August 2017 Update

Processed with VSCOcamGeneral Comment
August 2017 felt a little bit different for me this year. Normally in Italy everything shuts down, the heat rises, and that “holiday feeling” hangs in the air, a bit like when we were in school. The difference for me this time is the fact that I have decided to have no job (see previous posts), and after a month of unemployment things are starting to settle down and to be honest with you I feel much better than what I would have thought when I was in the midst of taking the decision to stop working. No, I have not reached FI, so there are concerns coming right up my alley in the near future, but for the time being I have decided not to worry about those!

Market-wise we saw a month where we witnessed some “tests for a correction”, mostly on geopolitical tensions. It seems that everyone is convinced that markets need to fall, and every little bit of news that might hint to a change of wind gets amplified massively, also on the single stock side, creating strong movements. This is good for options as IV rises, and opens up opportunities on core stocks too.

LH FUND

Explanation of terminology is HERE.

Month TR TER YoC
11.15 0.00% 0.00% 0.00%
12.15 -3.33% 1.27% 1.13%
12.16 7.06% 2.34% 4.75%
1.17 4.76% 2.38% 4.93%
2.17 7.26% 2.53% 5.30%
3.17 8.15% 2.57% 5.82%
4.17 7.82% 2.65% 6.36%
5.17 7.59% 2.83% 7.21%
6.17 6.96% 2.89% 8.51%
7.17 6.62% 2.96% 9.17%
8.17 5.99% 3.00% 9.73%

TR ratio keeps it’s fall since May, fourth decrease in a row. Currencies are playing a major role here (80% of my PF is in foreign currencies), so I have decided to start calculating the currency effect on the PF. As I do not have a lot of data right now I will not be posting much, but let it be known that right now I am netting a nice -6,51% from currency devaluation. So technically TR would be around 12%… Anyhow, that it’s not a major source of concern, stocks in the PF have been performing so and so, but this is the nature of a very defensive allocation.

Options Yield goes to 7.99% (+0.42% vs July), while Dividend Yield goes to 8.89% (+0.20% vs. July). All seems on track here, Options and Dividends are still growing as planned and the total result is a YoC that jumps to 9.73%, 0.55% in one month which is real good.

TER is lying low, a 0.04% increase is real good.

Dividends and Options

August scored a good 1590 Euro turnover.

Dividends were 710.39 Euro (+75% vs.2016) and Options scored a 879.76 Euro (+208% vs 2016). As expected the extra cash got in August from the FIAT bond is getting the option result to grow strongly, target is to reach 1000 euro constantly each month, but it’s proving to be hard unless I start clearing some of the bad trades that I carry since 2016…

Option strategy has changed regarding core stocks (stocks that I generally do not want to sell). On these stocks I now sell very long Covered Calls (at least 300 days) trying to catch AT LEAST 1 dividend payment as premium and +20% on my average cost as strike. This way if the option is called away I still get a good capital gain, the dividends and the premium.

On other stocks I keep the usual short put/covered call approach.

List of Options closed in August
Screen Shot 2017-09-03 at 15.26.12.png
DCA/Increased Positions

LON:WPP – Bought 75 shares @ 14 GBP

In a day WPP lost 14% due to a below expectation earning report. This is one of the biggest advertising companies in the world, with solid history of dividend payments and very good track record for accounts and the likes. After reading the earning report I have decided to double my position at a slightly lower average price.

New Positions – Sold Positions

LON:RMG – Bought 1000 share @ 4 GBP

I took this assignment from a put option that I sold. I have been looking at RMG for some time, lost a lot of ground recently and has struggles with the pension deficit. The news that I managed to find are not all bleak though, GLS parcel section is growing strongly and it seems that the company is trying to turn things around. Will sell Covered Calls with expiration after dividend payment, and will monitor the situation in the meantime.

MO – Bought 100 shares @ 65.50 USD

I wanted to own them for quite some time, the occasion came after the FDA released some documents about possible future changes in the way cigarettes are treated in the US. All tobacco stocks tanked and I took the opportunity to get this company through a Put Option. MO is market leader in the new e-cigarettes segment, although regulations are going to affect the business they are positioned well to exploit the changes that governments are imposing.

AMS:PNL – Bought 500 shares @ 3.79 EUR

Another postal service, this time the Dutch one. PNL recently reinstated their dividend and are posting interesting results of late. Postal services are a key sector in tomorrow economy and this explains my positions on PNL and RMG.

Options Plays

None to report this month, I have a few active that are likely to be closed in September/October.


Conclusions

So everyone is thinking that the stock market needs to fall soon. But the financial data that we get from governments are not that terrible. In Europe it seems that we are hitting the right chords finally, and a bit of growth is coming to town. America is still doing ok, despite Trump. Brazil seems to be waking up and Asia as a whole is doing great.

Of course there are geopolitical tensions, North Korea is proving to be a growing pain and it was thanks to them that the markets had two major “correction tests” in August. I see the opportunity in a correction, so I am not terribly concerned about them, but it’s evident that the general sentiment is changing since May/June.

I am still looking for bonds to invest in, but it’s still a difficult market there, maybe now with the dollar near 1.20 there might be opportunities, but I see that also T-Bills don’t have huge returns right now…

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14 thoughts on “August 2017 Update

    1. Ciao PID,
      I follow your endeavors with special attention to the real estate portfolio that you have, it’s something that I’d like to have myself but here in Italy there are many issues with renting properties, so in the end I stick with the financial markets for simplicity… Anyhow, thanks for coming by!
      ciao caio
      Stal

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  1. Nice results for August. Happy to see you continuing to make your buys as you average into positions. People have been talking about a corrections for at least three years if not longer. Just keep investing finding value where you can get it and grow that passive income stream.

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    1. I remember that when I started investing people were complaining about the market being too high and prices too inflated. Probably they were right, I am not sure about it, but reality is that since 2014 there has been quite a growth out there! It’s probably one of the hardest things to do, investing when everyone screams at how high prices are, but in hindsight if I didn’t do it I would have missed a lot of returns now (also some losses but they are part of the game)… Thanks for stopping by!
      ciao ciao
      Stal

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    1. Ciao WFT,

      Thanks for stopping by! Talking about correction/crisis, yes I do agree that it will arrive sooner or later. Then the portfolio and investment thesis will be “really” tested. It’s hard to make predictions so for the moment i am keeping the course that I set at the beginning πŸ˜›

      ciao ciao
      Stal

      Like

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