July 2019

General Comment

Back from the holidays in June, me and my wife saw fit to have a spell of continuous sickness that lasted more or less one month.

Clearly that was not welcomed by the family, but apparently it was due to some sort of “summer virus” that saw fit to attempt to get residency in our throats/lungs. Fortunately the whole thing is a memory at the time of writing, but it did dampen the mood a little, especially in a moment where 90% of the Italian population start leaving for the holidays, having finished them and being sick it’s not the best of things.

As summer gives me a little bit more of time I managed to perfect my bread recipe (yes among several things I back my own bread), this will explain the picture here above! 😀 Now moving to “Focaccia Genovese” production…

Economically speaking July I cannot think of anything majorly important to report. Yes, there are tensions for trade tariffs in USA/China, yes there is still a front open on the North Korean crisis (if we want to call it this way), Europe voted the new parliament and new central banker and the UK saw fit to get Boris Johnson to take the lead of the Conservative party (looks like another Trump took the power there…). Lots of events but nothing that actually had a real impact on the world economy which is still heading towards a stagnation/mild recession despite some data being overly positive.

Under this point of view the decision of cutting rates from the FED needs some special attention. As an Economics major I still cannot “see” what all this QE is going to do to the financial world, I have some ideas, but being uncharted territory (a spell of easy money like that has never been done before) it’s hard to give a prediction. I only think that all this money sooner or later needs to be recalled, as sooner or later debts must be repaid. If anyone has a “view” please share it in the comments below I’d love to hear your piece of mind!

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%
6.1914.41% 1.44%2.64% -3.17%
7.1916.13%1.43%2.66%-2.74%

TR is increasing (vs. previous month) – July was a positive month for the market, so… Up we go!

YTER is decreasing (vs. previous month) – After the taxmageddon of June we get a slight pullback, very good.

Net Yearly YoC is increasing (vs. previous month) – Yield is resuming growth, very good.

Forex is getting better (vs. previous month) – Dollar is strengthening and Pound is weakening, still I have more dollars than pounds…

Dividends and Options

July was not as eventful as June was, at least in terms of options being assigned. The extra cash generated in June was put to work for some short term trades (mostly puts), the end result was pleasing.

July ended with a 1112 Euro result.

Dividends accounted for 1082 Euro (+18.88% vs.2018) and Options ended up with a 30 Euro score (-69%% vs 2018).

Let’s see what got us to these results…

Unlike June, I did not lose any dividend paying stock in July, I actually used the cash generated last month to invest in options and other dividend stocks.

This helped in beefing up the figures of my dividend intake, and opened up the space to some new companies/strategies that I am planning to implement in the future.

Option-wise the result it’s pretty “boring” only because I had to roll 2 options (FLO) which kind of killed the proceeds of the month. As usual I rolled for credit so it’s not a huge deal.

List of Options closed in May

Part of the extra cash made in May was used to come back on the options market to sell aggressive puts, the expired options above are all referred to that strategy.

I kind of missed being able to do this, but cash was an issue before and I do not trade on margin, so it was a no-no for me until June.

DCA/Increased Positions

Bought/Sold 30 EPA:URW @ 133 EUR

Unibail Roadamco Westfield is the biggest commercial REIT player in Europe, last year bought Westfield to increase the number of countries where they operate and expand the mall base. It has been falling a LOT in recent months, but I believe that they can do well with this integration, plus they have a strong history of dividend payments and attention to the shareholders. I took the opportunity to sell at loss and buy back with a much lower average price, this allows me to “wash” some of the profits that I made in June with the sales I was forced to make.

New Positions – Sold Position

Bought 100 DOW @ 48.75 USD

Dow Chemicals, belongs to a sector that is not performing well at the moment. Recession clouds get bigger and bigger and the first to suffer are “materials” or “raw materials” companies. In this case we have a company that it’s quite similar to BASF, they produce a vast array of chemical products and plastics, all for industrial usage. If there is a slowdown in production they are the first to feel the pain. I might add similar companies in the coming months are I believe that there might be some occasions out there still.

Bought 100 NEE-J @ 25.13 USD

Time for new instruments in the LH Portfolio. Preferred stocks. In this case we are talking about Nextera Energy, a company that it’s the biggest producer of renewable energy in the World. Standard stock it’s way out of my league now, so when I had the opportunity to get the preferred near par I took a swing at it. Preferred stocks are peculiar, they have their own rules and can be recalled, but here I am in for the dividend and the fact that they are a bit less prone to volatility, plus they should perform well in a decreasing rates environment… We’ll see how they go, very happy to add this instrument at last.

Bought 100 ABBV @ 73 USD

Honestly? I made a mistake here, I was planning to do a buy/write trade, but forgot to sell the call when I took position into the stock. Unfortunately after that ABBV has been falling so I could not sell the call as I wanted anymore. I am happy with keeping the stock though, I think it’s undervalued at present time, and I can enjoy the dividends in the meantime…

Conclusions

July was important for the LH portfolio because the extra cash generated in June opened up some opportunities that were not on the table before. First going back to selling puts, secondly the addition of Preferred stocks. the second part is more important to me, as they should guarantee a very good yield, but they should be a bit more stable in terms of fluctuations. I am planning to increase their presence in my PF to 20%, provided that I find the right contracts and most importantly the right price. Right now they are sky high…

Apart from this slight change in strategy I am pretty happy with the performance so far, there will be some more “loss washes” that I will have to do from now till the end of the year, but I believe that this will happen in November/December. Right now there is no point in posting capital gains for this portfolio, so in case I make them (and I will make them through options) I will use the proceeds to sell some stock at loss and evaluate buying back at a lower price. This will mean that I don’t have to pay taxes on the capital gains, increasing the yield on companies that I feel can recover, or exiting from positions that I am fed up with.

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