PAS CC Overview .pdf
Original filename: PAS - CC Overview.pdf
Author: Samuel Rozzi
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Total Equity Exposure: 19% of Portfolio
-We use equity exposure for our best stock ideas. Most of our equity exposure comes
from smaller companies that we feel are undervalued.
1. GORO—Gold Resource Corp
-This is a precious metals exploration company that mines gold and silver. They
currently have one mine in Mexico that is in use and a mine in Nevada that is under
development. We like this holding because it gives us exposure to precious metals, which
protect against central bank money pricing. The development of the Nevada mine offers
long-term potential and the possibility of higher dividend payments in the years to come.
2. AIRM—Air Methods Corporation
-This company provides medical transport solutions to various medical institutions.
They primarily specialize in leasing helicopters to hospitals and medical support providers.
This holding is less economically sensitive than the broader market and it is trading at a
3. TZOO—Travelzoo Inc
-This is an internet travel company that provides travel deals to its clients. They have a
very active user base and access to many special deals in various industries. We view this
holding as a takeover candidate in the consolidating online travel industry, truly at an
attractive valuation with no debt.
4. RPXC—RPX Corporation
-RPX Corp provides a subscription-based patent risk management solution that
allows for a more efficient exchange of value between owners and users of patents. They
pursue and profit off wrongful use of patents. A recent acquisition should provide quality
growth opportunities while their quality balance sheet provides downside protection and
potential for share repurchases.
5. RRTS—Roadrunner Transportation Systems Inc
-This is a transportation support company that provides supply-chain support for
various firms around the country. The company has solid long-term growth potential and
trades at less than 7x earnings, and earnings should accelerate in the 2nd half of 2016. This
is a possible takeover candidate.
6. FRAN—Francescas Holdings Corp
-FRAN is a boutique retailer for women aged 18-35. The strategy entails turning over
inventory quickly so customers return frequently to find new styles and apparel. The
company has a strong balance sheet with a net cash position. New stores are growing
rapidly while the stock is trading at about 10x our estimated earnings for this year. An
improvement in earnings in the back half of the year and the hiring of a new CEO (previous
CEO left for personal reasons before we bought the stock) should provide stability and act
as a catalyst for the stock.
Total Inverse Equity Exposure: 37% of Portfolio
-Inverse equity profits from declines in the indices. We use these positions as hedges and
as a tactical allocation in areas we feel are overvalued, where we can profit from declines in
1. HDGE—AdvisorShares Ranger Equity Bear ETF
-This ETF sells short mid to large cap equities with catalysts, such as risky accounting
practices and high multiples. We are bearish on the broader equity markets so this fits with
2. RYAIX—Rydex Inverse NASDAQ-100® Strategy Inv
-This fund is a passively managed fund that shorts the NASDAQ-100. It does not use
discretion. It provides consistent downside protection.
3. RYURX—Rydex Inverse S&P 500® Strategy Fund Investor Class
-This is a passively managed fund that sells short the S&P 500 index of equities.
Foreign Currency Exposure: 5% of the Portfolio
-We use currency exposure to hedge against risk of sizable foreign currency moves.
Diversification in currencies can smooth volatility because the asset classes often deviates
from stock market return.
1. USDU—Wisdomtree Bloomberg U.S. Dollar Bullish ETF
-This ETF appreciates when the US dollar rises against a basket of global
currencies. When the dollar appreciates, US companies that operate internationally will
earn less money. This acts as a hedge against potential losses in equity holdings.
Total Fixed Income Exposure: 5% of Portfolio
-We own fixed income products for interest income and capital preservation purposes.
Our portfolio consists of high credit quality holdings. Our risk lies more with changes in
interest rates than with the credit downgrades.
1. MUB—iShares National AMT-Free Municipal Bond
-This low-cost ETF invests in federal tax free municipal bonds to provide income.
Municipal bonds offer tax-free income that is a great supplement to our portfolios. This
ETF is usually used in larger accounts as those investors are more likely to be in higher tax
Total Alternatives Exposure: 25% of Portfolio
-We own alternative holdings for downside protection, returns that are not correlated to
US equity markets through exposure to commodities, currencies, and foreign stock futures,
and offer flexibility in volatile markets.
1. HFXIX—Catalyst Hedged Futures Strategy Fund Class I
-This fund uses financial derivatives such as equity index options to profit from volatility
in the S&P 500. This fund is attractive because it has low, and sometimes negative,
correlation to equity markets, which offers the potential for downside protection.
2. VXX—iPath S&P 500 VIX ST Futures ETN
-The ETN trades short-term volatility instruments to profit from increases in S&P 500
option volatility. This fund is also used as a hedge against equity markets. It reduces our
overall risk and can increase return in down markets.
3. LOTIX—LoCorr Market Trend Fund Class I
-This fund specializes in trading options. Most of the time, their options are positioned
bearish. This is used with our other alternatives to protect clients money and profit from
Cash: 10% of Portfolio
-Our cash level is higher than normal because of the current uncertainty in the financial
markets. Our excess cash reserves provide the opportunity to finance new investment
opportunities, whenever they arise.