November 2018 Update


General Comment
img_20181029_144415

November has gone by, it retrospect it seems that this month was much more eventful than October when markets started tumbling. The reality is that in general terms world financial markets started to recover some of the losses from October. The lingering feeling that I get from the financial community, newspapers and more “economics prone” individuals, is that there is a slowdown in act. Not a recession, but a down-cycle is is place. It seems that everyone agrees on this, what they don’t appear to be agreeing is the severity of this slowdown and the timing, but that’s normal. I think that the important point is to understand and accept that we are in a different market altogether, so that we can adopt different strategies to reflect the new environment. 

We discuss a little about the Italian crisis that started in October, one of the negative catalysts that we are experiencing now. Well, it’s far from over, although it seems that Italian authorities are taking a less rigid stance and are now “speaking” with the EU about possible budget readjustments. Although I believe that the EU is a great thing, I also believe that this EU is simply not working well. You can’t have a union that financially and fiscally is still divided, it just doesn’t work. You get countries like Luxembourg, Ireland and Holland offering “almost” tax heavens status to corporations being in the same union as Spain, Italy and France that have a very high tax policy on corporative earnings. You get VAT being different from country to country sometimes in double digits terms (but no customs barriers to rebalance that). If the EU wants a chance to work in the future, it needs to undergo some serious restructuring under the fiscal/financial point of view. Right now this is pretty hard to envisage, especially with a flurry of divisions and nationalistic sentiments that are popping up everywhere.

Going back to the financial markets, another major catalyst for potential downturns has been the trade war between USA and China, but I should say USA and rest of the world. Not sure where Trump is looking at going with this, but it surely doesn’t look all that great for the world’s economic stability at all. 

LH FUND

Explanation of terminology and graphs is HERE.

Let’s see the numbers:

Month TR YTER NYYoC Forex
12.14 0.00% 0.00% 0.00% 0.00%
12.15 -3.33% 1.22% -0.13% -1.00%
12.16 7.06% 1.14% 1.16% -4.35%
12.17 9.94% 1.04% 2.64% -5.94%
1.18 9.06% 1.07% 2.66% -7.40%
2.18 6.13% 1.06% 2.66% -7.95%
3.18 5.85% 1.04% 2.81% -7.21%
4.18 9.02% 1.03% 2.90% -6.07%
5.18 8.89% 1.36% 2.68% -4.42%
6.18 9.16% 1.35% 2.65% -4.91%
7.18 10.60% 1.34% 2.67% -4.74%
8.18 10.33% 1.31% 2.70% -4.50%
9.18 10.53% 1.29% 2.80% -3.89%
10.18 9.24% 1.26% 2.73% -2.64%
11.18 11.43% 1.25% 2.78% -2.41%

Net Yearly YoC is increasing (vs. previous month) – Growth of my annualised Yield on Cost picks up again. Very good, after the fall last month… 

TR is increasing (vs. previous month) – If October wasn’t a particularly great month, November wasn’t either. The difference stands in a better exchange rate and some recovery that we saw all across the board right at the end of the month. We are still sailing stormy water, despite the better figures. Good point to notice: Record TR this month.

Forex is getting better (vs. previous month) – Dollar still getting stronger, pound might change direction after Brexit is announced (or not), in any case a breathe of fresh air for the portfolio.

 
Dividends and Options

November was and still is a key month for the portfolio. In the second half of the year was month N.2 in 2017 for revenue, and so far it is month N.1, thanks to a couple of events that boosted results. So the 61% increase over 2017 will be hard to match next year, but as far as I am concerned I have to enjoy the result now! November results in term of Dividends marked the absolute increase over 2017, which makes me very happy as one of the targets of this portfolio is to have growing dividend returns year over year.

November closed with a 1889 Euro result.

Dividends accounted for 1594 Euro (+73.95% vs.2017) and Options ended up with a 294 Euro (+16.24% vs 2017).

Let’s try to understand what happened…

I didn’t have a lot of action on options I managed to sell a couple of put (expired worthless) and did a quick buy/sell play on CVS to rake some profit, cannot complain about the result.

Dividends did marvellously, growing of a whopping 73% (for a more mature portfolio this is an extremely good growth rate). As mentioned before the 12871 mark of 2017 has been surpassed one month in advance, which makes December a month where I can try to get as much distance as possible from the previous year. So far so good!

List of Options closed in August
 
 
DCA/Increased Positions

Bought 160 BIT:GIMA @7.61EUR

Under a huge speculative pressure GIMA lost a lot since I have decided to initially invest in it. I have checked the numbers over and over again, looked at all publications and official press releases and I cannot make out the reason why this stock is so much under the water (apart from concerns with the tobacco industry as a whole). I have decided to up the ante a little, and accumulated some more. 

New Positions – Sold Positions

Sold 55 BIT:SFER @ 21.00 EUR

Tariffs, economic downturn, China slowing down are all major causes of concern for Fashion companies, especially luxury ones. Ferragamo was a very low yielder in my PF, it was there for growth reasons and because I love to have something that comes from my hometown Florence, but numbers are not backing the investment case anymore. I managed to get out with a moderate profit and might look to go back in again if the stock falls to 18/17 euro. There are rumours of the family selling the business, but remaining invested just for that looked a bit pointless to me.

Sold 40 LON:WTB @ 45.65 GBP

After selling the Costa Cafe business to Coca Cola Whitbread became a pure hotel play and I simply lost my interest in the stock. They have a lot of cash, so they can put it in play in the future, but I preferred to take the money and go after the dividend.  

Conclusions

We talked about markets in general, now it’s time to talk about the Long Haul portfolio. 

November was a very good month, managed to beat last year dividend intake a month in advance, which means that growth is there and that’s what I am aiming at. 2019 will be a very difficult year, I can already see it. This is when dividend growth starts slowing down, but all has been accounted for and it’s not a major cause of concern. 

I missed the 3% Net Annualised Yield target, hopefully I can meet it next year, it’s going to be hard but the bar is set there.

It’s also clear that strategies needs to be reassessed, entering with full positions on interesting stocks is something that I cannot afford anymore (in a declining market is a bit of a risk), so I will need to take positions in smaller instalments, a bit like I was doing at the beginning when deploying capital. 

On deploying capital I also will hold back my horses (if I can). So far I have been reinvesting dividends immediately, or as soon as I had the opportunity, it’s time to be more patient as more market collapses might be happening in 2019. 

Being patient is not a game that I am good at playing, but strong of this knowledge I hope to improve it! 🙂

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2 thoughts on “November 2018 Update

    1. Ciao Bierlollo! Su Gima mi sono espresso, non vedo motivi validi per un calo cosi forte, a parte la speculazione… Secondo me rimane un’ottima azienda, molto legata al mercato del fumo e a quello che fanno le major, ma prima o poi FDA sdoganerà le Iquos e le grosse aziende entreranno nel mercato della marujana, a quel punto potrebbe esserci una svolta importante per tutto il settore.
      Sulle opzioni, era tutto calcolato, da quando ho smesso di vendere put e concentrarmi solo sulle long calls i guadagni dalle opzioni sono crollati, ma come ho detto, era tutto calcolato. Per ora rimane una stampella ai dividendi, anche se spero nel 2019 di avere abbastanza cash da ritornare a vendere qualche put piu speculativa.
      Alla fine i dividendi salgono e quello è il target principale! ciao e a presto!
      Stal

      Liked by 1 person

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