Before we get into our $1M Portfolio, let’s look at our hedges.
We last reviewed our Short-Term Portfolio on Valentine’s Day, when the S&P 500 opened at 4,126 but we had already made our adjustments in our Live Member Chat Room on the 7th, when the S&P hit 4,176 which did, in fact, turn out to be the high for the month. That left us with nothing to change on the 14th, and the portfolio was at $3,888,503 and, this morning, after not being touched since, it’s at $4,069,493, which is up 1,934.7% in 3 years and up $180,990 in just over two weeks – which is how you end up being up 1,934%, of course…
Keep in mind we are 85% in CASH!!! at the moment and the value of our positions on the 14th was only $537,375 so the active positions have gained 33.6% on a 3% drop in the S&P – that’s the key to good hedging. We have close to $6M in downside protection in this portfolio and that’s more than we have in long positions so we’re a bit bearish overall but, on the other hand, our longs will make far more than enough to cover the losses on our hedges should we find ourselves too bearish – it’s a great balance and we’d hate to mess it up – so we are being very cautious when adding new longs.
Knowing how to hedge is like knowing how to apply the brakes in your car. If you don’t know that, you can only drive very slowly for fear of crashing into something or flying off the side of the road on a curve. The ability to brake opens up a whole new world of possibilities in your driving and in your investing – it allows you to move faster towards your goals, confident in your ability to make adjustments.
Unfortunately, we have not yet hedged our $700/Month Portfolio and we’re taking our first loss this month. Months 1, 2, 3, 4, 5 and 6 are available for review. This is an opportunity to learn our portfolio-building strategies step by step that, hopefully anyone will be able to follow.
Our goal in this portfolio is to show our Members how to use slow, steady, simple options strategies to amass over $1M over 30 years by investing just $700/month ($252,000). If you can apply this discipline in your early working years – your retirement will be a breeze.
Our goal is to make 10% a year on our investments and, though it has only been 6 months – the portfolio is up 8.5%. That’s a pace of 17% per year and, if we did that for 30 years, we’d have $6,440,776.90. No, I’m not kidding, you can do the math right here! Don’t expect to keep up that pace – we’ll have ups and downs along the way and this portfolio doesn’t attempt to time the market – it’s just off to a good start.
When we started the portfolio (Aug 25th), the S&P 500 was at 4,000 and now we’re at 3,996, so essentially flat. Nonetheless, we made 8.5%. That’s the magic of using options and our Be the House – NOT the Gambler strategy, even when you play very conservatively, you can still make nice gains in a flat market.
As with all our PSW portfolios, the returns tend to accelerate as our positions mature and we are still comfortably ahead of expectations, which is very nice in a no-margin portfolio.
Last month, we added 32 more shares of NLY and that was unfortunate timing because NLY has since fallen from $24 to $20 and we went from up $49 to down $202 on that position. Apparently they are cutting their dividend and we have no choice but to take the loss and sell the position.
We have $1,000 of margin requirement on the CIM puts and $500 on the SOFI puts and the cash on hand is $2,314 plus the $1,260 we will get from selling the NLY position – leaving us $3,574 less $1,500 is $2,074 to spend!
Before adding new positions, we should check to see if the old positions need any love:
CIM – I would jump all over these but they have the same management team as NLY so maybe cuts there too. I’m not worried about being assigned 200 shares at $5 (net $3.40) so not going to change it but it’s a bit premature to jump in with more.
T – We could add a put here, that’s tempting. The 2025 $20 put is $3.05 so we’d get $305 in cash and be obligated to buy net $1,695 more T. The return on margin in the non-margin account is only 18% over 2 years – we can do better.
SOFI – I do love them and they haven’t gotten away yet so worth considering.
As to potential new stocks:
- B2 Gold Corp (BTG) is a gold producer with a 5% dividend at $3.58, which is $3.8Bn and they make $350M so p/e about 11. They also have $600M in the bank and we like gold as a hedge.
- Nokia (NOK) is still alive and more of an equipment service provider these days. $4.68 is $26Bn and they make about $2.5Bn so 10x but just a 1.79% dividend. They do have $4Bn in cash though – I like that!
- Global Ship Lease (GSL) is a container ship leasing company who are paying a 7.3% dividend against their $20.70 stock ($751M cap) but they made $274M last year and expect to grow about 20% this year – so a nice little company.
- Barclays (BCS) is from our Watch List at $8.32, which is $32.5Bn but they make $5Bn so 6x is stupidly low. They pay 4.1% and actually have $16Bn laying around on top of that – half of their market cap!
- Ford (F) is back in consideration at $12.56, which is $50Bn and they made $6Bn last year and should bump 10% this year. I’m pretty sure, 30 years from now, you’d be kicking yourself for not buying this one. Dividend is a nice 5% too. $95Bn in debt is the dark cloud but autos, inventory, etc. – it’s kind of normal.
- Future Fuel (FF) is one of my favorite small caps. $8.67 is $380M and they made $23M so 16.5x with a 2.5% dividend but then they paid a special 0.30 (3.4%) dividend in December – a nice bonus. They also have $185M in cash – half the valuation.
- Petrobas (PBR) – Would be great but the Government forces them to essentially give oil away to Brazilians. Even now, they are trying to sell assets and the Government is interfering. In a riskier portfolio, I don’t mind but not here.
- Sunpower (SPWR) – Hard to not add our stock of the decade at $15.09, which is only $681M and they made $45M last year and should make close to $60M this year. No dividends but huge growth potential as the solar industry expands.
- Tronox (TROX) – Specialty materials are always fun and sales are up to $3.2Bn from $1.8Bn in 2018 and profits are $220M but $16.42 is $2.5Bn so call it 12x. 3% dividend as well.
- Trivago (TRVG) – Travel is picking back up and $1.76 is $600M and they expect to make $60M this year so 10X is underpriced. No dividends but fun options.
As we have the extra money and as SPWR is our Stock of the Decade and it’s only 2023 and our target is $50, not $15 (we started at $5 and already cashed out our original plays at $50) and, as the options are CRAZY – let’s add SPWR to our portfolio as follows:
-
- Buy 5 SPWR 2025 $15 calls for $5.70 ($2,850)
- Sell 5 SPWR 2025 $23 calls for $3.20 ($1,600)
This spread is costing us net $1,250 of our $2,074 buying power. It’s a $4,000 spread so the upside potential is $2,750 (220%) in two years – you’ve got to love that!
This will leave us with $824 to spend and I think that’s enough to adjust SOFI a bit more aggressively and what we will do is:
-
- Buy (to close) 5 SOFI 2025 $5 calls at $3.09 ($1,545)
- Sell 7 SOFI 2025 $7 calls for $2.40 ($1,920)
- Buy 2 (7 total) SOFI 2025 $3 calls for $4.18 ($836)
That’s net $461 spent and we’ve gone from a $1,000 spread at net $422 to a $2,800 spread at net $883 so our upside potential has increased from $578 (136%) to $1,917 (217%) by modestly adjusting our target in an already successful spread.
That still leaves us with $363 to carry over to next month!
Good Morning.
Good morning!
Sorry but it took me a while to find and analyze the potential candidates for the $700/month portfolio. In the end, we added SPWR and pressed SOFI – I could have figured that out without doing all the new work but at least I have a clear list of contenders for the rest of the year.
Friggin MSFT nerfed BingAI yet again. Now it won’t process multiple requests at once, probably to save them processing power. That means it’s barely usable as a stock filter or for consolidating large data. I’m sure MSFT is watching what people like to do with it and then those will be the things they charge us for in the next version. Hopefully Google will save us.
I can still get it to summarize the news though, but I have to do it in segments:
You kind of have to trick it by feeding it the headlines (it won’t go and read them) and then it cheats by going and reading them to give you a summary.
I don’t understand the credit on the above SPWR trade…
What credit?
This spread actually gives us a net CREDIT of $350
I know you just wanted to make sure we were paying attention 😉
As long as someone is. Thanks.
Oil with a wild dive and bounce on OPEC rumors. Bottomed out at $76, now $78.50 again, which lines right up with $85 Brent, which is where we wanted to short but into the weekend too risky.
Finviz is broken so you’ll have to do your own charts for a while.
S&P back over 4,000 but 4,023 is still not a weak bounce (4,040) and, after waiting a week – that won’t be impressive anyway (not a V shape by any stretch).
VIX is still down and down – now below 19.
Phil / compound ;
I’m doing a slightly amplified version of your 1m
portfolio. I’m 5x @ $3500 a month. Obviously big numbers are many years away but do you think things would be operating in the same way if/when the account has $6m in 20 years? Or would things be more in the world of LTP / STP? At what point is such a monster portfolio a bad idea?
It only becomes a bad idea if you don’t have time to manage it and, by the time you hit $6M, you’ll have put in your 10,000 hours.
As with all our portfolios, if you got back over time (and the Money Talk Portfolios are a good example as it’s easy to see each move we made quarterly), you’ll see we always start out fairly conservative and then we get more aggressive AFTER we make profits using the PROFITS that are above our expectations.
In other words, if we’re trying to make 20% per year at $3,500 per month, after 3 years we should have $189,504, which is up $63,504 (because we didn’t start with the whole $126,000 but still nice). If instead we have $245,000 from making more like 35% – then we have $55,000 we can play more aggressively with while still trying to make the next 20% on our expected $190,000.
If we do well with our additional play money, it can snowball fast and, if not, as long as we’re on track with 20%, in 10 years we’ll have $1.3M after putting in $420,000.
Sorry, there was an error calculating the SPWR spread so we can’t officially afford the short put (due to lack of margin) but it isn’t impactful on wanting the spread – it simply means we spend $600 more cash but use $1,800 less margin. The upside on using $1,200 of margin to make $600 on the short $18 puts was actually less than 5 of the 2025 $15/23 bull call spreads at $1,250 with $2,750 (220%) of upside potential – so no damage to the trade.
In a PM or even ordinary margin account, the short puts are a no-brainer but more of a struggle in a non-margin account though there’s nothing wrong with making 50% ($600 on $1,200) in two years either.
SOFI and SPWR both taking off.
This is new annoyance from Bing:
It’s like the only thing he’s learning is how to annoy me!
Still useful but now annoying and useful.
Wow, I asked it the same exact (copied, pasted) question as I just did and now it says:
Is MSFT secretly trying to destroy people’s faith in AI? It’s such a shame they control OpenAi because now we have to pray AAPL or GOOGL or FB come up with a better version.
Ah, interesting, Bing got worse, Warren got better. Same exact question to Warren:
🤖 Sure, here is a summary and analysis of the two articles you provided:
Article 1: “China Retail Investing Remained Lackluster Amid Reopening Rally” (Bloomberg)
Link: https://www.bloomberg.com/news/articles/2023-03-03/china-retail-investing-remained-lackluster-amid-reopening-rally?srnd=premium
The article highlights that despite a strong rally in China’s stock market, retail investors have been slow to participate. This is in contrast to the boom in retail investing seen in the US and other countries during the pandemic. The article notes that there are several reasons for this, including stricter regulation of online trading platforms, a lack of trust in the market, and a preference for alternative investment opportunities like real estate. The article also notes that some investors may be waiting for a market correction before entering the market.
Analysis: China’s retail investors have historically been a major force in the country’s stock market, so their lack of participation is notable. The reasons for this could be concerning for the Chinese government, which has been trying to encourage more retail investing as part of its broader push to reform and develop the country’s financial sector. However, it’s worth noting that institutional investors have been more active in the market, suggesting that there is still confidence among some investors in China’s economy and stock market.
Article 2: “Macy’s, Best Buy Sales Declines Reflect Shopper Pullback on Discretionary Goods” (Wall Street Journal)
Link: https://www.wsj.com/articles/macys-best-buy-sales-declines-reflect-shopper-pullback-on-discretionary-goods-3294ce3?mod=hp_lead_pos1
The article reports on declining sales at Macy’s and Best Buy, two major US retailers. Both companies reported weaker-than-expected sales in the latest quarter, which analysts attribute to a pullback in consumer spending on discretionary goods like clothing and electronics. The article notes that this could be a sign that consumers are becoming more cautious amid concerns about inflation and the economy.
He doesn’t get the concept that WMT doing well indicates people are shopping down looking for cheaper stuff. It’s not a healthy thing. When the Dollar stores are booming – it’s time to short the market…
Asking Warren what he thinks of my premise:
Yawn, right? But here’s how I get the best out of my boy and why I love him so: “Can we add more of a sense of caring about the suffering and the struggles of the average consumer and what that means for the US economy and the US sentiment. Think carefully about the way Dickens reflected on the suffering of the poor and what it said about society in general:”
🤖 Certainly, here’s a rewrite that incorporates a sense of empathy and concern for the struggles of everyday consumers:
As the cost of living continues to rise, everyday consumers are increasingly feeling the strain on their wallets. Many are being forced to turn to discount retailers like Walmart in search of more affordable options for their everyday needs. However, for those who are experiencing even greater financial hardship, they may have no choice but to seek out even cheaper retailers, such as dollar stores. This shift in consumer behavior is indicative of a larger trend of ordinary Americans struggling to make ends meet, and this could ultimately have a negative impact on the broader economy and the national sentiment.
It is concerning to see that retail sales unexpectedly fell by 0.3% in January, with a particular decline in spending on non-essential goods like clothing and electronics. This drop in retail sales came despite a spike in consumer spending during the holiday season. The fact that some dollar store chains, like Dollar General, have reported strong sales in recent quarters, with a 5.5% increase in same-store sales in the latest quarter, indicates that some Americans are already being forced to turn to even cheaper options.
As a society, we must take note of the struggles that many ordinary Americans are facing. When a large segment of the population is unable to afford basic necessities, it is a sign that there is something fundamentally wrong with our economy and our social safety net. If we do not address these issues, we risk creating a society that is deeply divided and lacking in economic opportunity.
Give me open access to this guy for a few months and I’ll have him winning a Pulitzer!
Check this out: Me – “Can you list all the ways you are better than Bing’s AI?”
We should have them debate each other.
You could do that by acting as the middleman, but it would be a pain.
That’s OK, we’ll see AIs debating each other in 2024 as 90% of the speeches will be done by AIs by then.
We’ll know something is wrong when MTG starts sounding smart!
https://i.chzbgr.com/thumb800/16424197/h01683647/funny-tweets-roasting-marjorie-taylor-greene-gazpacho-gestapo
anyone know if there is any particular reason nat gas rocketed upward today?
Because we bet on it, silly!
🤓 According to the web search results, natural gas prices jumped to $3 today because of increased demand and inflation. Some of the factors that influenced the price increase are:
Phil, What’s your target to exit out of /NG futures position?
See above. No reason to be greedy.
Was waiting on a NG victory lap–I missed the boat there despite all the graphs and superb analysis. SPWR has been called out twice so it should be lifting off soon. How can you bet against the power of the sun?
As I often say, if you are not going to buy things when they are low – when are you going to buy them.
Being a Fundamental trader is all about KNOWING what things are actually worth and then buying them when they are on sale. We don’t wait for the crowd to change their minds – by then you missed the bus.
Thursday: Fed Fails to Inspire the Bulls
Ha -wrote a SQQQ spread following Phils logic and went to add to it . TD Webroker( Canadian site ) US Margin account and scaling in the next trade was rejecter so I called them. It is not permitted on Can Webroker to do a spread on leveraged stock . The first one slipped through . Any fellow Canucks have a workaround?
Set up a family office and open a US account.
4,046 with 15 minutes to go – finally the weak bounce!
Nasdaq firmly over 12,000.
Happy days are here again!
Phil, in your ruminations re. chip companies, where do you get your numbers?
On Thursday March 2, you say
But TDC has debt!
https://stockanalysis.com/stocks/tdc/statistics/
Cash & Cash Equivalents 569.00M Total Debt 637.00M
Also, where do you get 140X forward P/E for MongoDB? Isn’t that another one of those Kathy Wood things with no grounding with fundamentals?
You are right, they had $50M cash net of debt last year (2021) and now (2022) they have net $50M in debt. I go by Stockopedia on the first pass and then, if something looks interesting, I cross-check the sources.
At to Mongo, I believe they’ll get to $100M and they are $14.2Bn so 140x is my forward approximation but, as I noted, too much for me so I move on. They have a good-sounding idea and fantastic growth, it’s a small company that’s executing and even stockanalysis.com says they have $602M in net cash while the past 12 months net cash flow was -$16.5M so they have about 35 years to figure things out.
🤓 MongoDB is a company that provides a document database service. A document database is a type of NoSQL database that stores data in flexible, JSON-like documents. This means that each document can have different fields and structures, and the data can be changed over time. This makes it easier for developers to work with data that matches their application code12.
I think they are filling a real need. Most data is messy. They also have a neat distributed server platform and a full suite of analytics. I wouldn’t write off companies just because Kathy Wood likes them – you wouldn’t be able to buy half of tech!
2a3tube hi im a canadian i began using interactive brokers years ago to do phils plays because td would not let me do shit.
goodluck.
Phil/VALE: Please let me know your thoughts on Vale. Other than it being Brazilian, and a large increase in debt (any reason why debt spiked?) this trade below looks pretty attractive. Thank you!
Buy 1000 VALE Shares to Open
17.00 x 2P-17.18 x 12P
Sell 10 VALE Jan-25 17 Call to Open
2.70 x 1-2.90 x 16
Sell 10 VALE Jan-25 15 Put to Open
2.22 x 50-2.58 x 50
That is Net 11.80 or so increases the yield to 11.8%, if you get called at 17 in 2 years, a 68% return with the 23.7% cumulative dividend payments….
Hello Phil,
good morning, market is all green today.
Your last week trade recommendations are SPWR, SOFI, QCOM and IBM in different portfolios.
is it still good time to get enter the trade ?
Phil / fellow humans —
sorry to keep harping on this, but for folks who are playing along the $700/mo portfolio and have brokers like TD who have restricted selling options (even as part of spread) on SOFI, which is the best alternative from the following?
Phil, there may be an arithmetic mistake on your post on Friday March 3 for SOFI.
Before this month, we had spent $205 net for 5 units of a $3-$5 spread and selling 1 $5 put.
$205 cash spent, $500 cash margin requirement for the put = $705 tied up with SOFI.
On Friday, we upgraded the spread to 7 units of a $3-$7 spread, spending $461 more cash.
So, $666 spent on the spread so far, plus $500 margin requirement = $1166 tied up with SOFI.
Max profit is $2800 if all goes well.
If the absence of any option selling, I can
1. Just buy $3 calls for $4.20.
For $1166, I can buy around 3.
SOFI has to go past $12 by 2025 for me to make the equivalent of the portfolio’s gain.
2. Buy SOFI stock.
SOFI at $6.50, I can buy 200 shares for $1300.
Then I can sell 2 covered calls to net it down.
3. I can do nothing, and pick something else TD has not restricted.
What should I do?