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April 03, 2012
Back to Mid Cap for April
For the month of April, Northlake’s Market Cap signals switched from favoring small cap to favoring mid cap. As a result, client positions in the Russell 2000 (IWM) have been swapped into the S&P 400 Mid Cap (MDY). The Style model remains on a growth signal so client positions in the Russell 1000 Growth (IWF) will be maintained for at least another month.
The shift from small to mid cap is the result of a combination of factors. As mentioned in prior updates, the small cap signal was relatively weak for both months it was in place. A small shift in the underlying model factors could easily shift it back to mid cap. This is exactly what happened as the technical and trend indicators favoring small cap weakened and the uptick in interest rates this past month is a negative for relative performance of small caps. The technical and trend indicators reflect that small cap stocks very slightly lagged large cap the past of couple of months. Interest rates are pretty straightforward. Small companies have less access to credit as a general rule so any uptick in interest rates, even from very low levels, tends to focus investors toward larger companies unaffected by possibly tighter credit conditions.
During March, the models put in a mixed performance. The small cap signal neither added nor subtracted value as the Russell 2000 and S&P 500 each rose a little over 3%. The growth signal continued to perform well as IWF rose 3% ahead of the 2.5% gain for the comparable value index. For the quarter, the story was much the same as the Market Cap model produced a return in line with the S&P 500, while the growth model beat the S&P 500 and the value index. Growth is benefitting from superior performance of technology stocks over the past few months.
Disclosure: MDY is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg's personal accounts. IWM is a core holding in select accounts at Northlake Capital Management, LLC. Steve is sole proprietor of Northlake, a registered investment advisor with the Illinois Securities Department. IWM is a short hedge in the Entermedia Funds. Steve Birenberg is co-portfolio manager of the Entermedia Funds, owns a stake in the Funds investment management company, and has personal monies invested in the Funds.
Posted by Steve Birenberg at April 3, 2012 11:43 AM in Models
1.do you think we are reaching the end of the correction?
1.what do you think of lmca, aapl and cetv at these prices?
3. goog has dropped with the issuance of c shares/ do you think this is an opportunity to buy or do you think the public has soured somewhat on goog because of these non-voting shares?
I think the correction could go deeper than the lows this week. I also think that any recovery will be muted for a few months. Sell in May and go away will be prevalent for six weeks. As long as Europe and China are int he news with fear and US economic data is less than perfect I think we are due at least a rest and consolidation period.
Google is down but not due to the split. That is meaningless. Instead I think there was no upside. Just an inline report. I don't think it goes much lower and I believe it offers more upside than almost any stock over the balance of 2012.
Apple is consolidating. After the big gains I can handle it. It may be useful heading into earnings in two weeks as expectations have gotten out of control. I still like Apple but see 20-30% upside from here. That is good not great.Lots of stocks offer that.
Including LMCA. This stock is tied up with SIRI. I expect good results from SIRI this quarter and optimistic guidance. But LMCA moves when the long-term relationship between is clarified. No way to judge when we will know that news. LMCA remains my largest holding across Northlake and Entermedia. That says it all.
Posted by: Steve at April 13, 2012 12:11 PM