December 2016 Update

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!