October 2017 Update

cropped-img_20141020_091103.jpgGeneral Comment
A month to remember, mostly because I have got married on the 28th and that’s one of those landmarks that few years ago I would have never thought possible in my life. I will not enter the economics of the wedding as I still want to leave that to a separate post, but instead I will concentrate on the stress and pressure that a wedding can bring to bride and groom. It was a very hard job to pull, but we were happy in the end and all was great!

Coupled with the preparations for the course in January, the wedding took a lot of time off my usual schedule, my trading slowed down as we were approaching “the date” and results in October and November are going to show this, because I did not plan many option sales in November and at the same time I have less opportunity to check companies and their movements for further investing on the dividend side of things.

All in all the result was better than last year and that’s positive.

Macroeconomics headwinds are coming up, right now in the form of the usual “market is inflated” news and scary newspaper articles. My thoughts?

Markets are high, they will fall for sure, we will enter the “worst crisis of the world” and probably we’ll overcome it. Investing in the stock market doesn’t have many rules, but there are some points that you must give for granted. If you think anything different AND you are investing, then you are a fool.

  1. Markets and the Economy move in cycles, what goes up WILL come down.
  2. Basic Economic theory revolves on the assumption of infinite growth, which is impossible. Everyone know it but still growth is considered a major point in the evaluation of stocks. There will be a point when a company will be “a little less profitable” than the year before, it’s in the nature of things, this is when the cycle will enter it’s downward phase until valuations are going to be very very low and it will be profitable to buy again. (i.e. don’t be surprised of a -50% fall if it happens)
  3. “a correction is overdue” is like betting on a number that did not come out at the Lottery in many draws, thinking that it’s “due”. If there will be a market crash it will be for reasons that right now few can see.
  4. Inflation plays a huge role in stock valuations, after a crash, in a rising prices environment, turnovers, FCFs, and lots of other performance indicators will be higher than before, resulting in higher stock prices (all other things being equal of course). This is why boring companies with boring products, that enjoy a market dominance of some sort, will likely come out of the crisis at higher valuation (if the market doesn’t change in the meantime).
  5. Timing a crash is like playing the lottery, EVENTUALLY you will be right, but if I listened to the news in 2014 when I started the LH portfolio I would have not invested back then, losing a lot of opportunities and gains that I made since then.

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% 2.84% 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%
9.17 7.36% 3.05% 10.30%
10.17 9.10% 3.11% 10.81%

Total Return of the LH Portfolio is rising strongly for the second month in a row, breaking the 9% threshold and setting the record so far. Currencies played an important role as the euro got weaker, but they still account for a -4.73% on the result (TR without currency effect would be 13.85%).

TER was strongly on the rise thanks to some movements I made on the UK market which is always very expensive to trade, so the increase is under control.

YoC rises to 10.81% still rising despite a very bad trade on the options front that almost wiped all my gains in October.

Dividends and Options

October scored a 1363 Euro turnover.

Dividends were 843.95 Euro (+35% vs.2016) and Options scored a 518.78 Euro (-18% vs 2016). Very good results for dividends, very disappointing result for the Options. Option trades this time last year were starting to enter their “full swing” so the first month of comparison was a miss, there is an explanation for it of course, as my trade on STX (see below) will show I had to roll a DITM Call on the stock effectively losing 470 euro (between GE and STX) in the process. So I take the hit today and will hopefully turn on the profit later in the year (or next year), this is part of the game of trading options…

Either than that I am happy with the new options strategy, some long calls were already bought back as the underlying stock fell, but all is under control (for now!).

List of Options closed in September
Screen Shot 2017-11-05 at 23.51.20
DCA/Increased Positions

No activity here

New Positions – Sold Positions

KHC – Bought 100 shares @ 77.50 USD

Kraft Heinz Corporation is a giant in the food industry, known for the high stakes that Warren Buffett own in the company on top of their products that are distributed all over the world. Right now defensive food industries are suffering and I have decided to take a position in KHC as I think it’s a good company (with a little too large debt) with a strong product line and also a quite strong market dominance (on top of international presence).

Options Plays

Managed to close the IBM trade with a 19% Aroi.


Conclusions

Economic fundamentals are still positive all over the globe, apart from black swan happenings and other amenities like that it’s hard to have a pessimist stance on the state of the markets. One point that I see more and more is the huge swings that are created by any piece of news that might have a slightly negative meaning for a company. The market is looking for volatility (when Volatility is higher there is more money to be made), and these swings open up opportunities that one can seize to sell options of enter a stock at a favourable price.

LH Portfolio will take a bigger hit in December when taxes will be calculated (hopefully in Jan/Feb), but if all goes according to plan I should be over the 2% net return per year since inception. I am trying to hit 3% by 2017 (much earlier than expected) but it might be hard to do considering that in November my trading will be very much reduced.

 

 

 

 

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6 thoughts on “October 2017 Update

  1. Congratulations for you and your wife Stalfare. It must have been an exciting month. You even managed to generate a profit from your portfolio, which is a nice bonus, but probably doesn’t compare to the big day!

    Like

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