Update On A Bear-Proof Portfolio

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Japanese gameshow contestant versus bear. Image via TMZ.

Bear-Proof Portfolio Update

Here’s the “bear-proof” portfolio we presented in our pre-market post on Tuesday (Building A Bear-Proof Portfolio). This one was designed for an investor with $500,000 to put to work who was unwilling to risk a decline of more than 20% over the next six months.


As we noted in that post, each trading day, our system analyzes total returns and options market sentiment to estimate potential returns for thousands of stocks and ETFs The ProShares Ultra Bloomberg Natural Gas ETF (BOIL), Peabody Energy (BTU), Generac Holdings (GNRC), Green Plains (GPRE), Overstock.com (OSTK), and Cassava Sciences (SAVA) were selected because they were among our top names: the ones that had the highest potential returns, net of hedging costs. Our system started with roughly equal dollar amounts of each, and then rounded them down to round lots, to reduce hedging costs. It swept up most of the leftover cash from the rounding-down process into a tightly hedged Cleveland-Cliffs (CLF) position, to further reduce hedging cost.

Here’s how the components of that portfolio have performed since. 


The top-performer there was Cassava Sciences, which has a promising  Alzheimer’s Disease drug candidate. The other two names up double digits were inflation/commodity plays: Peabody Energy and Cleveland-Cliffs. Since that portfolio is scheduled to last six months, so we’ll post a final performance for it, including the impact of the hedges, at that point.