In November my IRA account balance increased 1.5%, which is after all expenses and fees. The S P 500 was essentially flat. November was a wild ride as the portfolio raced up about 5% in the first half of the month before settling back.
During the month I entered a few more positions, reducing the percentage of cash in the account to about 10%. Domestic equities account for 38%, international equities 23%, commodities 15%, and inverse bond 14%. Within the equity positions, hardware is now the largest position followed by industrial materials. This weighting, coupled with the commodities positions, continues to highlight my opinion that deeper in the economy's supply chain, where I believe inflation is building, is a better place to position investments. In addition, it highlights a large weighting towards international with a large portion of revenue for domestic companies coming from overseas, specifically China and Asia. This weighting reflects my view that inflation, in the form of asset prices, likely continues to grow in this region for the foreseeable future. It also reflects my view that the yuan likely appreciates against the dollar as the Chinese government is forced to loosen the exchange rate in order to lessen inflationary pressures.
The largest drivers of growth in the account came from American Axle and Mfting (ticker: AXL), Kulicke and Soffa (ticker: KLIC), Huntsman (ticker: HUN) and ETFS Palladium (ticker: PALL). Each are positions greater than 4% and were up 11%, 11%, 12% and 8%, respectively. The reasons for the increases in AXL and KLIC, in my view, include relatively low expectations coupled with a brightening fundamental outlook. For AXL it appears as though car and truck sales have stabilized and 2011 should provide modest growth within the U.S. and international markets remain bullish. For KLIC the business is quite volatile but the U.S. economy continues to improve and the secular driver of the adoption of more copper components should drive business in 2011. For PALL the improving U.S. economy and robust growth in Asia is driving demand for Palladium.
The worst performances came from GT Solar (ticker: SOLR), MKS Instruments (ticker: MKSI), and China Gerui Adv Materials (ticker: CHOP), which were down 19%, 6% and 4% respectively. GT Solar has suffered from estimate cuts as analysts have fretted over supply growth outpacing demand, especially as government subsidies for solar likely come under pressure. I don't argue against the possible weakening of fundamentals as supply increases, however I believe the demand may prove more robust than expected and a weakening dollar should help the company. SOLR is trading under 6x the lowered consensus EPS estimate for C2011, suggesting a healthy risk/reward. MKSI is trading under 8x the consensus calendar C11EPS estimate, and thus my belief that the economy is improving should prove this valuation conservative. I do expect CHOP to begin to move upward, at the latest, when either production comes on-line mid-2011 or investors' risk appetite increases.
Proshares Ultrashort 20+ Yr Treasuries (ticker: TBT) has moved sideways during the quarter. An interesting tug-of-war is occurring in which Fed Treasury purchases, European contagion fears, and political unrest on the Korean peninsula are raising prices. Alternatively, healthy holiday demand trends thus far by U.S. consumers and rising inflationary concerns in Asia and in the U.S. are pushing prices down. I see the forces pushing the prices up and yields down as temporary in nature, and therefore I expect TBT to perform quite well during 2011.
Summary
The following is a summary of my positions and their performance during November:
| Name | Ticker | % Portfolio | Chg |
| RF MICRO DEVICES INC | RFMD | 2.1% | (3.8)% |
| KULICKE and SOFFA INDS INC | KLIC | 4.4% | 10.8% |
| HUNTSMAN CORP | HUN | 4.8% | 11.7% |
| FREEPORT MCMORAN COPPER and GOLD INC. | FCX | 4.1% | 6.9% |
| GT SOLAR INTL INC COM | SOLR | 3.4% | (18.9)% |
| DUOYUAN GLOBAL WATER INC SPONS ADR | DGW | 1.5% | 0.0% |
| JEFFERIES GROUP INC NEW | JEF | 2.9% | 0.9% |
| CA INC COM | CA | 1.9% | (1.3)% |
| LYONDELLBASELL INDUSTRIES N V COM CLASS A | LYB | 2.4% | 8.7% |
| CHINA GERUI ADVANCED MATERIALS | CHOP | 3.6% | (4.3)% |
| PERKINELMER INC | PKI | 1.9% | (0.6)% |
| AMERICAN AXLE and MFTING | AXL | 6.6% | 10.9% |
| MKS INSTRUMENTS | MKSI | 2.5% | (5.9)% |
| MULTI SECTOR COMMODITY TR PWR DB AGR | DBA | 9.5% | (2.1)% |
| ETFS PALLADIUM TR SH BEN INT | PALL | 5.6% | 8.1% |
| PROSHARES ULTRASHRT LEH BROS 20+ YR TREAS | TBT | 14.3% | 2.3% |
| ISHARES INC MCSI CHILE INVESTABLE MKT INDEX | ECH | 4.7% | 1.0% |
| ISHARES INC MSCI HONG KONG INDEX FD | EWH | 4.6% | 0.9% |
| MATTHEWS CHINA FUND | MCHFX | 10.0% | 0.5% |
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