This was an interesting year for investments of course, in particular stock market funds which typically delivered catastrophic losses which will take many years to recover from.  Many will never fully recover.  Against this background we are pleased to announce that Hedgehog not only made a profit last year but did so with an unprecedented degree of consistency, banking a profit in 11 out of 12 months.  Our one small losing month was actually recovered in just the first five days of the following month.  So our members really took no heat whatsoever in this the year that replaces 1987 as the iconic year that will have investors breaking into a sweat each time they recall it.  In normal times our performance comfortably falls within the top 2% of funds ranked by profitability, this year we are virtually sitting alone in the winners circle.

We came into 2008 operating with just 25% of our normal trade size.  We were being ultra conservative having recently tweaked our strategy to focus on delivering consistent monthly profits rather than targeting all out maximum profit. As the months progressed and the unbroken stream of consecutive profitable months grew we started to lift our trade size back up and ended the year running at 70% of normal size.  With capital preservation always being our top priority this was a prudent approach, albeit with the consequence of reducing our actual profits accordingly.  At full size this would have been a 29% annual profit, not huge but quite acceptable given the extreme environment prevailing this year.

2009 Expectations

Needless to say, many people have asked recently if we think the market will go up this year.  As always we have no idea.  No one can see into the future, even those who claim they can.  Successful traders, without exception, know that the future is unknowable.  They concentrate purely on the present and leave the crystal ball gazing to the dreamers, who sadly are entrusted with most people’s life savings!  That is why the Hedgehog strategy is designed to make money if the market goes up, down or sideways.  The market will do what it will do and it makes no difference at all to us.

Our monthly profits are currently running at approximately 3%.  Some months are bigger, some are smaller but that is about the average at our current trade size.  During the first half of the year the plan is to continue the process of slowly lifting our trade size back up to full size and consequently to lift the monthly profit to 5% which is our target running level.  Then we will simply work to maintain that running rate as consistently as we possibly can.  5% per month is more than sufficient to achieve the objectives set out on the website and we can even afford the occasional small losing month.

We should bank on the odd losing month too.  It is now 16 months since we implemented the “consistent monthly profits” approach and of those 15 have been profitable and 1 has been a loser.  It is unrealistic to think we will totally eliminate losing months and actually the occasional loser is healthy.  What matters is that under this approach a losing month really doesn’t derail us at all and we are even budgeting for it, because it is a realistic expectation.

Since the Hedgehog strategy was put to work in 2003, annual profits have averaged 40%.  Our absolute minimum expectation for 2009 would be to meet this average, but we confidently expect this to be improved upon as we move forward.

Disclaimer, risk warning and copyright notice apply to all articles published on this site.

Copyright © Hedgehog LLC 2009, all rights reserved.