May 2019

General Comment

One more month goes by, this time it’s May, a rather stormy month in Europe and on financial markets.

I won’t comment on the weather, because there is very little to talk about, let’s see what happened in the financial world.

Having left all the difficulties related to Brexit in March and April, one would have thought that May was going to see very little action. There are two major issues with that thinking. The first one is related to the “old saying”, Sell in May and go Away. The second has to do with the fact that after 4 months of continuous growth, time is ready for a bit of a correction, if not for a full fledged crisis.

Well apparently doom and gloom predictions this time got it right and markets started heading down a little.

As usual I try to look for the catalyst that forces people to sell stocks, the reality to me seems more linked to investors and traders wanting to take some profits.

Yes the Trump administration is still fighting against China (and now Mexico) about tariffs, Amazon decided “to amazon” mobile phones companies and created a bit of a stir. European side of the market was impacted, in a minor way, by the elections while it seems that debt ridden countries like Italy might pose a bigger threat than expected.

Being Italian I can say that I have been exposed to all kinds of debt crisis over the years, it seems that there is always “a way” to get out of difficulties, so right now I cannot see anything new under the sun.

Still a downturn was welcomed and my feeling is that we did not see the end of it yet. Commentators tell us that in December there will be a recession, I wonder how they can be so sure. The only event that points towards something like that is the fact that materials and chemical companies are all suffering a lot. They normally anticipate cycles as they produce raw materials, but it might be just their cyclical nature that gets them to do so…

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%
2.1912.02%1.24%2.69%-1.95%
3.1914.86%1.22%2.70%-1.21%
4.1916.86%1.21%2.83%-1.87%
5.1912.73%1.22%2.81%-2.42%

TR is decreasing (vs. previous month) – We mentioned a correction, the Fund goes down as well!

YTER is increasing (vs. previous month) – After several decreases we have a slight increase. I need to understand why, as I did not operate like a madman to explain a specific increase, but maybe I am wrong. Anyhow not a huge deal.

Net Yearly YoC is decreasing (vs. previous month) – We’ll see why it went down later, but it’s a result that I was expecting.

Forex is getting worse (vs. previous month) – May confirms the negative trend that this stat has, we are still in an acceptable range, so no big deal, but we can/should do better.

Dividends and Options

May is a sort of “pay month” for Europeans, as most of the dividends happen to be paid during this month.

May ended with a 1177 Euro result.

Dividends accounted for 2736 Euro (+33.29% vs.2018) and Options ended up with a -1559 Euro score (-479.68% vs 2018).

Let’s see what got us to these results…

Dividends were flying this month, thanks to a couple of last minute operations too, but generally they are going very well. The “strong and stable” part of the portfolio is performing as it should and that’s all that matters.

Options on the other hand are showing a negative number, that’s because I’ve decided to take advantage of a movement of PG and SBUX to roll “away and high” two options that I had ITM (in the money). I didn’t need to do it but I don’t want to let the stock go so I’ve opted for this protection of the trade. Of course that means a financial loss this month (in real terms nothing changes), not a big deal.

List of Options closed in May

Following some comments from the readers I have decided to change the way I am reporting options. I am not reporting the “financial” part anymore, but rather the “money management” part or it.

By doing so I managed to add the information on the Price when the option was opened.

A little explanation needs to be given, on some options you will see that there is a “tick” next to the ticker. This means that that option has been rolled.

In order not to make mistakes when rolling I close the original option assuming that i buy it at the same premium as sold it for. I then open a new line with the same opening date as the former option, but new expiration date, and new premium (I usually roll for credit).

In May rolling PG and SBUX costed the portfolio a financial loss of 1730 Euro, so in the end the final tally of -1559 Euro is not that bad because it means the standard option business profited 200 euro. Of course when volatility increases like it happened in May more options trades are possible.

DCA/Increased Positions

Nothing to report

New Positions – Sold Position

Bought 1000 BIT:ISP @ 2.18 EUR

Intesa San Paolo is one Italy’s biggest banks, probably the biggest consumer side. It’s one of the dividend players in Italy, which I did not take back in December when it hit a 1.89 low. It pays a 10% dividend, decently covered. I’ve decided to get in to take advantage of the generous dividend, despite the fact that the valuation was higher than in December.

Conclusions

I am not sure if this is the beginning of a major chaotic period or not. My feeling is that markets are taking a pause after a long rally. The portfolio is behaving as it should be, and I hope that there are going to be opportunities for further investments in June. Some stocks are already approaching interesting valuations but not quite at the level that I would like to buy. I need to be patient…

2 thoughts on “May 2019

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