September 2010 Part II?

Ascendere Model Portfolio Daily Update:  December 2, 2010

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Of Note:
UBS initiated coverage of Ares Capital Corporation (ARCC) with a buy rating and $18 price target, continuing the trend of model portfolio stocks presaging major sell side actions.  Fossil (FOSL) was up today and Macy's (M) was down.  Investors were probably hoping for a higher same-store sales forecast for the quarter.  Wall Street Journal has more details on Macy's.

Meanwhile, our long models were up 1.95% versus 1.28% in the S&P 500 today, brining the 2-day MTD model return to 4.68% versus 3.30% for the S&P 500.  Meanwhile, our model short positions are up even higher; as we have been noting for quite some time, there simply are not any ugly stock out there to short.  A number of “low-quality” stocks today will be the “high-quality” stocks tomorrow.  It should be pretty clear that earnings is improving across the board.  We still would not go long “low-quality” stocks yet, however.

We will not be surprised if we see a repeat of September to some degree.  Earnings are too good and portfolio managers are too under invested.  So many companies still show good value relative to their cash flow growth and ROIC prospects.

About this report
This daily update is a supplement to a monthly report dated November 30, 2010 that details the model portfolio strategies of Ascendere Associates LLC (“Ascendere”).  For more information, please see our list of frequently asked questions, suggested tips on using our newsletter or an interview with us on Covestor Live.  Please see our disclosures and disclaimers at the back of this report.  See also our long-only model based on actual trade data.