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I know I haven't yet finished the Navistar post.  I'm working on it.  I thought I'd take a minute to discuss my investment philosophy.  I most believe in value investing and I am somewhat naturally a contrarian.  I think I'm a rational contrarian and not a contrarian who is a contrarian simply to be a contrarian.  How's that for a tongue twister!

The portfolio that this site is tracking is a short-term money making portfolio and not a value portfolio. I think value investing is the most efficient investing method.  But, it does require time.  Something I don't have the luxury of at the moment.  This portfolio is enabling me to pay for grad school.  So my needs are more immediate.  Value investing requires that you find stocks that you believe to be undervalued and depend on the market at some point recognizing the true value - requiring time.  It is the first type of investing that I was exposed to.  When I was in high school, I read a book on Warren Buffett.  The book had a great effect on me and after that I read a book by Benjamin Graham and then a book by Phil Fisher. 

Warren Buffett is not just an extraordinary investor but also highly ethical as well. I love the combination.  I'm digressing, but those books taken together describe a value investing approach to investing.  Over long periods of time, I believe value investing to be superior.  Of course here I'm not dealing with long periods of time. 

I also am a firm believer in a long-short approach.  That is of course represented in this portfolio.  I have been successful with this approach.   Not as successful as I could be due to the administrative risks discussed in a  prior post.  But, you'll notice the shorts have been very good for the portfolio in this environment. 

I will likely be working on this post on and off.  Last Friday I invested in a company that  is prima facie counterintuitive in the current environment.  It's an automotive company that makes and finances trucks engines and parts for the foregoing listed on the pink sheets at the time of purchase.  Why would I make such an investment?  And believe me I second, triple and quadruple guessed myself.  But I like the story.

Well the company Navistar was listed as of today on the New York Stock Exchange.  It was actually delisted, and they have now brought themselves back into compliance with New York Stock Exchange rules.  This bodes well.  First off, the relisting on the NYSE will allow more mutual funds and other big investors to buy shares of this company.  Many funds are prohibited from buying pink sheets stocks or are limited to buying a certain amount of pink-sheet-listed stocks.  

Now of course this industry - generally - is facing headwinds: slowing sales due to higher gas prices, slowing global economies and higher input costs.  *Stay Tuned.*

Q-Prime is long NAV. 

Ok, so it's 1:32 am Sunday,and what am I doing?  Researching stocks!  I know it's sickening!  But, I love this, and I hope I always will.  I also hope I get better and better and profit along the way.

So, over the weekend I read Warren Buffet's partnership letters.  These are the letters he wrote to his investors before Berkshire Hathaway.  Not many people talk about them.  I find them instructive.  More on this later.

Ok, so my game plan is this.  I think the market will get much worse.  The portfolio is well positioned now to profit.  I'm going to slant the portfolio a bit and position it to profit more from a bearish market in two ways.  I'm going to focus for the long term on purchasing business development companies i.e. ACAS and in the short term - more shorts.  In particular I want to short emerging markets and will do this via FXP.  And I'm studying more short plays.  More to come...

I expect the portfolio to do better in down markets and maybe not as good as the overall market in good markets.  Over the long-term, the portfolio will hold up well. I'll be able to test this idea here on Covestor.   My bet is that my ranking will go up for similar reasons.  You'll notice from now on that I will get more and more short exposure via ETFs.  I'm doing this to take out what I think of as administrative risks associated with my broker.  When you short individual stocks there is always the risk that your broker won't be able to keep borrowing the stock for you.  This has happened with my broker twice.  It's hard for me to believe that a big  short seller like Jim Chanos has this problem. I thought about this and figured that a bigger broker lessens this type of risk so I will mitigate this risk by 1) using inverse ETFs to get short exposure and 2) switching brokers. The latter will not happen for a while. 

I much prefer to short individual stocks.  I think your chances of finding a bad company are much greater than finding a bad sector.  But you do what you have to do obtain the best results. 

It's been interesting to watch on the sidelines the battle between TCI and CSX.  I was combing through the Wall Street Journal today and noticed an ad directed to CSX shareholders.   I can't help but think battles like this between shareholders and management can be anything but good for shareholders.  I think often times management run companies for their own benefit and forget about the shareholders.  More often than not shareholders have a theoretical power that is not realized because the power we hold is greatly diluted. It's hard to tell who is right in this particular case, but I'll be watching intently the outcome of this proxy battle.  I may even buy shares prior to the vote.