Blue Line Futures
Blue Line Futures is an independent introducing broker, working with individuals, family offices, companies and institutions. The client mix is two thirds institutional and one third retail. Oliver Sloup and Philip Streible, who run the day-to-day client management and hedging, worked with Baruch at Lind Waldock. The main part of the business is hedging, especially in agriculturals, energy and metals. “We also offer clients quantitative trend models, and fundamental coverage. We write the research in-house, which partly overlaps with Blue Creek Capital Management research,” says Baruch.
Blue Line Capital
Wealth management mandates are focused on financial assets and can have various equity/bond splits. “The core portfolio is 80% equities and 20% bonds, but it could even be the reverse – 20% equities and 80% bonds – for some clients,” points out Baruch.
This is only the strategic weighting, which can be tactically adjusted. Cash reached 12% in March and April 2024 and can easily be raised again.
The diversified equity portfolios have owned 25-40 names and have outperformed benchmarks such as the S&P 500 and Nasdaq 100 by about 3% annualized over the past three years, while the concentrated books have outperformed by far more. This was partly thanks to substantial Nvidia exposure. The technology allocation has been as high as 55% at times. “We have been heavy of technology when momentum is strong,” says Baruch.
Nvidia has been as much as 20% in the concentrated alpha strategy, with Apple and Amazon also sometimes over 10% reflecting Baruch’s confidence: “We have been vocal bulls of the AI trend, catching it from the very beginning. Our Concentrated Alpha program was +81% in 2023 and leaned heavily into that. I think the possibilities for AI and Gen AI are very large, and we are in the early stages. However, given how dependent our world is on the internet itself, it is tough to say bigger than the internet, but that remains to be seen as new advancements evolve in things like biotech to make our common life easier”.
Equity portfolios allocating 12% to energy are overweight compared with 3-4% for the S&P 500 index. “Marathon Oil has received a bid from Conoco. We also traded Philips Petroleum just after the Marathon bid and now own Exxon. These firms have tremendous cashflows and strong balance sheets. The mergers make sense, and we expect M&A will continue to play out,” argues Baruch.
He can easily eschew some sectors and avoided financials and banking altogether around the start of 2023 for several reasons: “They were not trending very well, and we were aware of their debt profile. They did not respond well to stronger yields. M&A and IPO fees had also dried up”.
Hedging
The strategy has occasionally held S&P 500 and Nasdaq puts to protect downside. “We might sometimes use outright puts or put spreads. We would typically layer into a 1% position size in options. We became cautious in May 2024 because despite the great Nvidia earnings report the market had poor breadth and there were economic data risks on the calendar,” explains Baruch.
Outlook
Baruch’s views are fluid but in July 2024 he suggested: “I was not surprised to see the rotation from Nasdaq into Russell 2000 in July, and I think there is a case for small caps as a whole to outperform the S&P through the end of the year. However, I am nimble with my view and not married to this being the case”.
On US politics he identifies three especially sensitive sectors: “I think onshoring, the energy sector, and cryptocurrencies could see a positive impact to a second Trump presidency”. Investors can catch his latest views every week on CNBC.
