July 2020

General Comment

Pulled Pork!

Me and my neighbour decided to try this BBQ recipe this July, as he’s the BBQ master I’ve decided to use my bread making skills and produced a batch of burgher buns for the occasion. Total success, we have some room for improvement on the BBQ sauce as I didn’t have enough time to make my signature “Lox’s honey mustard BBQ sauce”, but the result was rather pleasing! (coleslaw was also homemade).

This month was pretty good, despite staying at home most of the time, we had some good time going at public pools with Leonardo and generally trying to get him out and around thanks also to my father’s help who took him in the mornings to playgrounds and walks.

Italy in the summer is glorious if the weather doesn’t get too hot, Florence is almost empty because of COVID restrictions on travel, so we made good use of the city. Of course I hope that this all ends soon, because the economics of the city (and Italy as a whole) have been badly impacted by the lack of tourism, but I guess there is nothing we can do about it right now.

Work is still lacking, unfortunately news from the US are not great and this is impacting the future influx of students and therefore University work. My “Plan B” is also on hold because of summer holidays and COVID, hopefully in September there might be some news, but right now I am counting the money and we are trying to be clever in the way we spend it.

The feeling that we are getting in Italy is that despite still being in the pandemic people are starting to relax. Maybe a bit too much. But we need to restart some sort of “normal live” sooner or later, otherwise we are going to face problems that are going to be much bigger than what we lived so far.

Heading into August, historically a very hot month, we do not have any special plans, we might be hiring a baby sitter to get Leonardo to play with different people (a sort of soft introduction to kindergarten which will happen in September), and to have a little bit more room for me and my wife to do things that normally we cannot do with the baby around.

We’ll see how this works out, but either than that no other special plans are in our immediate future…. Apart from some more BBQs! 🙂

LH FUND

Explanation of terminology and graphs is HERE.

Let’s see the numbers:

Month	TR	YTER	NYYoC	Forex
12.14	0.00%	0.00%	0.00%	0.00%
12.15	-3.33%	1.22%	-0.13%	-1.00%
12.16	7.06%	1.14%	1.16%	-4.35%
12.17	9.94%	1.04%	2.64%	-5.94%
12.18	3.28%	1.24%	2.70%	-3.53%
12.19	23.50%	1.35%	2.72%	-1.40%
01.20	21.13%	1.36%	2.65%	-0.45%
02.20	13.04%	1.35%	2.67%	-0.63%
03.20	-5.82%	1.27%	2.51%	-0.12%
04.20	0.91%	1.26%	2.49%	-1.72%
05.20	4.68%	1.26%	2.53%	-2.14%
06.20	5.82%	1.36%	2.52%	-3.14%
07.20	3.92%	1.34%	2.56%	-5.59%

TR is decreasing (vs. previous month) – Total return fell in July, especially in the second half of the month there was a decrease in the level of the markets.

YTER is decreasing (vs. previous month) – Not much activity to report, means not many commissions to be paid to brokers, so that’s good, lowers total costs of the PF.

Net Yearly YoC is increasing (vs. previous month) – Lower costs translate in higher Net Yield, options and dividends did their part and it’s good to see an increase in this metric!

Forex is getting worse (vs. previous month) – The dollar decided to get weaker against the Euro, this is the main cause of a lower result in this area.

Dividends and Options

Was June a white swan or did the LH Portfolio confirm the superpositive results of the previous month? Let’s check the numbers!

July income was 1719 Euro.

Dividends accounted for 966 Euro (-10.74% vs.2019) and Options ended up with a 753 Euro score (+2416 vs 2019).

A bit of a mix bag of sweets it seems. On aggregate the month was rather positive, getting a growth on 2019 of 54% is no simple feat and of course this is a great result!

If we look at the specifics the growth was achieved thanks to a massive growth in option premiums. The trades manage to cancel and improve the decrease that I’ve experienced with dividends.

Seeing dividends not growing is not a positive sign for a portfolio such as this one, despite the fact that the sum of the first 6 months shows some growth in 2020 vs 2019, the aim is to record growth every month in order not to have bad surprises at the end of the year.

The explanation of this result is quick, in July I was assigned the short call on ABBV (which I sold 1 year ago, near the money, to get the highest possible premium), so I did not get the dividend from ABBV, but on the other side I could record the proceeds of the premium that I sold.

As usual, as I knew what it was happening all things are under control, no alarms and no surprises (cit.).

Options positions as of end of July

DCA/Increased Positions

70 OKE @ 27.50 USD

I had 30 shares, we were 10% lower than my average price. OKE was hammered because of falling oil prices, but it’s not a pure oil play per se. A good portion of its business relies on oil prices being high (LPG pipes and transmission), but other parts of the business have not been affected all that much by the price of oil. The dividend is very high, so it’s one of those “red alert” moves that I would not recommend unless you did a good DD on the company, chances of a cut are high. But the business is what interests me, and that’s why I topped up to get 100 shares in the PF, now it’s optionable too.

New Positions – Sold Position

Sold

100 ABBV @ 75 USD

Called away on dividend because of the short call that was badly ITM, I had to see ABBV off. I didn’t mind owning the stock, but there are some clouds on the drugs pipeline that they have and that was the reason that got me to sell the option NTM when I bought the shares an year ago. I walk away with a modest profit and a more than 1 year of dividends in option premium.

Conclusions

So how did markets do?

They did pretty well, Q2 earnings are still rolling in, but generally speaking there were many positive earning calls and this was reflected in the broader market.

No major rallies (excluding QQQ, again), a minor fall during the last week in July, but the score is still positive all around.

I’ve discussed already what I think of this buoyant market situation, so I won’t go back talking about it, my trades reflect the fact that I cannot trust such a strong market in such a difficult economic situation.

It’s true that there are whole sectors that are still terribly depressed, airlines, tourism, fashion just to name a few, but it seems that it’s “just their problems” judging from what other sectors are doing.

As a whole the portfolio that I manage, being devoid of technology stocks, is not really seeing any major rally, and I have to say that there are several occasions where I am pondering if I should change stance on the dividend policy that I have.

There are several names that I consider great companies who suspended their dividends, their prices are very low, and I could accumulate now lowering average prices in the hopes that dividend streams will be reopened. But doing this would mean locking capital for no immediate return, who knows if and when dividends will be restarted?

Right now this is the greatest dilemma that I have, because frankly speaking I see not many opportunities in other stocks at these prices…