New York (HedgeCo.net) Since the end of February, the basic materials sector has been the second worst performing sector, second only to the energy sector. The Materials Select Sector SPDR (NYSE: XLB) was down just over 20% from the beginning of March through the low last week. This downward spiral for the sector has led to big gains in the HedgeCoVest Basic Materials Short-Only model, but it has also led to big gains for the HedgeCoVest Basic Materials Long/Short Model.

Looking at performance from Monday, we see that at the time the model was up 14.71% on a year to date basis and it was up 8.54% over the last 30 days. Since the XLB peaked on February 24, the ETF is down 15.6% while the long/short model has gained 19.3%.

In addition to the performance numbers we see that there were 11 positions open at the time which makes it one of the least active composite models at this time. The standard deviation is 16.44% and that is among the higher readings in the long/short models. However, the reason for the high standard deviation is that the model has had a bearish skew for most of this year. That bearish skew has allowed the model to produce the returns it has. The maximum draw-down for the model is a very meager 4.86%.

The current allocation indicates a rather concentrated portfolio at this point in time. There is only one stock being held long and that is a telecom stock. The other 10 positions were all short positions and they are concentrated in the mining and chemical industries.

Rick Pendergraft
Research Analyst
HedgeCoVest