient Outlook Rankings. Learn more more about the Investor’s (H)Edge Portfolio.

Staying Balanced in an Unbalanced World

by David Brown, Chief Market Strategist, Sabrient Systems

The market rallied big today, but it would be Pollyannaish to get too excited about it. The global picture remains dark, with serious nuclear risks threatening to further the chaos in a ravaged Japan and with the Middle East still in turmoil.  The conflict in Bahrain has heated up with the threat of Saudi Arabia entering the fray, and Libya continues to struggle against Gaddafi, who seems to have gained the upper hand over the past week. And that’s hardly good news.

Domestically, our economic data has been mixed.  Today’s rally was fueled in part by strong readings from two indicators:   The Philly Fed survey showed an improvement in general business conditions, and there was a nice uptick in the leading economic indicators (LEI).  Confusing the picture was an unexpected drop in industrial production.

Moreover, the very large drops in housing starts and permits earlier this week threaten to cut short the small rebound in the housing sector. The indexes that measure inflation – the PPI and CPI – were neither good nor bad, which leaves us a bit edgy.  But after the market damage of the past week, it’s not too surprising that a little good economic news overshadowed the bad.

Fortunately, our Investor’s (H)Edge Portfolio remains balanced between long and short positions.  This past week proved once again that “balanced” is what’s needed in this kind of market.  Since our publication last Thursday, our portfolio has gained +1.16% while the S&P 500 has dropped -1.66%.

Portfolio Review

This week we are reviewing long position Tyson Foods, Inc. (NYSE:  TSN) and short position Terex Corporation (NYSE: TEX) . . .  Click here to learn more about the Investor’s (H)Edge portfolio.