Long Short Strategy

Long-only investment:

-       Asymmetric active weights (under weight is limited to market cap, over weight is unlimited)

Long-short:

-       Can eliminated market risk (e.g. market neutral hedge fund), long and short 2 stocks from the same market

-       Symmetric active weight

-       Leverage (magnify risk and return)

Stocks is more overvalued than undervalue

-       Barrier to shot is higher (need to borrow stocks)

-       More buyer than seller

-       Analysts feel pressure not to do sell recommendation

-       Firm promotes their stocks

Equitizing long-short strategy

+ future: so that to capture the growth of the market (as long-short strategy is market neutral)

Short Extension

130/30 or 120/20

130 long + 30 short. They are all from the same portfolio instead of 2 seprate: 100 + 30/30

Selling disciplines

1. Opportunity cost selling disciplines
2. Deteriorating fundamental sell
3. Valuation-level sell
4. Down-from-cost sell
5. Up-from-cost sell
6. Target price sell

Turn-over of value investor is lower than that of growth investor