Annual review

On the one-year anniversary of this journal I want to run over the performance of the portfolio. It has been a good 12 months for stocks in general and for biotech stocks in particular. The 12 month performance of the NASDAQ is +18% while for the NASDAQ Biotech index it is +39%. The portfolio is +298% for the same 12-month period. Clearly this has been significantly impacted by ACAD yesterday – however, even before the ACAD move the performance was +182%.

The portfolio had 165 up days over the year with 87 down days. The average up day showed an increase of 1.49% in value while the average down day was -1.1%. The average daily movement over the year was ~+0.6%.

The maximum drawdown for the portfolio was ~11%. The longest period of drawdown was 48 days (April 4 to June 12). The longest drawdown for the NASDAQ was 113 days, with a max. of 12%. The NBI’s longest was 36 days, and largest was 13%.

In total, I opened 30 positions. 2 remain open. Of the 28 that are closed, 20 were positions in stocks (19 long, 1 short) while the remaining 8 were in options. Of the positions in stocks 80% were winners while in options 88% of the trades produced positive returns. The average return for a stock trade was +30%; the average option return was +103%.

On average, stock positions were held for 47 days while option positions were held for 2 days.

By far the most successful strategy was selling good news (either via a short or by buying put options). I had no losing trades with this approach during the year. Of course, this will be a transient phenomenon and I do not expect it to prevail moving forward. Its potential is also limited by availability of shares to borrow and the liquidity and availability of options.

It has certainly been a better year that I could have planned for when I started writing these updates last November. I am encouraged by how well the portfolio has stacked up against the indices in terms of drawdown size and durations and Sharpe ratios. Biotech has been on a tear for most of the year. While that will certainly slow down or reverse, hopefully we can continue to outperform the market and grow assets moving forward.

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