PhilStockWorld May Portfolio Review (Members Only)

Month 5!

We have now been at war most of the year. That’s how wars are, they start off as “operations” and then turn into the new routine. As with most of our wars – this one is happening very far away so we generally ignore it – except when there is inflation or shortages (jet fuel already) that impact our lives or when our children come home in body bags – thank God not much of that so far… 

My mother was born in London, November of 1940 and her father was off fighting Nazis in India (tank brigade – very cool) – she never met him until he came home in 1945 and her earliest childhood memories were air-raid sirens, bombs and rationing – THAT’s being in a war! – One time she was standing looking at out the right window of the house and the left window exploded from a bomb that landed on her street – a different choice of view and she’d be dead and I wouldn’t be here – we make those choices every day, don’t we?  

When Trump’s war began, I made a timeline of World Wars I and II to illustrate how these things are slow-rolling disasters early on – the then snowball our of control. I would love to say, 73 days later, that we’re not on that path but we’re halfway through our 3rd month and no end in site. Oil is $101.57 this morning and Brent is $107.84 and Trump is off to Bejiing, not at the table with Iran – instead he sent the man he used to call “little Marco” to negotiate.

Let’s see what has changed since our March 5th concerns:  

WHY THIS MATCHES WWI/WWII PATTERN:

1. Alliance Systems Activating

Just like 1914:

• • • • US-Israel joint operations
      • France deploying carrier, authorizing base use
      • Canada can’t rule out joining
      • NATO intercepting missiles for Turkey
      • Gulf states being pulled in whether they want to or not

2. Rapid Geographic Spread

Started Saturday in Tehran.

By Wednesday: Iran, Israel, Lebanon, Kuwait, UAE, Saudi Arabia, Bahrain, Qatar, Oman, Iraq, Indian Ocean off Sri Lanka

That’s not a regional conflict. That’s multi-theater warfare!

3. Shifting Justifications

Trump’s reasons keep changing: nuclear program (UN says Iran wasn’t close to weapons), preemptive strike (no evidence), regime change

Just like WWII Poland invasion had shifting pretexts.

4. No Exit Strategy

Hegseth: “we’re just getting started,” “accelerating not decelerating”

US planning “several days of attacks” (already on day 6)

5. Congressional Approval Bypassed

Senate voted down War Powers Act challenge

Just like executive branch unilateral action that expanded both previous world wars.

6. Economic Warfare Beginning

Iran threatening Strait of Hormuz (1/5 of global oil), attacking Gulf energy infrastructure

Oil tanker hit in Iraqi port, Iranian missile struck Bahrain oil refinery

This is how global conflicts start—choking trade routes.

7. Proxy Forces Mobilizing

Kurdish-Iranian armed groups launching ground offensive

US asking Iraqi Kurds to assist in cross-border operations

Just like how WWI pulled in colonial forces, WWII activated resistance movements.

Well, the best thing I can say, although it’s pissing Trump off is, so far, the rest of the World is not joining in. For some reason he can’t get it through his head that they aren’t joining in because he’s fighting an ILLEGAL war, WITHOUT Congressional approval – and he refuses to get that for fear of rejection – Trump REALLY hates rejection…  

Back on March 5th, we had plenty of ways to play the war for our Members (you can become one HERE): 

Defense Contractors 

• • • • Lockheed Martin (LMT)
      • Northrop Grumman (NOC)
      • Boeing (BA) – defense division
      • Raytheon/RTX (RTX)
      • AeroVironment (AVAV) – drones
      • TransDigm (TDG) – aircraft parts
      • L3Harris (LHX) – communications/recon
      • General Dynamics (GD)

 Energy – OIL/GAS

• • • • Integrated majors (XOM, CVX)
      • Midstream/infrastructure (TRGP, EPD, ET)
      • Services (SLB, HAL)
      • Energy ETFs (XLE, VDE)

Precious Metals – GOLD

• • • • Physical gold
      • Gold ETFs (GLD, IAU)
      • Gold miners (GDX for diversified exposure)
      • Silver as secondary play

Consumer Staples / Utilities

• • • • Procter & Gamble (PG)
      • Coca-Cola (KO)
      • Walmart (WMT)
      • Utilities ETFs (XLU)

We also had lists of what to avoid (follow the link). Some of the above made it into our portfolios and today we’re going to do our May portfolio review but we are now past the tipping point, when things start to get ugly and we start running out of things.  The April CPI Report just came in burning hot at 0.6% and, SO MUCH WORSE, Core CPI came in at 0.4%! That’s not food, that’s not energy – THAT IS THE CORE INLATION RATE!!!

0.4% is up 100% from March’s 0.2% – this is NOT a good trend!  That should push the 30-year notes over the critical 5% line and the 10-year notes are already past 4.4% – we are like frogs boiling in water at the moment – too dumb to get out of the pot!  

With that being said, let’s review our pots (previous review was April 14th):

Money Talk Portfolio Review: I was last on the show on March 25th and we put up the Review on the 24th, as the show tapes the day before (5 pm). It was a very tough call (see my conversation with Quixote) you can’t imagine my angst on March 24th – trying to decide if I should call a bottom or get people out of this portfolio – which we can only adjust on show days (quarterly).  

Rather than cashing out into the uncertainty of earnings, we chose to hedge heavily with SQQQ and our hedge is down $13,270 thanks to this incredible rally but, fortunately, the longs are holding up nicely and the portfolio is at $536,140 – up 436% since we started on Aug 21st, 2024 with $100,000 – a great pace for 2 years! 

I will be on the show again early June and those short SQQQ calls should go worthless and we’ll have to pay money to roll the long calls down to lower strikes – that’s the cost of insurance. We made it through earnings season and now we’ll see if another 3 weeks of war begins to grind things down (no signs so far!).  

As you can see, we’re sitting in a 50% CASH!!! position so it will be a busy interview in June, when we get to announce our changes.  We’ve been identifying PLENTY of good buying opportunities for our Members recently and, now that earnings are winding down, we’re in a fantastic position to go shopping! 

$700/Month Portfolio Update: We just did a review on this one last Tuesday so nothing to add here actually:  

Most of our holding have reported and usually I’d stick to last week’s report but I’m training Boaty to review portfolios (soon to be a service for our Premium Members) and here’s what took him all of 15 seconds to tell me this morning:  

Short-Term Portfolio (STP) Review:  We review this one a lot, last time was April 30th and we were at $540,151, which is up 170% since June 4th of last year – so pretty good – especially for our hedges in a bull market. We have been losing money, however as we were down $36,000 from the April 14th review and now we’re at $530,261 – down another $10,000 but THAT IS NORMAL in a market rally as this portfolio contains our hedges – it makes money when the market goes down, not up. 

We do, however, hedge our hedges with some bullish positions in the STP – things we are fairly certain are not going to hurt us (much) in the market pullback that will boost our hedges. Mostly we use short puts on stocks we’re happy to buy at a discount in the LTP (transferring the loss over there – if there is any) and then short-term and momentum plays we want to keep our eye on more than monthly.  

Short Puts – We expect the market to correct by 20% and we’d better REALLY want to own anything we’re selling puts against! 

• • AVGO – Too far out of the money to worry about.
  • B – Same
  • CSCO – 20% cushion (and we’d LOVE to own them at net $69.20!
  • FCX – Miles out of the money.
  • FSLR – See, these are all companies we REALLY want to buy. If we don’t get to buy them cheaply, the profits are our consolation prize.  
  • GOOGL – See!
  • HOOD – New one. 
  • IBM – Liked it enough to buy it twice.  
  • MSFT – Holy cow, what a list!
  • NKE – Although we’re showing an 85% loss, we sold the $45 puts for $5.25 so net $39.75 and NKE is $42.21 so the loss is just premium and, as long as they hold $40 – we’re fine.  
  • SOFI – New one. Should have waited, $6 was our target sale price…
  • SWK – New one. 
  • T – Who doesn’t want to own T for $21.05?
  • UUUU – On track.  
  • VG – Also new.  

That’s $134,226 worth of short puts and, if we don’t get to own the stocks at very low prices – we’ll just have to keep the cash and that helps pay for our next round of insurance.  

• • BTC – Now safely over our target but only net $29,000 on the $50,000 spread so still $21,000 (72.4%) upside  potential so, unless we are short of cash – there’s no reason not to leave this and collect what most people would consider a fantastic 20-month return.  

When you have a cash-heavy portfolio, you should have a few positions that are helping you make a nice return on your cash.  

• • OVV – Brand new (yesterday!) – that means good for a new trade.  

• • SOUN – Fairly new and still good for a new trade. Earnings were good but GAAP earnings were not so some traders are exiting but I think they are making progress – especially on the revenue front.  Notice we aggressively sold July $9 calls – so this is exactly what we expected would happen.  

• • SPY – It’s a $600,000 spread and currently net $141,325 so we have $458,675 worth of downside protection. The short July $650 puts are $82 (11%) out of the money and we can always roll them along so I’m happy to wait 66 days to collect that $13,000 in remaining premium. We have 6 more quarters to sell $25,000 is $150,000, which pays for the spread so FREE INSURANCE!!!

• • SQQQ – At $44.50, we multiply that by 1.6 to account for a 20% drop in the Nasdaq and that’s $71.20 so the $100 calls are stupidly out of the money – it would take a 40% drop to hit those and then the World would be ending – so who cares about hedges?  
  • Let’s roll 75 (1/4) of the short 2028 $100 calls to 125 of the short Sept $60 calls at $4 ($50,000) as we can always roll them back and they expire in 129 days vs 619. We’ll do that each Q and, at some point, 2029s will come out and we’ll roll our longs there and leave the remaining short calls to expire.  
  • The short June calls will pay us another $23,100 and 6 more of those is $138,600 and the net of the $600,000 spread is currently just $156,000 so $444,000 of downside protection here AND IT SHALL BE FREE!
  • Also, for net $2 ($60,000), let’s roll our 2028 $50 calls to the 2028 $40 calls at $17. That increases our downside protection by $150,000 (so + $90,000 net).  

• • TZA – The math is not as pretty here. $4.91 x 1.6 is just $7.85 so not quite $3 for the $5s would be $120,000 and the net is $57,750 – so nowhere near as efficient as the other hedges. We’re right at $5 and I think the RUT rolls over as small-cap earnings come in so let’s buy back the 200 short July $5 calls for $10,600 and wait for a pop to re-cover.  That will bring out net to $68,350 with just $51,650 in downside protection BUT we should be able to cover $21,000 per quarter so it is still FREE INSURANCE – so no hurry to cash it out.  

• • UNG – On track and good for a new trade at net $9,310 on the $42,000 spread so that’s $32,690 (351%) upside potential – and this is how we pay for our hedges! In fact, if we do it right (and we have been) we can MORE THAN PAY for our hedges and make a profit in this portfolio.  Clever, right?  

We have just under $1,044,325 in downside protection against a 20% pullback after spending $120,600 (1/3 of our cash) on adjustments. That means we’d better find some longs that are going to make at least $240,000 in a flat to up market or why are we hedging. 

So on to the LTP!  

IN PROGRESS