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PhilStockWorld November Portfolio Review – Part 2

Image result for one million dollars animated gifImage result for one million dollars animated gif$2,274,065!

That's up $39,533 for our paired portfolios (LTP and STP) since our October 15th Review and that's great considering $1,942,247 of it is in CASH!!!  We are VERY flexible as we wait for the pullback that never comes but, while we're waiting, we find some ways to put our unused trading power to good use.  

On Tuesday, we bumped up our hedges (it's been a bad month for hedges as the indexes went back to their highs) in our Short-Term Portfolio (STP) but we also added several new positions to the Long-Term Portfolio (LTP) which should more than pay for any losses we take – should those hedges fail to pay off.  

The ideal situation is when we get a pullback, cash in our STP profits and add to the LTP positions which then recover.  That has happened several times since we started our LTP/STP pair with $600,000 (500/100) on October 1st of 2019 and look at us now, welll over $2M after two years.  Obviously this is not normal – so we need to enjoy it while we can.

We cut half our positions in August but now we're back with 19 short puts and 36 spreads (W is the only bearish play in this portfolio).  In the last two months, we added short puts on BA, COIN, IBM, LEVI, MRNA and XRX – taking advantage of earnings dips to plant a flag in stocks we'd like to have full positions in down the road.  We collected $97,450 for promising to buy those stocks at lower prices – getting paid to wait is the key to our very patient strategy.  

Also in the past two months, we've added longs on BIG, BNTX, CAKE, GOLD, IBM, MU, PFE, T and WPM so we're certainly not resting on our laurels either.  That's 15 positions added since October 1st just in the LTP – earnings season is always busy for us but, otherwise, there's not much to do but see how things play out at what we still believe is a very toppy market.  

Short Puts – Mostly on track and this is how we keep an eye on stocks we would REALLY like to make long positions in – ESPECIALLY if they get cheaper – so the ones that are in the red are the ones that are most interesting to us.  We sold the MRNA $200 puts for $25 so, if assigned, our net entry would be $175 on 500 longs.  From there we would build a position selling more puts and calls, probably dropping the cost another $50.  So, at $240, the question is whether we want to commit to owning 1,000 shares (when we sell more puts) for about $125?  Yes, we would like to buy 1,000 shares of MRNA if they are 50% off – so we keep the position for now.  Very simple.  

W is the only short position in the LTP as the market has little tendency to go down.  What's important here is the short puts should inspire worthless in 64 days, leaving us with the long puts at net $43,000.  We'll sell more short-term short puts and hopefully end up with free long puts into next year.  

  • CIM – Pays a nice dividend and well above our target.
  • SKT – They are back to paying dividends (3.5%) so a great bonus for this successful spread.  

  • APO – Over our tarrget.
  • BABA – Back to $150 this morning after missing on earnings and cutting guidance.  Depends what we come up with when we analyze the results but most likely we'll buy back the short calls and roll the long calls lower as I have long-term faith in them.

  • BIG – Still has that new trade smell.  It's a $30,000 spread still at net $3,000 so $27,000 more to gain if BIG can hit $55 in two years.  
  • BNTX – Off to a poor start but certainly a long-term trade idea.  It's a $100,000 spread at net $2,325 so huge potential gains but it's a bit speculative.  What sells it for me is the short put is conservative ($200) so I don't consider it too risky of a shot at making $97,675 (4,200%) in 2 years.

  • BYD – They took off quickly but have now pulled back so it's back to being a reasonable new entry at net $8,162 on the $30,000 spread.  We sold $1,900 worth of calls in August and they are going worthless so maybe 3 more sales will knock out most of the cost of the spread along the way.  

  • CAKE – Doing very well already. 
  • CHL – Waiting for resolution on this one, where the government halted the trading last year.
  • DOW – Cheaper than when we bought it.   How can we have an economic recovery without DOW?   Per their earnings, this is all about supply chain issues and price adjustments will be made going forward.  We spent net $4,650 on the spread and committed to owning 1,000 shares for $60 and it's now $58.30 – so nothing to panic about but 2024s are now out so we may as well roll the 10 short 2023 $60 puts at $10 ($10,000) to 10 short 2024 $55 puts at $11 ($11,000) and we'll roll our 20 2023 $55 calls at $7.80 ($15,600) to 30 of the 2024 $50 ($12)/65 ($5.50) bull call spreads at $6.50 ($19,500).  So, for net $2,900 we've rolled from a $30,000 spread that was $6,000 in the money to a $45,000 spread that's $24,000 in the money and we'll put a stop on 1/2 (10) short 2023 $70 calls at $4 ($4,000) to make sure we don't get burned on the way up.  

  • FB – My first thought is "Why is FB here, I don't even like them?" but then I remember it's an income play, where the long spread is simply to backstop our short call selling.  We paid net $9,000 for the spread and we sold $12,360 worth of calls and puts against it so we're just waiting for the puts to expire so we can sell more.
  • GILD – 100% in the money but only net $9,537 out of a potential $15,000 so worth keeping.  

  • GOLD – Still in the running for Stock of the Year.  I'm not inclined to cover the longs yet.  
  • HAL – Coming back down so maybe a chance to get in if you missed it the first time.
  • HBI – I love these guys, nice and steady, great value.  Good time to get in at net $4,200 on the $20,000 spread.  

  • HPQ – This would have been my Stock of the Year if they hadn't popped.  Still stupidly cheap 
  • IBM – A former Stock of the Year and even cheaper than our entry, now a net $12,825 credit on the $45,000 spread so $57,825 upside potential if IBM can make it back over $150 by 2024.  Worst case here would be owning 1,000 shares of IBM at net $117.175 – that's right where we are now.  

  • INTC – Was our 2022 Stock of the Year and we sure like it again down here.  Notice this is a super-conservative spread but it's a $60,000 spread at net $4,500.  Aren't options fun?
  • KHC – Nice boring play and another conservative spread.  This one is net $4,738 on the $18,750 spread and all KHC has to do is hit $40 at the end of next year.  

  • LMT – Our Stock of the Century!   That means we expect at least a 10x return over the next 78 years but way more than that if they come up with a working fusion reactor.  This is just a $70,000 spread playing for a 10% gain in 2 years and only net $12,575 at the moment.  It's amazing to me how they just give money away like this! 

  • MO – Not doing well so far but we like them so we'll buy time by rolling the 30 2023 $45 calls at $3.45 ($10,350) to 50 of the 2024 $40 ($7.50)/$50 ($4) bull call spreads at net $3.50 ($17,500) so we're spending net $7,150 to move from a $30,000 spread at the money to a $50,000 spread that's half in the money.   
  • MU – We sold the puts a while ago but it's essentially a new $40,000 spread at net $12,525 – a very good deal as it's 75% in the money!  

  • PAA – Just paid out 0.18 dividend ($1,440) but we'll be called away in January so this is done.
  • PFE – We went back in on last month's dip and already over our target.   It's already up $5,475 from our net $7,250 entry and a great example of how a "boring", conservative, long-term play can still pay great money in the short-term – but they are so much safer to play than gambling on short-term trades.  

  • PHM – Near out goal already.
  • QSR – Disappointing so far after a good start.  Let's roll the 15 2023 $60 calls at $4.25 ($6,375) to 25 of the 2024 $55 ($7.70)/70 ($3.25) bull call spreads at $4.45 ($11,125).  We'll see how that goes.

  • REYN – Blasted up to our goal and now 30 days left at net $22,500 on the $25,000 spread.  It's not worth risking the gains so may as well kill it.
  • RIO – Down and down they go but I still like them going forward so let's roll the15 2023 $67.22 calls at $3.70 ($5,550) to 30 of the 2024 $55 ($10)/70 ($4.20) bull call spreads at $5.80 ($17,400) and let's roll the 10 short 2023 $67.22 puts at $15.20 ($15,200) to 20 of the 2024 $60 puts at $15.60 ($31,200) so an overall $4,150 credit to make this adjustment.  

  • SPWR – Another Stock of the Year contender.  The only reason they aren't it is because they popped from $20 to $35 in the past month but below $30 they are back in contention.  Meanwhile this $112,500 spread is 100% in the money at $30 but still only net $37,988 – amazing!  
  • T – Yet another contender under $25 – such a bargain!  We just rolled to take advantage last month so watching and waiting now.  
  • TROX – I love these guys and I wish we could keep playing but Apollo is buying them out so we'll have to let them go.

  • VIAC – Yet another Stock of the Year contender (this is why our portfolio does so well, I guess).  Ridiculously cheap at $35 so we'll take advantage and roll our 30 2023 $30 calls at $7.55 ($22,650) to 50 of the 2024 $30 ($9.35)/47.50 ($3.75) bull call spreads at $5.60 ($28,000) and we'll sell 10 of the 2024 $35 puts for $7.50 ($7,500) to pay for it so net $2,150 goes in our pockets as we move to the $87,500 spread.  
  • WPM – So nice we played them twice and I like bothe of them.
  • X – As with DOW – how can they not be doing well in a booming economy?  Right on track here at net $4,612 on the $36,000 spread.  With the Infrastructure Bill passed – this is free money! 

 

IN PROGRESS

 

 


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  1. Phil / BABA  Earnings slight miss, but large takedown in outlook for next year….  Thoughts   as well as any changes to position?


  2. Good Morning.


  3. Good morning! 

    That LTP Review takes way too long – we should go back to cash.

    BABA/Batman – Haven't had a chance to read them over yet.

    Indexes dipping a bit:

       

    That's despite the Dollar coming down too so worse than it looks:

    Oil bounced the $1 we expected in the Webinar

     

    /NG back to $5, also as predicted:

    The Most Pervasive Valuation Extreme In Stock Market History


  4. Markets are at or near all time highs but long time market stalwarts such as T, MO, VIAC all seem to be going the other way.  Yield on T and MO is over 8% now.  What is the disconnect on these?  People to infatuated with crypto and tech space?  I've initiated positions in both via leaps over the last month but this ongoing relentless downward pressure is worrying….


  5. Phil// What is your take on HOG?  If there is a trade you like what would that be?  Thanks.


  6. CVS to Close 900 Stores Over Three Years





  7. Disconnect/Ult – 90% of trading is TA so they don't care about the value of the companies – just the trend on the charts..  Even you are saying you are worried because it's going down.  Are profits going down or just the squiggly lines on the charts?  

    HOG/Rookie – I've never been a huge fan.  We played them in the great crash as they were a good brand name to pick up cheaply but, overall, it's a niche company in a stagnant market.  They have a high debt load and make about $500M/yr so $5.8Bn for the whole company at $37.61 is not a terrible deal but they are fairly priced considering the risk if we have another downturn (they made $1M in 2020).  To me, Harley customers are getting older and older – I don't see them as a thing for a new generation of customers.  

    BABA/Batman – Revenue was up 29% from last year.  It may have missed expectations but that's pretty good growth.  To me, last year had lockdowns so boosted business more than the current Q, so I would not treat them harshly.  Also, they took control of Sun Art late last year and that consolidation hit their earnings (though boosted revenues).  They added 60M new users to 1.24Bn, so 5% more users in one quarter is very nice,  NFLX adds 3M users and people go into a buying frenzy….    Supposedly, the 27% decline in earnings (to $.5.4Bn for the Q) is due to investments in operations – but good luck figuring that out.  More likely, expenses outpaced price increases (labor, especially) and will take some time to catch up – hence the poor guidance.  

    Bottom line for me is BABA is trading at 14x earnings and AMZN is trading at 66x earnings and it's mostly racism that's undervaluing BABA vs AMZN – there's little difference between what the two companies are offering.  Regulatory issues in China seem to have calmed down but they are the same issues that keep AMZN out of BABA's markets.  

    September Quarter 2021 Financial Highlights

    Revenue Breakdown by Segment

    Cost Trends

    Investment in Key Strategic Areas

    Cloud computing for them is just getting started:

    Segment Reporting: Cloud Computing

    Segment Reporting: Digital Media & Entertainment


  8. Phil / BABA – thanks for the review…..  


  9. Earnings Portfolio Review:  $301,766 is down $11,822 since our last review.  We didn't touch anything then (we added IBM and SPWR since) so I'm pretty sure it's the SQQQ hedge that hurt us this month.  Still, up 201.8% after two years doesn't suck and I like the fact that this portfolio self-hedges.  

    • IBM – Brand new put we couldn't resist with a net $100 entry as our worst case and $12,500 in our pockets for agreeing to buy IBM for that price.  

    • GILD – On track.
    • GOLD – Aggressively long but small.

    • PETS – It's on track but it's a crazy track.

    • SPWR – Just added and down a bit so far.  You know I love them.  

    • SQQQ – So here's the problem as we didn't have any major gains in our longs and this one took a huge hit.  The short $30 calls didn't change (they are essentially done) but the 100 long $5 calls dropped $15,000 while the short $17 calls only gained $7,000 so net – $8,000 on these explains our poor performance this month.  Not much can be done about it but let's buy back the short $17 calls ($9,400) and sell new ones when we get a bounce.  

    • VIAC – Here's where the rest of our money went as the 2023 $35s took a $6,000 hit.  The whole trade is net -$2,000 so not a big deal and we like VIAC so our job becomes "How do we take advantage of this dip?"   It's a good time to roll since our $35 calls are at the money and all premium while the in-the-money 2024 $25 calls fell from $14.50 last month to $11.75 ($2.75) while we fell from $8.10 to $4.75 ($3.35).  Since the roll is not "better", rather than buy back the 2023 $25 calls, we'll just add 40 of the 2024 $25 ($11.75)/40 ($5.70) bull call spreads at net $6 ($24,000) and we'll sell 10 of the 2024 $35 puts for $7.50 ($7,500).  So we're spending net $16,500 on the new $60,000 spread and our intention is to get at least $6 for the 2023 $30 calls when we get a move back up ($12,000) so we'll have spent net $4,500 on the roll in the end (hopefully).  Oops, let's also buy back the short 2023 $50 calls at $1.66 – they aren't going to lose enough money to make a difference before we're done with the roll – they can only really hurt us. 


  10. AAPL/Phil  AAPL is trying to burn my toes .. have (cov) 10 short  Nov $155s ($6) and 10 short $160s ($4.1) so I could see how these options behave close to the money at expiry (tomorrow).  AAPL is obliging as they were both out of the money yesterday but not today with AAPL pushing $158! Bought back the $160s for $.31, watching and waiting on the $155s.  Good news is I should be able to sell 20 more say Feb? calls for a good price. Suggestions? 

    Thx!


  11. AAPL/Wing – That's a big pop today – up $60Bn in market cap in one day.  It's because of this:

    Apple close to Tesla on AI necessary for autonomous car – analyst Gene Munster

    That's something we've expected for a long time so not news to us but apparently to others.   Just have to keep an eye on them and see how they handle $160.