Continuing to deploy cash

July was a fairly active month in terms of deploying cash. In addition to the two names mentioned on this site previously, there were four other candidates that came into buying range. I have taken the liberty to accumulate and am sitting at around 37% cash at present.

The portfolio looks schizophrenic at present – there are a bunch of deep value plays (under book value with a low projected P/E) and the other half are clear growth picks – one undervalued gem has two business segments, one took a significant revenue reduction for legitimate reasons, while the other segment (which is most of the business) is growing significantly faster. The automated screens out there aren’t picking up the growth because you have to do a little homework to dredge out this information. Once the market figures it out (after some quarterly results) there should be a P/E expansion (not to mention the actual EPS will be increasing as well).

My YTD so far is roughly flat, but when I do my own valuations on what I am owning in my portfolio, I would expect to see some positive gains that will outdo the indicies. Just a matter of being patient.

One other side note is that I am increasing my US dollar exposure. Most of these companies trade in the USA.

Electronic trading perils

One aspect of trading electronically is that you better make sure your algorithms are correct, otherwise you are going to make stupid trades and suffer losses. Knight (NYSE: KCG) is the victim of their own electronic infrastructure, taking a 22% hit.

During the flash crash a bunch of trades were busted, but my personal opinion is that the only way to prevent these sorts of things happening is by depriving those that made the errant orders of their capital. Perhaps it will give a bit more incentive toward those that actually program their systems correctly, or heaven forbid, give it a little bit of human manual intervention before sending a billion-dollar order that has 10 minutes to get rammed through the markets.