The following is to provide some insight and perspective on the performance of the Audacity Strategy for March and more. For more information on the strategy, visit our website here.
The Audacity Strategy is most often recommended as only one component of a Super-Diversified Portfolio. Therefore the information in this blog only pertains to one component of a Super-Diversified portfolio. For more on Super-Diversification, visit our website here.
* Estimate based on Patton Funds calculations.
Note: the Year-to-Date return is back-tested through 3/31/2020
Audacity had a strong month in July posting a gain of +12.4%. This was the 5th best month of 126 months since the launch of Audacity’s sister Flex Strategy in early 2010. Returns prior to April 2020 are simulated based on the Flex Strategy’s actual performance with the added leverage of Audacity.
Frequency of Returns
The accompanying graph shows the frequency of returns, or number of months within a given performance range, for both Audacity and S&P 500. For example, on the far right of the graph, Audacity has had a return in excess of +10% in 18 of the last 126 months while the S&P 500 has had only 2. This holds true when looking at returns of +5% to +10% with Audacity having 21 and the S&P 500 with 13. Audacity does though have more negative returns as well with 20 months down -5% or more while the S&P 500 has had only 12. The combination of these up and down months has resulted in Audacity producing a far better long-term return.
Strong positive long-term returns, and certainly more big gains than big losses, are the single most desired outcome for Audacity with a very close runner up being the way in which the returns are achieved (not going up and down at the same time). Although both Audacity and the S&P 500 produced strong returns in July, their performance moved in the opposite direction 8 of the 22 trading days of the month as shown in the below graph.
Audacity’s performance behavior, although sometimes seemingly insignificant during a rising market, continues to demonstrate the low correlation of Audacity to the S&P 500 indicating that any downturn in the market would not directly impact the performance of Audacity (see July’s blog discussing the neutral allocation between longs and shorts today for more).
The trading during the month was relatively active resulting in several changes in the long positions, or those we want to go higher in price, in the Strategy. The following table shows the long positions added with 5 of the 8 in the technology sector.
The following table shows the long positions closed during the month with only 2 of the 9 being technology stocks. The combined impact of this buying and selling resulted in Audacity’s total technology sector exposure increasing from 21.0% at the end of June to 29.5% by the end of July.