My very personal Fund saw quite a good performance in August and closed the month with a 4.17% result since inception, compared to July (2.61%) there is a substantial growth, mostly due to markets being on the good side and my new option trading activity. YoC of my dividend and options trading now accounts for 4.12%, TER is 2.17%, so there is still quite a long way to go for these numbers, but just to give an idea of how things are moving in April these two figures were respectively 1.79% and 1.77%.DCA/Increased PositionsNone traded.New Positions – Sold PositionsNew Position – FLO 200 @ 15USD
Due to a double load of “bad news” (an investigation from the work department and growth not in line with expectations), share prices plummeted. We are talking about the second biggest bakery in the US (first is the Mexican group Bimbo), very strong brand portfolio, a boring industry that sells a very very very basic commodity… Bread!
New Position – GME 100@31USD
Game Stop was my second entry this month, it wasn’t planned but I took a gamble on my option strategy and I was assigned the stock. Not sure if it will become a permanent feature in my portfolio, but I only trade options in stocks that I wouldn’t mind owning and GME could have been one of them. Very good yield, biggest game retailer in the world, management recognised fall in core business and started differentiating to cover for losses (new sectors are growing in double digits). It’s under pressure and I will be selling calls against it, but if it doesn’t get called away and things improve in Q3 I might be tempted in keeping it.
Sold Positions – CINF, O, UHT, LON:BA, LON:BLT
Closed my top 3 performers in the US market, they are not core and grew a lot, which meant no chance for DCA or selling puts at the average price. They were also minor positions, so I took the capital gains to start cleaning up some positions that were doing badly. (see elater)
In Italy we can compensate losses with gains, I guess that’s present in some other countries too. As I trade in 3 different currencies, and as the pound has fallen considerably I had some positions (namely LON:IRV and LON:BLT) where not only I had a capital loss to the stock value, but also a loss for the exchange rate (that is if I sold the stocks).
For example on LON:BLT I was almost at my average price, but had a -18% loss because of the exchange rate. By selling these positions I could lock in the loss and use it to compensate the gains on the US securities that I have sold. (without loosing “pounds” in the proceeding)
Different story is for LON:IRV where I was actually loosing on stock price and exchange rate. In this case I sold and bought back the day after, I think this is a good company and didn’t want to let it go. By doing this I did loose some money, but I got a much better yield plus the tax harvesting.
Our government assumes that you are going to exchange the foreign currencies back to Euro immediately after you sold something, but as I am not interested in doing so, I have had some positions like LON:BA where I was up 20% on the stock (so I had 20% more GBP) but only 8% on taxable positions (because of the devaluation). By selling and not converting to Euro I keep the 20% more pounds and keep investing in the market.
In total return terms nothing really changed (my index didn’t move), but by doing that I have more cash in hand (which I need for options), I cleaned up the Portfolio and some bad positions, increased yield on one position (I am waiting for BLT to go a little bit lower to re-enter) and let go some less important stocks that grew a lot in recent months and that are going to be penalised by the future interest rate hikes that the FED is likely to dish out. All without (technically) incurring in any tax from capital gains and such.
The rationale behind this is that I do not need to take profits now, but if by harvesting I can lock in the gains in currencies that I have it’s a positive thing.