Why I took some risk off the table and sold Southern Copper
Author: Bill DeShurko, 401 Advisor
Covestor model: Dividend and Income Plus
I'm currently on vacation, and anxious to head to the beautiful beach here at Kiawah Island Resort outside of Charleston. Maybe being away from the office has made me a little skittish, but on April 5th I took a lot of risk off the table in our Dividend and Income Plus Model.
Decided to cut loose Southern Copper (SCCO). Still like the holding, but my thesis for the year. I believe the markets will be weak over the summer; so our model may as well go with a lower beta offer like Thunderbird Energy (TBD) for a few months. If China pours on the economic gas in the fall as they have a habit of doing, I fully expect to re-buy in October - November time frame for the seasonally stronger November - May period. Also markets tend to perform well post-elections.
The "Plus" part of our model involves an approximate 20% allocation to (JNK), the SPDR's High Yield Bond Index. This is held long for its additive value to the portfolio's overall dividend yield. But since "junk bonds" are considered a fairly high risk asset, I time this holding along the 30-day moving average. Following the 30 simple moving average (SMA) would have resulted in several whipsaw trades already this year.
So I have held on as the stock market has shown a solid uptrend. But the last few days have been negative for JNK, stock market volatility is rising, and the S&P 500 is showing weakness. Also the first week of April is historically a strong seasonal period, that we obviously are not seeing this year. All this adds up to a good time to raise cash and lower our portfolio's beta.
Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.