August 2019

General Comment

After an easy July I was expecting another uneventful month in August… I couldn’t have been more wrong!

This time the highlight of the month was the stock market, which decided to go on a “ride” and showed signs of strong volatility all over the board. Recession news from Europe and probably the USA, tariffs between America and China, UK electing Johnson as a PM and expediting the no-deal Brexit procedures, Italy going into a political crisis worthy of the best comedy show… It seemed as the world decided to give itself an appointment in August to create some havoc.

So markets did go down in August, not as much as I would have liked, but few opportunities came up and I was able to play some chips, while keeping some reserve cash for the end of the year that “usually” brings other downturns in the market.

The reality of things is that, at the time of me writing, all major crisis seem to have subsided (apart from Brexit, that one escalated), and the markets are finding a more stable footing, with volatility decreasing.

Another reality of this crisis is that it was all news based… Or at least it felt so. Yes, there are some economics indicators that don’t look good, I am not going to deny it, but neither they look terrible.

In short this August downturn was positive to clean up some more losses and starting positions in companies that I was eyeing but that were not there quite yet.

I am working at a system to help me highlighting points of entry to potential stocks and options, in collaboration with a friend who’s into investing too. These mathematical systems cut out the noise that the news inevitably give you, which is positive in my opinion. We’ll see if it works at all…

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%
8.1915.82%1.41%2.66%-1.98%

TR is decreasing (vs. previous month) – August saw a pullback in the markets so down we go. The decrease as a whole is quite small despite a larger fall of the broader markets.

YTER is decreasing (vs. previous month) – Costs are not rising despite a lot of trades, this is a positive point.

Net Yearly YoC is stable (vs. previous month) – Not even a 0.01 % movement, not very happy about it, but better times should be coming soon.

Forex is getting better (vs. previous month) – Dollar is strengthening and Pound is also finding a bottom (it seems).

Dividends and Options

August in total was a bad month, the aggregate results of options and dividends are on the fall since 2 years, mostly due to the option trading but still it’s not a nice number to see.

August posted a 1224 Euro result.

Dividends accounted for 1012 Euro (-5.26% vs.2018) and Options ended up with a 212 Euro score (-43.71% vs 2018).

Let’s see what got us to these results…

While in July I had some stocks which didn’t pay the dividend, August was “almost there” as 2018 a few stock are paying into September what they were paying in August and the difference stands all there. Merely statistic.

Options on the other hand saw quite a strong increase in trading, thanks to my new found liquidity, and a few rolls that depressed the income in August.

List of Options closed in August

DCA/Increased Positions

Bought 40 FRA:BAS @ 57 EUR

Increased my stake in BASF, now I own 100 pieces which will allow me to trade options too.

Bought 200 BIT:BRE @ 8.8 EUR

Increased my stake in BREMBO, I still do not own the multiple needed to trade options but I am waiting to understand how this stock will move, there is a crisis in the automobile world that might push it down a little more, so I’ll wait to see how it moves.

Bought 160 BIT:ENI @ 13.15 EUR

Increased my stake in ENI, touched my “10% threshold” and a valuation that was really interesting, so it was time to add up a bit of Energy/Oil play.

Bought 10 MMM @ 159 USD

Increased my stake in MMM, what more can I say about them?

Bought 1000 LON:LGEN @ 2.35 GBP

Increased my stake in LEGAL AND GENERAL, right before dividend. This is a good insurance company, carefully managed and that showed some good results. Brexit is weighting on the financial sector a lot in the UK, but it was a good opportunity in my opinion.

New Positions – Sold Position

Bought 100 EPA:MMB @ 20 EUR

Lagardere is one of those stocks that I “lost” due to some covered call gone wild, been waiting till it hit the 19/20 area and decided to move back in again (through an option). Will probably increase my stake of another 100 pieces to sell some NTM covered calls, this stock is a solid dividend payer and a well managed company in France.

Bought 100 LYB @ 72.8 USD

Pretty much like my recent trades in BASF, MMM and DOW, I decided to take a stake in LYB, a producer of polymers, plastics and all things “polluting” that has got a substantial stage in the world’s markets. Like any other company from this sector (materials), it’s down considerably from it’s higher valuations. I believe that since the whole sector is down there are some forces in play that are telling us that a crisis might be really ahead of us, and these stocks feel the negativity before others… We’ll see if that’s true, but I am quite happy with this trade.

Sold 200 SO @ 50 USD

I did not want to sell Southern, but a covered call gone south did not help there. Still I made a good profit so no reason to get upset!

Sold 200 GE @ 8.05 USD

I really couldn’t bear GE no more, after the accounting scandal (rumours) I have decided to clear the gains that I have done this year with this loss. It’s a big one, but I really can’t stand this company anymore. Should have sold it much earlier, but now it’s a thing of the past.

Sold 60 LON:NXT @ 61.8 GBP

Next PLC has been in my PF for quite some time. I have been trying to see it for a tiny profit, or even breakeven three times already, with little luck, this time I managed to get it off my list. For now. Yes because the company is good, but I’d consider it again when it will hit the low 50’s and not the low 60’s as I had. Plus I am trying to remove these 100%UK plays now that Brexit is coming…

Conclusions

Let’s review the numbers, and see how August was in hindsight.

The LH portfolio as a whole is “producing less” than last year. Adding up dividends and options I am 1000 Euro behind. This result is due to the several Covered Calls that were executed and resulted in a financial gain on one side but also in a loss of dividends on the other.

As I always say, as long as you know where you’re heading everything it’s ok, and this is a perfect case for me because I have under control that side of the Portfolio and the “loss” is a no surprise for me.

If I look closer the culprit is not the dividends, but the options that are performing with a 1000 euro lag.

It looks like 2019 won’t be the year where the PF strikes my target of a 3% net return from dividends and options, but I am certainly lying the grounds for this result to come real. If my calculations are correct, the PF already produces 3,1% net return from dividends only, so hopefully the average of 3% can be hit soon enough.

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3 thoughts on “August 2019

    1. Ciao Bert,
      Absolutely right, this month was probably one of the most active in the last couple of years, although volatility was higher back in December, in August I had more money to put to work! As to the income, no complaints apart from the fact that I couldn’t hit the same results as 2018, but that’s mostly because of the options… Thanks for stopping by!
      Ciao ciao
      Stal

      Liked by 1 person

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