Time to sell: a Tugboat portfolio update

Saltydog Investor aims to boost fund investors’ returns via a simple strategy: buy what’s rising, avoid what’s falling. Here, Saltydog’s Richard Webb updates on its cautious portfolio, the Tugboat.

Global stock markets have now been falling for three weeks in a row. To us, that makes the move now more of a trend than a blip. Look at the performance of various fund sectors and you’ll see the problem. The top absolute-return funds actually managed to deliver last week. But all the other sectors, on average, lost money. So given that our strategy is to follow trends, our portfolio is becoming progressively more defensive.Saltydog portfolio chart

This week we’ve sold the Baillie Gifford Global Discovery and Neptune US Opportunities funds. That takes the cash position in the portfolio to over 70%. Selling into a falling market isn’t easy – no one likes to take a loss, and it is often easier to convince yourself that you should hang on until markets recover. But you shouldn’t.

Regular readers will know we are fans of Jesse Livermore, the great American momentum trader. His view? “Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocketbook and to the soul.” We are with him!

We have lost money in the last month. But we have still beaten both of our benchmarks and are still up 22% since our launch (a FTSE 100 tracker would be up around 11% while the benchmark we use is up 17%). As far as we are concerned, that means what we are doing is working. What next? Let’s see where the trend takes us. We are ready to invest as soon as the numbers tell us conditions have become more favourable.

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Portfolio holding % now Last week
Cash 72% 46%
CF Odey UK Absolute Return 21% 21%
PFS Chelverton UK Equity Inc 7% 7%
Baillie Gifford Global Disc. (SOLD) 0% 20%
Neptune US Opportunities (SOLD) 0% 6%