Recently we added two more ETFs to the portfolio. They were selected in order to add certain missing attributes to the existing portfolio. Those qualities are described below:
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Barron’s 400 ETF (BFOR)
This relatively new ETF selects its portfolio using the Barron’s 400 Index as is guide. The components in the index are selected using a growth at reasonable price criterion combined with elements of momentum and market sentiment. The long term record has been strong.
iShares Core S&P Small-Cap ETF (IJR)
The Covestor Macro Plus Income portfolio lacked diversification in the small cap area. In order to gain better representation in the lower end of the S&P 1500 universe, we added IJR. We recognize small cap performance has been exceptional and the fund is probably due for a correction. Therefore we added one half of the desired position and will add the other one half if such a pullback occurs.
In addition to our ETF additions, we want to comment on one of our income holdings. Short interest in Linn Co. LLC (NASDAQ: (LNCO) has been increasing dramatically.
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In my opinion, this attack is without merit and the 10% yield and potential price recovery should provide a better-than-average return to the income portion of the portfolio.
Most of our bullish case rests on the outcome of a proposed merger between a former holding Berry Petroleum (NYSE: (BRY) and Linn Co. I have no way of knowing this for sure, but as of the time of this writing, the SEC seems to have cleared the way for that merger and I await the outcome of a soon to be scheduled conference call dealing with this matter.
As with most of my speculative holdings I have limited the size to 5% or less of the portfolio. However, in my opinion, even with this limited exposure, a successful outcome would imply price improvement large enough to have meaningful impact on the portfolio.
The investments discussed are held in client accounts as of October 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.
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Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures.