Why ALF is a must for your portfolio, page-6

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JSharma

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01/09/17

17:30

Post #: 26939964
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Originally posted by JUSTBOB ↑

ALF is a must for your portfolio because it acts as a hedge for the time when interest rates climb & the rest of the stock market tanks.

ALF is currently in a position of having a somewhat neutral position with both the long & short portfolios of similar size. After borrowing stock & then selling it, the funds were used in setting up the long portfolio. This means that shareholders funds are sitting in cash.

Consequently, when interest rates eventually rise, as they inevitably will, ALF will benefit to the point where each percent increase in interest rates will lead to a 1% rise in profit. In the meantime, ALF is dependent on its stock- picking, the ability to be long in stocks that outperform stocks in its short portfolio.

ALF are, therefore, 100% long, 100% short & 100% cash. This position will change, from time to time, when Justin perceives a period of strength or weakness in the market & the long portfolio will be larger than the short portfolio or the reverse.

As a result of having about 100% of shareholders funds in cash, ALF will benefit considerably when interest rates rise & your individual portfolios will suffer as others sell stocks to take advantage of the rate increases.

ALF & WMK are both excellent hedges against increases in interest rates.

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Hi JustBob,
I am wondering if your optimism re. ALF and their other stablemate WGF still holds 3 months later? Their performance this past year has been all downward from 1.85 to 1.18! Is it time to book a loss or hang in the hope that they will somehow miraculously turn around. I guess the worst that can happen is they drop to a dollar. What do others think?

ALF Price at posting: $1.18 Sentiment: Sell Disclosure: Held
1 Upvote

0 Great analysis

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Why ALF is a must for your portfolio, page-6

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