January 2019


Houses over the Arno River (Florence)

General Comment

2019 has kicked off with a moderate positive feeling to it, the draughts of December that we experienced in the stock market made way to a rather quick recovery, all across the board.

I guess that January did not hide any special surprise for us, no dramatic news, no Brexit decisions, no China trade wars, so I guess in a relatively stable international picture markets managed to claw some losses back and rose.

Whether or not this growth will continue in 2019 remains to be seen. What I can see at the moment is a market that is waiting for any possible bad news to start a selloff.

Markets did rise consistently in many years, and specialised and non so much specialised individuals (people who know nothing of financial markets), they all seem to indicate a difficult 2019, an opener to a much tougher 2020.

Again, my guess is as good as yours, I still do not see major causes for a sharp decline of the economic activity, but it would be careless to ignore some of the signs that occurred last year and the struggles that the EU and UK are going to go through in 2019 with elections and Brexit. These happenings are going to have an effect on the stock markets, much like the USA-ROW (rest of the World) decisions on trade, the potential Venezuelan crisis and Russian tensions with the US.

We’ll see where we get to, it’s going to be an interesting year as usual, changes outlined in the previous post are studied to reflect this scenario and I hope that they’ll help the portfolio perform well as it has done so far.

When I teach my students about strategy, I often start by saying that we cannot foresee the future. But going to battle without preparation and a plan gives you the only certainty that you can have “you will 100% be unprepared for what comes”. At least by studying and trying to anticipate some events we can decrease that percentage, the future remains impossible to see but…

LH FUND

Explanation of terminology and graphs is HERE.

Let’s see the numbers:

MonthTRYTERNYYoCForex
12.140.00%0.00%0.00%0.00%
12.15-3.33%1.22%-0.13%-1.00%
12.167.06%1.14%1.16%-4.35%
12.179.94%1.04%2.64%-5.94%
12.183.28%1.24%2.70%-3.53%
1.199.76%1.26%2.69%-2.75%

Net Yearly YoC is decreasing (vs. previous month) – We are there, pretty much the same result as December, but technically 0.01% lower, that would explain the red colur! 🙂

TR is increasing (vs. previous month) – Markets started to grow again in January, quite strongly I should add.

Forex is getting better (vs. previous month) – I was expecting a worst number here, but I guess that what’s changing the number here is finally options and dividends, more on that later.

YTER is increasing (vs. previous month) – Costs for the accountant that follows my tax return were increased massively, I might have to abandon him and try to do the calculations by myself, but for this year I had to go with him so the start wasn’t great for the expenses…

Dividends and Options

I expected January 2019 to be lower than January 2018 and unfortunately my prediction was right, last year i have had 2 extra dividends from ORI and BKE that this year did not materialise. Good news are the options that ended in positive territory, and the fact that the difference in the end was rather small.

January ended with a 1328 Euro result, second best January since 2014.

Dividends accounted for 1157 Euro (-26.20% vs.2018) and Options ended up with a 171 Euro (+100% vs 2018).

Let’s see what got us to these results…

As mentioned in the intro, special dividends from BKE and ORI were dearly missing, that would explain the lower result this year (in total 425 dollars). Options were on the positive side, i have a little cash and I am planning to use it for some naked PUTs but only on stocks of companies that I really want to hold.

List of Options closed in January

DCA/Increased Positions

Nothing to report

New Positions – Sold Position

Nothing to report

Conclusions

I mentioned it several times, and it’s one of those thin red lines that will pop up again during the year, but 2019 it’s not going to come easy for the LH Portfolio. As the fund is now “mature” growth rates are going to be there (hopefully) but in percentages and forms that cannot be compared with the first 3 years of investments.

Major focus will go on dividends, last year they grew by 8.8% vs. 2017, if I could confirm a growth like that it would be simply great, but my fear is that this figure it’s going to be much smaller. As long as this percentage is positive (at least above 2%), then the result will be good.

Options can play a major part in getting extra performance this year, as my outlook is mildly negative, all the long calls that I have sold might be good plays if the market goes south, but it’s too early to say.

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