May 2017 Update

General Comment
“Sell in May and go away”. If you’ve been trading some time you might have encountered this phrase reading articles or blogs or simply watching the news. It is believed that May is the time to let money sleep to catch the year end’s rally where companies give it “all” to reach the yearly targets. I never believed in these “theories” and as a matter of fact I have bought in May, not sold. Generally speaking May was a good month, economically wise we are seeing a strengthening of the Euro, first real Trump’s actions, and few signs of recovering from Brasil after 4 years of terrible economic trend. The positive wave started in November 2016 is still continuing, no complaints about it of course!

LH FUND

The “Long Haul Fund” is my attempt of getting an “immediate” state of the art of all the investments that I am following. Pretty much like professionally managed funds I can boil all the activity down to a performance indicator, in our case Total Return.  (Thanks to Dividend Life for this post on how to create a Fund)

TR stands for Total Return (selling everything, paying taxes and commissions and converting to euro), 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%	0.00%	0.00%
12.2015	-3.33%	1.27%	1.13%
12.2016	7.06%	2.01%	4.75%
1.2017	4.76%	2.04%	4.93%
2.2017	7.26%	2.20%	5.30%
3.2017	8.15%	2.24%	5.82%
4.2017	7.82%	2.32%	6.36%
5.2017	7.59%	2.49%	7.12%

May was a pretty stable month, no records were set, not huge pitfalls were stumbled upon.

TR ratio is down, mostly due to the markets which have not been buoyant like they had been before. For many European markets it was also “dividend pay month” which means a loss in capitalization all concentrated in one month.

Options Yield goes to 6.80% (+0.40% vs April), while Dividend Yield goes to 5.79% (+0.18% vs. April) a very modest growth due to the fact that in May the capital deployed in stocks increased substantially (thus reducing the average YoC).

TER is saw an higher increase due to the trading activity and soon it will (alas) get another boost from the Italian tax office, but that’s part of life I guess…

Dividends and Options

May keeps the positive trend started before and get on record a total of 2541 Euro worth of income from Dividends and Options.

Dividends were 1857 Euro (+ 50% vs.2016) and Options scored a 683.39 Euro result.

I am still managing several positions that I need to keep rolling, this makes the Options income very unstable, but so far so good.

May is the fourth month in a row where the fund returned more than 1000 euro, and the first to pass the 2000 euro mark, I am really happy about these results, the LH Fund seems like finally picking up pace.

List of Options closed in May

DCA/Increased Positions

LON:BT.A – Bought 805 shares @ 3.09 GBP

BT Telecom was one of my first stocks, it did really well until 4/5 months ago when a series of bad news, Brexit and a tax issue on the Italian market got the stock to fall badly down. I waited patiently for the stock to find a “bottom”, which I believe now being in the 2.90/3.00 GBR area, and bought the rest of the shares that I needed to reach 1000 pieces and being able to sell covered call. I think that BT has all the shots to do well, the tax scandal will be overtaken a way or another (and by the way things are done here in Italy I would not be surprised if the fine that originally has been publicized will be strongly reduced). It’s a bold move, because it happens before the elections in the UK, but it felt right and I managed to secure the price I wanted.

LON:LGEN – Bought 740 shares @ 2.49 GBP

Totally different from BT.A, LGEN is a company that I “had” to let go due to an early assignment (see April post). Again I waited for some pullback and went back in to reach 1000 pieces for covered call trading. I would add more if it falls below 2.45 GBP.

VZ – Bought 55 shares @ 45 USD

Didn’t think I would get a chance again to buy at my cost price, but VZ is under fire (until the 5G network kicks in, then they have a quite interesting competitive advantage), bought to reach minimum size to trade calls.

New Positions – Sold Positions

Sold EPA:MMB 100 shares @ 26 Eur

Another (hopefully the last) covered call situation where the stock is called away before dividend. I have tried to protect the position as much as possible but in the end it was assigned before dividend and I had to let the stock go (with a good capital gain, but it’s a small consolation).

Buy BKE 100 shares @ 19 USD

The Buckle is an interesting company that was pointed out to me by a friend. It’s in the most battered and bruised economic segment of the moment (retail), but it has some perks that make it interesting to me. First of all it has no debt. Yes you read correctly, no long term debt. They even had a small stash set aside (100 million dollars), plus they have been profitable so far, despite marginally, but they are still making money. There are negatives too, most of the stores are located in secondary, more rural areas of the US, collections are not exciting (great management of costs but not so great creativity). It’s a far bet, but I think it was undervalued and after the recent pullback in the 17 USD area I believe it is even more of a bargain. Pays a good dividend (covered by earnings).

Buy CINF 100 shares @ 70 USD

If I think that I started into CINF at 54 USD… Before selling all the shares for a good capital gain… Oh well. Anyhow, no brainer. The stock took a beating on earnings, 70 is not “great” but it’s good enough to go back with them and enjoy the 2.83% Dividend Yield (net is 1.77%, not great but I’ll live with that).

Options Plays

Options plays are strategies that I put in play with some stocks where I want to “trap” a dividend and sell the stock immediately after. It doesn’t always work, so sometimes you get to keep the stock for a longer time.

These results are already factored inside TR, Options and Dividend gains and are expressed “net”, including all taxes and commissions.

 

Conclusions

So far so good, markets were a bit slow in May and I have used that opportunity to go in some stocks that I was monitoring, Options trades are “getting there” although I believe that I will start cleaning some of the mess created by all the trades at the end of 2017, it’s a shame because those options lock in potential gain, but it’s also true that they are all lessons that I had to learn to refine my trading style. We’ll see what the end of June brings, there are UK elections and winds of government change in Italy,  so we might see some shake up of the current situation, right now there aren’t many occasions out there, but patience is king in these situations and options can put to work idle cash in the meantime.