As noted, I began 2006 with a portfolio very different from that of the beginning of 2005. I had 20% invested in Asian funds and about 60% in resources stocks, particularly metal mining companies and energy producers. I also had 10% in Ship Finance Limited (SFL), a lessor of oil tankers, and 10% in cash. With fewer dividends and higher borrowing rates, margin made less sense.
The first 5 months of 2006 were very easy. In that span my portfolio appreciated almost 50% as miners soared along with metals prices. Silver Wheaton (SLW) jumped from 6 to 11. A gold miner called Desert Sun, which I bought in the high 3s, rose 50% before getting taken over in April by Yamana (AUY). The latter rose strongly into May. My biggest gainer was Eurozinc Mining (EZM €“ since acquired by Lundin Mining or LMC). I bought my initial position below $1 and by May it was close to 3. Positions in Northern Orion Mining (NTO) and Northgate Mining (NXG) also did well.
The metal’s euphoria peaked in early May. Gold had run up from 525 at the beginning of the year to 725 on May 12th. Copper was approaching 4, having started the year at 2. With impeccable timing, commentator James Cramer plugged EZM on May 10th. The next day it hit an intraday high of 3.25 before closing at 2.91. Then the metal correction began. In mid-June gold was back near 560, and copper fell below 3. EZM had dropped to 2.10 by May 22nd. That turned out to be its low, but SLW, AUY and others didn’t bottom till mid-June. SLW bottomed at around 7, while AUY was down 50% from its May peak around 12.
Needless to say, my portfolio took a dive, but it was nothing like the April 2004 subprime debacle. My yearly gain remained above 9%, and then began to rise again. While it never regained early May levels, it remained solidly in double digits. I did a pretty good job of holding through the pain with one exception noted below. There was another commodities hiccup in September. I timed well the sales of some covered call on AUY and NTO, which mitigated the pain.
Japan was an idea which didn’t work out in 2006. I could have perhaps divined from the oversize gain in late 2005 that it might need to catch its breath. The decision I regret the most, however, was selling SFL This had been going sideways for the first half of the year, though during that time it was pumping out an 11% dividend. I sold the position during the commodities debacle of May and June. I suspect this was a psychological risk transfer. I wanted to sell something, but didn’t want to sell the mining stocks which had been so much higher just a little while ago. So I sold the quiet position. It started to take off in July, going from around 18 to 28 today.
Despite SFL, I finished the year with a healthy 34% gain. I had also regained my confidence. While confidence can be a double-edged sword, I think it was probably a good thing in this case. When near the end of the year a friend suggested I start blogging, I decided it was worth a try. The rest of my trading history can now be seen here daily on behavioraltrader.com.
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2006 Recovery (my trading history Pt. 10)
As noted, I began 2006 with a portfolio very different from that of the beginning of 2005. I had 20% invested in Asian funds and about 60% in resources stocks, particularly metal mining companies and energy producers. I also had 10% in Ship Finance Limited (SFL), a lessor of oil tankers, and 10% in cash. With fewer dividends and higher borrowing rates, margin made less sense.
The first 5 months of 2006 were very easy. In that span my portfolio appreciated almost 50% as miners soared along with metals prices. Silver Wheaton (SLW) jumped from 6 to 11. A gold miner called Desert Sun, which I bought in the high 3s, rose 50% before getting taken over in April by Yamana (AUY). The latter rose strongly into May. My biggest gainer was Eurozinc Mining (EZM €“ since acquired by Lundin Mining or LMC). I bought my initial position below $1 and by May it was close to 3. Positions in Northern Orion Mining (NTO) and Northgate Mining (NXG) also did well.
The metal’s euphoria peaked in early May. Gold had run up from 525 at the beginning of the year to 725 on May 12th. Copper was approaching 4, having started the year at 2. With impeccable timing, commentator James Cramer plugged EZM on May 10th. The next day it hit an intraday high of 3.25 before closing at 2.91. Then the metal correction began. In mid-June gold was back near 560, and copper fell below 3. EZM had dropped to 2.10 by May 22nd. That turned out to be its low, but SLW, AUY and others didn’t bottom till mid-June. SLW bottomed at around 7, while AUY was down 50% from its May peak around 12.
Needless to say, my portfolio took a dive, but it was nothing like the April 2004 subprime debacle. My yearly gain remained above 9%, and then began to rise again. While it never regained early May levels, it remained solidly in double digits. I did a pretty good job of holding through the pain with one exception noted below. There was another commodities hiccup in September. I timed well the sales of some covered call on AUY and NTO, which mitigated the pain.
Japan was an idea which didn’t work out in 2006. I could have perhaps divined from the oversize gain in late 2005 that it might need to catch its breath. The decision I regret the most, however, was selling SFL This had been going sideways for the first half of the year, though during that time it was pumping out an 11% dividend. I sold the position during the commodities debacle of May and June. I suspect this was a psychological risk transfer. I wanted to sell something, but didn’t want to sell the mining stocks which had been so much higher just a little while ago. So I sold the quiet position. It started to take off in July, going from around 18 to 28 today.
Despite SFL, I finished the year with a healthy 34% gain. I had also regained my confidence. While confidence can be a double-edged sword, I think it was probably a good thing in this case. When near the end of the year a friend suggested I start blogging, I decided it was worth a try. The rest of my trading history can now be seen here daily on behavioraltrader.com.
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