At Oceanic, I invest in multiple asset classes: domestic, broad international and emerging market equities, fixed income, commodities and energy, real estate, and foreign exchange. The Global Diversified Moderate portfolio uses both individual stocks and ETFs, but does not use leverage.
I seek to reduce risk through a diversified allocation of asset classes and regular portfolio rebalancing. Individual assets, sectors, or asset classes that have a high degree of volatility play a reduced role in this portfolio.
In the Global Diversified Moderate portfolio, I strive to deliver a unique combination of assets that will generate the best returns for a given level of risk. These assets are carefully watched for their correlations to the major equity indexes. My goal is to create a portfolio that has lower volatility yet still achieves a potentially significant share of any upside while protecting investors from some downside risks.
I do not employ any leverage in this portfolio or use tactical allocation strategies. I expect to rebalance the portfolio every three-to-six months.
My research focuses on asset allocations, as well as selecting what we believe are the right stocks within those allocations.
My asset class research primarily focuses on investment performance correlations over various horizons.
I then look at each sector fundamentally once a proper asset allocation has been established. I tend to favor “category killer” companies that benefit from strong competitive barriers, have high liquidity and price transparency.
At Oceanic, I conduct my own research and also purchase outside institutional research. My sources include The Gartman Letter, Financial Times, Bloomberg, Barron’s and The Dow Theory Letter, among others.
Our goal is to achieve "diversification optimization.” In our efforts to achieve it, we study the relative performance and historic correlations of different asset classes and sectors. We typically select non-traditional and uncorrelated assets in an effort to offset portfolio risk and volatility and to try to stabilize returns.
In this portfolio I typically have 10 to 20 positions with weightings ranging from 5 to 20% per position. Allocation rebalancing is usually performed semi-annually, based on market activity.
I maintain sell discipline on both the upside and downside. I establish near-term sell thresholds for each new position.
On the downside, I will not typically close out a position entirely unless it experiences an early 10 to 15% loss. I will first look to trim positions and rebalance allocations.
On the upside, my semi-annual rebalancing trims exposures of appreciated assets. However, if a position achieves a gain of 50% or more before the next rebalancing, I will look to trim the position back to the original invested amount, simultaneously reducing the allocation.
Although my overall focus is strategic, this portfolio employs tactical strategies as well. I look for opportunities to add to my returns during stressful or calm markets by buying or selling volatility as I see appropriate.