Hedging
Hedging provides additional protection during volatile financial market cycles. It's another tool that we use here at Yacktman Capital Group. This hedging strategy is similar to that of seen with the popular 130/30 products that have grown in proliferation in the last couple of years.
Hedging involves shorting a portion of the portfolio. The level of shorting will greatly depend upon current market conditions and current buying opportunities. Premiums received from the short sales provide additional income to buy long an equivalent portion in stocks. This allows us to increase concentration in stocks in which we have conviction. The net long exposure remains at 100%, but through this hedge we have created an opportunity to further enhance returns.
