February 2020

General Comment

The funny thing about February 2020 is to do with human nature I guess. Until the end of the month we have been updated by numbers coming from China, reporting mounting amount of people catching a disease, a new virus. We even gave it a name “new Corona Virus” and all seemed clean and cool.

Because it was happening in China, that is.

Then the virus made its way to Europe and all of a sudden, in the space of a week, we went from looking lazily at the news to “oh my god we are all going to die”.

Italy was struck by the virus, we have been pointed as to be one of the countries with the biggest outbreak, a modern plague spreader, judging from the reactions of some states.

The “funny” thing is that until the day before news agencies started to report the end of the world, nobody gave a damn about this thing.

Oh well, as usual extremes are always wrong, and the Italian media (and government) are now trying to do like the German and French counterparts did, i.e. reporting only those cases that are serious.

Yes because most of the people who catch this virus don’t get symptoms, or get mild ones, most of the time not worth of medical attention. So the idea of testing indiscriminately anyone from certain areas was probably a wrong thing to do.

Anyhow, human nature. The velocity at which total madness spread all around the country (and the financial community) is some feat. Another reminder that modern society is clearly affected by the amount of information that we produce.

Either than that, this virus is certainly going to affect our lives in the next months, not so much for the mortality rates that it can produce, but mostly under the economic point of view, as it looks like the world came to a “stop” that was not really planned for.

The black swan event everyone was talking about? Maybe, we will have to see.

What is sure is that there are going to be interesting times ahead…

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%
12.1923.50%1.35%2.72%-1.40%
01.2021.13%1.36%2.65%-0.45%
02.2013.04%1.35%2.67%-0.63%

TR is decreasing (vs. previous month) – After the havoc created by the last week in February this figure was meant to be massively in the red. Lost 120 basis points, perfectly in line with the market…

YTER is decreasing (vs. previous month) – Small decrease, nothing to be overly joyous about, I guess…

Net Yearly YoC is increasing (vs. previous month) – Another small increase, but between reductions of YTER and increases of NYYoC I might get closer to the 3% target that I’ve set up to do… Patience…

Forex is getting worse (vs. previous month) – Not a huge change, so so major worries I guess.

Dividends and Options

While January was a “train wreck” of a month under the dividends and options point of view, February was a train wreck for the Total Return side of things. Two train wrecks in a row!

February income was a nice 1192 Euro.

Dividends accounted for 978 Euro (+22.36% vs.2019) and Options ended up with a 214 Euro score (+703% vs 2019).

A positive month for income that shows some promising growth on the YoY comparison. There is little to say in reality. I took the crash opportunity to close some positions in terms of Options trades, and dividends did their part, growing as they “should” do. Or at least as I’d hope the do!

List of Options closed in February

DCA/Increased Positions

Bought 535 LON:PZC @ 1.90 GBP

PZC Cussons is defensive goods producer, decided to add some shares on a recent dip (prior to the crash at the end of February).

Bought 25 LON:ULVR @ 46.88 GBP

Another defensive stock increased, prior the crash and before exdiv. Unilever is a quality stock, yield was ok so I’ve decided to add some.

Bought 65 LON:RDSA @ 17.5 GBP

Royal Dutch Shell fell to my average price and I’ve decided to add some more positions to my holdings.

New Positions – Sold Position

Bought 100 BIT:SFER @ 14.40 EUR

I had Salvatore Ferragamo in the past, the stock is under terrible pressure for collapsing sales in Hong Kong and China, plus the virus madness. A chance to enter, I love this company (it’s from my city), a huge intellectual equity and unrivalled products. It’s small enough also to be bought, so could be potential target from one of the big groups out there…

Bought 100 CNP @ 25 USD

CNP is an America utility. Financials and market seems to be pretty good but it fell over some issues with the utility regulators authorities in the US, meaning that they risk to have to pay substantial fines. Despite that, it’s still a good company and while fines will pass (if they are levied), hopefully good management will stay!

Conclusions

February started nicely and ended up quite terribly. All in all is not that bad, if you’re in for the long haul these crashes have the great effect of allowing you to enter the market at better yields.

Plus a fall was long overdue, if you knew it was coming half of the stress is gone just with that knowledge.

I do not think that the virus will wipe the human race from the earth, neither it will reap deaths like the Asian Flu of the 50’s and 60’s or the old plague. But it’s a strong wake up call, especially as we can observe what a panic situation brings to the society as we know it.

I was at the WTO recently and speaking to one of the former presidents of the WTO he mentioned that “the organisation of the WTO doesn’t exist. The moment one country stop wanting to use the rules that WTO gives, the whole WTO thing falls apart. We cannot enforce anything, it’s the countries willing to collaborate that make it possible.”

Well, society is the same. The rules that we have are there because we need them to live not like barbarians. But the moment we believe that they are not there (panic situations), it’s the moment all falls apart…

I’ve seen people on TV buying 50kg of pasta, or buying 50 packs of toilet paper, all in fear of this virus… Surely they’ll never die of hunger, although I am not sure the virus actually cares!

Keep calm and enjoy the storm, there’s more of it coming our way!

6 thoughts on “February 2020

  1. Snap!…I also re-purchased ULVR this week (but RDSB….no way!).

    I have been following the story on coronavirus and was wondering how things were panning out for you in Italy. Let’s hope it’s not too severe and blows over soon and the markets become less volatile. I am not so concerned at present but more worried about the probability of a GREEN swan event!

    Liked by 1 person

    1. Ciao DIY!
      Yes ULVR is “always” in my cross-hair, when it enters the 3% yield I normally consider it. Given the fact that I was predicting a slowdown in the economic activity all around the globe (but I wasn’t expecting a virus of course), it made sense to buy more.
      RDSB I don’t think it’s a company that you would consider, I’ve added them because of the plans that they have on trying to switch to more sustainable productions, but they remain quite a polluter…
      Here in Italy the situation is “developing”. The virus had some outbreak in the north, they are trying to contain the spread but the real issue is the people who end up in intensive care. ICUs are calculated on the population and on statistics, so there are so many “beds” per area. This virus is not like Ebola (lots of deaths), but some require ICUs and of course if there is an over-demand for ICUs the whole system collapse. So it seems that now the race is to make as many new ICUs as possible in order to deal with a possible increase in cases.
      Either than that life here in Florence is “normal” (we are not in the red area), but the repercussions on tourism and economy are mindblowing. It’s not going to be a nice 2020-2021… 😦
      How about the UK? Any cases yet?

      Like

  2. Latest news is 87 cases in UK but no deaths – mainly people returning from abroad or their relatives. Expect these numbers to increase significantly over the coming weeks but government and health authorities seem to be well prepared with their contingency plans.

    I see you now have all schools and colleges closed for two weeks so things must have escalated quite a bit in the past few days.

    Clearly tourism will take a big hit – airlines, cruise industry etc. but at least the planet can take a break!!

    Like

    1. Yes schools were closed in order to increase the containment effect of the measures that are already in place.
      In reality numbers are growing but that’s quite normal as whatever they did to stop the contagion will probably show its effects in one week. Italy started testing everyone for the disease, this created a lot of panic and a media induced plague situation, in other countries only the serious patients are tested, clearly returning less alarming numbers. After all 50% don’t have symptoms, 35% have flu-like complications, and only 15% get into the pneumonia stage.
      So far death toll is around 3% on the Italian cases, but yet again you need to consider that we have a very old population (Coronavirus seems to like the “oldies”) and yet statistically we don’t have a big enough sample to know how this virus really behaves (including China we have 90K patients in the world).
      I guess we need to start living with the media induced effects of something like that, right now this is what is creating the highest damage.

      Like

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