This post is written exclusively for Investing.com
You don't buy a high quality long / short fund for thrills and spills. Robinhood gunslingers would probably find the JP Morgan Opportunistic Equity Long / Short Fund () boring. Someone with a different streak would call it healthy.
In the best markets, there are some corporate stocks that deserve to be sold or even shorted. In the worst markets, there are those begging to be bought.
The same is true for sector rotation. It is here that the very best long / short funds thrive and rise above the rest. They don't necessarily need to go short in stocks to do this. For example, let's say a long / short fund decides to buy all sectors of the S&P except, for example, and.
In 2020, compared to the, which consists of 11 sectors, including energy and financial services, if a fund had no stakes in Energy and Financial services and divided its funds equally in the other 9 sectors, it would have been much better outperformed the benchmark. S&P.
SPX vs. Sector Performance
The S&P is up 5.27% this year. But consider an example of what the worst performing part did:
Performance of Energy Sector Components
A – that's "1" – power company is ready for the year. You don't * even * want to look at page 2 of this chart!
I am using this example because "short selling" immediately scares some people. You don't have to short circuit; you just have to play the right sectors and "effectively" short the losing sectors.
Here are the top 10 holdings for JOELX: Fiserv Inc (NASDAQ :), Altice USA (NYSE :), Beyond Meat (NASDAQ :), NXP Semiconductors (NASDAQ :), Alibaba (NYSE :), Cigna (NYSE: ), UnitedHealth Group (NYSE :), Tesla (NASDAQ :), Air Products and Chemicals (NYSE 🙂 and LogMeIn (NASDAQ :).
You will notice that their long side roster seems quite sharp given how they have performed and are currently performing:
Now I want to make sure that we all understand that JOELX has been no match for the S&P for the past 10 years, but that it has clearly been ahead of his tall / short colleagues …
JOELX 10Y Performance vs. Long / Short Peers
In fact, you will notice that while it took less risk than "the market", it outperformed the S&P about as much as it outperformed its long / short competitors!
In the kind of market we may face in the coming months, with all the uncertainties of the election, the timeframe for COVID-19 vaccine development and treatment regimens, the ability of companies to stay open or new businesses I suppose a well-managed fund that doesn't swing at every ball but moves slowly and steadily forward might be perfect for your due diligence.
Indeed, as the S&P 500 has done so far this year, take a look at the comparison with JOELX.
Portfolio management counts. By being opportunistic, the JP Morgan Opportunistic Equity Long / Short Fund never fell as much as the S&P did in March, giving its shareholders greater peace of mind. Even today it is ahead of the S&P!
Disclosure: I own shares of JOELX, both personally in the model portfolio that I maintain for clients. I own it for wallet protection. In case there is another sudden downward movement, it will be nice to have a regular performer embracing the "mean" above.
Finally, as I always have to point out, unless you are a Stanford Wealth Management client, I do not know your personal financial situation. Therefore, I am offering my opinion above for your due diligence and not as advice to buy or sell specific securities.
