December 2016 Update

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DISCLAIMER – PLEASE READ
The following post was written during a total revamp of my accounting system that unfortunately outlined some major issues in the reporting of profits especially of the options part of my PF. Numbers are totally different from what I thought, I’ll write a more detailed post later, but please consider that the comments here below are not consistent with the real situation of the portfolio. As a matter of fact things are not as rosy as I believed mostly because I am reporting cashflows and not actual profits. Next updates are going to be correct, sorry for any misleading information I might have given!
General Comments

Trump Rally month, I’d call the experience in December. It seems that slowly (but steadily) the rally that started after the USA elections lost steam, but kept steady up to touch record highs in many stock exchanges, only to pull back during the last trading days of the year.

Holidays, terrorist attacks, not so strong political changes (in Italy) and a great weather capped the month off. A good month for all markets and economic environment, not so much for political issues but I guess that those will be more prominent next year. On the PF management the few days of holidays that I have brought me to reprogram my Google Sheets files and now I can also predict also income taxes on dividends and capital gain according to the Italian standards (fairly accurately, me thinks). Incidentally all this programming highlighted  that under the italian tax office point of view the year was not positive as it is under the cash flow point of view (mostly because gains on options are calculated ONLY when you close positions), and this means that I will actually report a capital loss at the end of the year (more on that later).

LH Fund 

TR stands for Total Return (what selling everything, paying taxes and commissions and converting to euro would mean in terms of return), YoC is Yield on Cost (what my investments have returned to me via dividends/options), TER is Total Expense Ratio (commissions + taxes).
Total Return is not something I am particularly concerned about at this stage (plus it’s an estimate as I have calculated potential taxes and commissions in it), it’s highly affected by the way the market behaves especially in a young portfolio such as this one. But it’s a metric that it’s worth keeping an eye on. YoC is on the other hand more interesting to me, as that is what the PF has produced over time, my target is to reach the 2% x year net mark (by net I mean YoC-TER).
Month TR TER YoC
11.2015 0.00% 0.14% 0.00%
12.2015 -3.33% 1.41% 1.11%
1.2016 -1.52% 1.52% 1.37%
2.2016 -1.52% 1.50% 1.40%
3.2016 -0.27% 1.60% 1.55%
4.2016 0.73% 1.69% 1.83%
5.2016 1.32% 1.83% 2.35%
6.2016 2.57% 2.01% 3.50%
7.2016 2.61% 2.07% 3.83%
8.2016 4.17% 2.10% 4.17%
9.2016 3.74% 2.07% 4.63%
10.2016 3.20% 2.15% 5.02%
11.2016 4.21% 2.06% 5.20%
12.2016 7.06% 2.10% 5.58%
WOW, record set right at the last available month with a staggering 7.06% TR score. Nothing much to say about it, between options and paper gains on the portfolio the month was a good one indeed.
TER starts growing again, after the capital influx of last month that actually saw it decreasing, while Y0C continues in it’s slow and steady run.
Looking at the numbers the Long Haul PF is returning 3.53% (Gross), 2.48% (Net) and creates “dividends” for 2.79% (Gross) yearly no matter what happens to the markets.
The reality is that the first year and half was rather slow and did not have such numbers, while the last part of 2016 saw a much stronger and quicker pace.
In any case one (and probably the only) target of getting a minimum of 2% return yearly is met, and that’s what matters at this stage.
You will notice that the actual growth of the PF is very small taking away the yield from all the stocks and bonds and options. Well, this was partly intended as I sold some positions realizing a loss to decrease taxable amount, but all in all the UK part of the portfolio is suffering from a huge devaluation of the pound and generally a poor performance of my stocks. Europe did “okish” while the US was positive both currency and stockwise.
Anyhow nothing to worry about the 2.79% gross “dividend” result is what matters right now and that is something that I am looking at increasing with options and future movements.
Here some graphs to describe some of the movements of the Fund since I have started working on it.
Dividends and Options
December marked the 5th month in the year where the PF managed to overtake the 1K mark in earnings through dividends and options, so I cannot complain at how things are going.
There is an issue with reporting that I have found and that it’s giving me a lot of headaches, so far I have been reporting income and earnings as it is done in my broker, but with options the positions are not closed till they “are” closed, and that means that I might report a gain today that later in the year I have to diminish because the option has gone bad or I bought it back for some reason.
I am reporting how much I am opening (and also how much I am closing), regardless of the status of the option, and I think that this might be a bit misleading.
For example, this month I have sold/bought options for 566 Euro, but that doesn’t mean that I have locked that profit in already.
On the contrary dividends are locked in (this month we have 539 euro), I found out about this major discrepancy when I reprogrammed my google sheets to be more consistent with the Italian tax system and now I am a bit struggling to decide how to proceed.
Cash-flow wise it’s correct to report things as they are now, taxwise is not. Anyhow I will work on this issue in the few next coming days and make up my mind, if anyone has any advice…
Here the list of dividends:
WFC USD 41.8
JNJ USD 36
ADM USD 16.5
LON:HSBA GBP 54.68
LON:ULVR GBP 31.79
EMR USD 31.2
CVX USD 36.72
MMM USD 33.3
ED USD 27.47
KO USD 35
ORI USD 18.75
LON:RDSB GBP 76.18
LON:WTB GBP 11.96
FLO USD 32
BME:ENG EUR 41.15
DCA/Increased Positions
Bought 155 LON:GNK @ 6.8 GBP
Increased position in GNK, I still believe that because of pound devaluation hospitality and breweries in the UK might get a good run from the extra tourists that inevitably will be attracted to visit the island thanks to a low pound.
New Positions – Sold Positions
Bought 1000 LON:ADN @ 2.8 GBP
This is my first stock bought in the UK through options. It’s an investment company so it has been under fire for a while, has a very good dividend but to be fair I would have liked not to be assigned. It’s one of my first option plays, one of those “long shots options” that I hardly do anymore, so now I am selling calls to get rid of the stock, trying to end up in profit anyhow. We’ll see how it plays out.
Bought 100 PFE @ 33 USD
Bought through options, I could have had a better entry point but I am confident that the stock will rebound. Pfizer is a solid pharma, albeit a gigantic one, pays a good dividend and I am going to sell calls to gain more profits on it. Might increase my position as I really think it’s a good bet in coming years (it has been under pressure heavily in 2016).
Bought 100 MDT  @ 72.56 USD
One of my first loves, quickly dismissed because of a poor dividend yield. The yield has not increased but because of a new strategy that I am trying out when selling options I have decided to take a position back for a quick “dividend capture” and sell right after it. As it happens the sale has not occurred yet, so things did not go exactly as planned, but it’s not cause for concern as the entry point is very close to 52wks minimums and I think that the market has been a bit too harsh on MDT recently (at least judging from the reports that I am reading and some of its numbers). Will hold till profitable enough to sell.
Tax Optimisation
I had to hold the horses here as the calculations that I was making were not correct. I will have to wait for feedback from my accountant on the real results of 2016 and then when all will be confirmed and correct I can re-start the tax optimisation program! 🙂
Please ask questions if anything is unclear, I have started only recently to report my trades and development like that, so maybe something is not really understandable and I do not realize!

 

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18 thoughts on “December 2016 Update

    1. Ciao PID,
      Still a long way to go and most of the growth is because it’s the first “full” year with all the money deployed in stocks, but all in all I cannot complain! 🙂
      Thanks for stopping by!
      Stal

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  1. Ciao Stal,

    I think the only correct way to show options income is what is realized at the closed trade. Everything else is a fraud on yourself. If you have to roll an option many times you do not make that much more win in the nexts months. instead you have a loss in the actual month and a win in the next maybe.

    But this is only my opinion.

    Nevertheless its a good income! 🙂
    I am writing on my income post, trying to finish it tomorrow.
    best regards
    Chri

    Liked by 1 person

  2. Ciao Chris,

    Actually I agree with you, the more I look into the matter the more I realise that it is wrong to report cashflows and not actual result… I am working hard to change things as we speak as I need to re-program my spreadsheet (and inevitably all results for 2016 will be different!), but I guess it’s the right thing to do because the potential gain tomorrow in not sure, so albeit cashflow is positive I might not be able to confirm it later… Oh well another lesson learnt for 2016 I guess..
    Thanks for stopping by!
    Ciao caio

    Stal

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  3. Great month, I really like your monthly return. It has to feel good to cross over $1,000 again. I feel your pain on the options reporting front. I had my own issue earlier this year. I went back and restated my income for all of my trades. It’s a lot easier to report and manage when you only treat income at the close or assignment of a contract. Best of luck in 2017.

    Liked by 1 person

  4. Ciao IH,
    Thanks for the comment, I am wrapping up everything today (if I am lucky) then I need to re-write the post because some numbers are totally different, but it’s better to have found the issue than continuing to make mistakes… 🙂
    Best of luck in 2017 to you too!
    Ciao ciao
    Stal

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  5. Ciao Stal!
    Innanzitutto buon anno! 🙂
    Ti scrivo in italiano in quanto sono italiano anche io e dunque vado molto meglio che non con le imprecise traduzioni di Google e co. 😉

    Sono piacevolmente capitato sul tuo blog, leggendo un tuo recente msg sul blog di Alfio (BDP) che ho imparato a conoscere da poco ma che mi piace moltissimo come filosofia di investimento.

    Anche io infatti mi sono costruito, nel tempo, un portafoglio molto diversificato, fatto inizialmente solo di titoli italiani, ma poi progressivamente spostatosi su alcune blue chip europee e ovviamente americane, tutte con distribuzione di dividendo! 🙂

    A tal proposito, mi ha incuriosito quindi la tua frase dove scrivi che stai “lavorando su un sistema di cattura di dividendi tramite le opzioni”…

    Puoi cortesemente darmi qualche indicazione in merito a questa strategia?
    sono sempre curioso di scoprire cose nuove che possano risultare profittevoli… senza rischiare troppo! 😉

    Grazie

    Bruno

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    1. Ciao Bruno!
      Grazie di essere passato e buon anno! Mi fa sempre piacerissimo quando ci sono investitori dall’Italia, è cosi difficile trovarne come noi… Allora per la questione della cattura dei dividendi ti dico innanzitutto che si tratta di una strategia che prevede vendita di opzioni. Stavo pensando di scrivere un post su questa tecnica, ma prima di spiegarla (che poi è una cavolata), bisogna che ti chieda se conosci questo strumento e se lo usi.
      Se poi hai tempo e voglia sono curioso di sapere come è composto il tuo PF, spesso ottimi titoli li ho trovati solo parlando con le persone che scrivevano… 😛
      Grazie di nuovo, e a presto, aspetto tua risposta e poi in base a quella ti mando la spiegazione di come lavoro (da molto poco) su quel fronte.
      Ciao ciao
      Stal

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      1. Ciao Stal,
        grazie della cortese risposta!
        Spero di poter condividere con te (ed altri lettori del blog) questa passione per gli investimenti cosiddetti “noiosi” ossia quelli che lentamente (ma costantemente), offrono un guadagno “tangibile”… 🙂

        Per quanto riguarda le opzioni, ho letto qualcosa grazie ad un altro blog molto bello e utile (che credo anche tu conosca) ossia Partito da Zero.
        Purtroppo il mio limite di disponibilità economica e ovviamente anche quello conoscitivo nel campo delle opzioni (purtroppo io non investo dove non conosco bene l’argomento) mi frenano un po’…
        Avrei indubbiamente bisogno di esempi chiari, con elencati gli ISIN dei prodotti da trattare, oltre che di qualche numero pratico delle varie operazioni… tanto per fare anche io delle simulazioni, almeno per partire…

        Poi da quello che ho capito, occorre anche avere un broker che tratti questi prodotti… ed io, con il conto trading on line di bancoposta, non credo di poterlo fare… 😦
        Se però, come scrivi, riesci a semplificare al massimo e dare alcune info come quelle che ho chiesto sopra, magari riesco a capire meglio… e dunque provare! 😉

        Sul discorso portafoglio, ti posso far avere sicuramente la mia composizione… dimmi se la posso scrivere qui oppure preferisci che la mandi ad una tua mail personale…

        Grazie intanto

        Bruno

        Liked by 1 person

      2. Ciao Bruno,

        Ti rispondo per mail che si fa prima 🙂 Una cosa però importante la dici, meglio non avventurarsi in investimenti su percorsi sconosciuti, è un’ottima idea secondo me! Certo questo non vuol dire tentare di imparare, ma c’e’ tanta gente che si butta e poi si fa solo male… Ti scrivo tutto per mail! Ciao ciao
        Stal

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    1. Ciao TITM,
      Thanks for stopping by and happy new year! It’s hard to say what 2017 will bring, the news that we are getting recently are quite upbeat and positive, so I guess we need to roll with them. I also think that Trump can have a very bad effect on the economy, not so much for the policies that he will implement, but more for the way of communicating them. It seems that markets are more and more reliant on news and that means that we all need not to be caught in the middle when panic strikes… Will now go to check out your blog!
      Ciao ciao
      Stal

      Like

  6. From a dividend perspective it looks like you are doing all the right things. Your income went up nicely on a year over year over year basis with many solid names paying you for the month. I started looking at PFE recently too as well as MRK to add to my health sector holdings. I’m not ready to buy those names yet but they are looking compelling. Thank you for sharing your recent update with us and good luck in ’17 with dividends and options!

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  7. Ciao DH,
    Pharma is under attack from the Trump administration and of course it makes it an interesting sector to trade. I think that PFE is near, very very near, a good buy and hold entry point, MRK I don’t follow so I wouldn’t know but the company is surely a good one… Let’s see what this year brings! Thanks for stopping by!
    Ciao ciao
    Stal

    Like

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