Investments – the long and short of Toyota and Ford

As mentioned a couple of times previously, I like to go long and short for some of my investing. I also invest in private companies, and with GMI who have a nicely diversified portfolio.

Going long and short means you are neutral versus the market, and you are bascially placing matched bets of one company against other.

My first trade in the most recent series was to go long (buy)  Toyota and short (borrow the shares and sell) Ford. This happened between March and May last year, and the results were impressive.

TM vs F

While the chart shows a 26.8% gain, my actual gain was 44% – as I managed to time the exit well. Should I have held for longer?

TM vs F - longer

Well – no. The incredible march of Toyota continued, but Ford recovered somewhat. Perhaps I should have sold the Ford and doubled up on the Toyota.

At the time I shorted Ford rather than GM as I felt that GM’s stream of negative press and results had depressed its share price too far. Meanwhile, while generally ugly, the quality of GM cars had been improving. Lucky I didn’t short GM then:

TM vs F vs GM

Turns out GM, after a short period of underperformance, has outperformed even Toyota over the last year. So what I should have done was to buy back the Ford, and double up on both GM and Toyota. Hindsight is always perfect, and it was also a shame that the money involved in this trade was trivial.

Published by Lance Wiggs

@lancewiggs

2 replies on “Investments – the long and short of Toyota and Ford”

  1. Which brings into play the old personal versus managed investing discussion. The amount of time needed to make good calls for often negligible total portfolio worth when compared to the opportunity cost of going out and doing whatever it is the investor does to earn their disposable income…..

    Of course for many it’s a hobby….

    Kind of like incessant blog commenting!

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  2. Agreed – I don’t have time or enough money to make my own diversified portfolio, so GMI does that for me. The money I make from 6 stocks is worth the small amount of time I spend making the decisions. and it is good blogging fodder….

    If I had investments of such a size that the extra return I could get by self managing a diverse portfolio was well in excess of my ordinary income, then I’d do so.

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