A retired colleague of mine has started his a "hedge fund" for his own portfolio. He is both long and short an equal dollar amount of stocks. Of course, the long stocks are different from the short stocks. The idea is to choose long stocks that go up more than short stock in an up market. Theoretically, the long stocks should also decline less than short stocks in a down market. The net effect is an investor will make money in both up and down markets.
With the market trading in a range, I think this is a good time to do a long and short portfolio. It seems the strong stocks keep trending up and the weak stocks keep trending down despite the direction of the market at the moment.
The stocks I'm currently considering for the long side are McDonald's, IBM, Phillip Morris and Stericycle. The stock I'm I considering for the short side is Shutterfly. I will need to find more stocks for long and short positions, but this a start.
Disclosure: Our retirement accounts are long shares of McDonald's and Phillip Morris.
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