Money Talk Portfolio Update

I'll be on BNN's (Bloomberg Canada) Money Talk tonight at 7pm.

As usual, we will be reviewing our Money Talk Portfolio, which we initiated back on Sept 6th, 2017 to track the trade ideas we would introduce, live on the show, about once each quarter.  The idea of the portfolio was to select highly leveraged, high-probability trades that did not have to be adjusted very often (or at all) and, so far, it's been a tremendous success with our initial $50,000 turning into a lovely $127,663 (up 155.3%) at yesterday's close, about 18 months after we got started.

We recently reviewed the MTP back on Feb 15th and, at the time, the portfolio was at $88,922 with, of course, the exact same positions – as I hadn't been on the show since Jan.  We did send out an alert (our first ever) to dump GE shortly after that – those alerts go out free of charge on Twitter, Facebook, Seeking Alpha, etc to make sure they were available to all so make sure you follow those feeds.    Note that, for each position, we clearly define our expectations and, overall, we expected our positions to make another $76,638 at the time but we've already made another $38,741 (43%) – which is way too fast – so we have to be careful that some of our positions are overbought already.  

That's right as FUNDAMENTAL VALUE INVESTORS we believe that stocks – even the ones we like – can be too expensive, as well as too cheap.  When they are too cheap, we buy them – when they are too expensive, we sell them.  It sounds logical but how many traders actually do it when the time comes?  

Now, let's take a fresh look at what we have:

  • Alaska Airlines (ALK) – Just a short put that nets us in for $51.80.  We're not worried about it.  Expect to gain the full $4,100 so $2,650 left to gain.
  • Nasdaq Ultra-Short ETF (SQQQ) - A hedge we expect to lose on and so far, so good as we're down about $4,000 with just $450 in value left.  Still, we do need hedges so


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Tempting Tuesday – The Beats Keep Coming (so far)

Image result for beats by dre logoEarnings are going very well.

While there are plenty of misses in companies you probably don't care about (ABCB, ASTE, BANC, EDU, FCF, FBC, IRDM, MLI, PII, SHW and WAT missed just this morning), there are plenty of beats from large-cap companies you probably do care about like DGX, HOG, HAS (by a mile), JBLU, KO, LMT, NTRS, PG, PHM, STT, TRU, TWTR (by a mile) UTX and VZ – all from this morning.

Of course large caps are benefitting from tax breaks and buybacks but, as a shareholder, money (per share) is still money so up and up we go.   This is why we still have our longs – FOMO continues to be a thing and it doesn't matter that a stock is already high in anticipation of earnings – good earnings take them up anyway.  We're still adding hedges on the way up but it's silly to close down too many positions if the market is determined to break out to new all-time highs.

One thing that is too high is Oil (/CL) Futures at $66 – that's a good spot to put our foot down and play for the short but be very careful around inventories tomorrow (10:30, EST) – as they can move us pretty violently but $66 is a good stopping out line, so a good place to short with tight stops above.

Generally, with our /CL trades, as soon as we make $500 we try to lock in $350 and then $500 at $700, etc – a $1,000 gain ($1 in price) on a single move is not something you often catch though, as you can see – it happened TWICE on Friday night with an over $2 move from $64 to $66.

For bigger companies and commodities, weak Dollars are a benefit and the Dollar was generally weaker in Q1 than it was in Q4 and that's giving everything a boost but we may be heading back to the top of that range (98) as the UK is back in turmoil mode – with Theresa May very, very close to being forced to step down – perhaps as soon as next week.  That would be Pound/Euro negative and Dollar-positive.  

 

 

 

IN PROGRESS

 

 

$300,000 Thursday – Our Options Opportunity Portfolio Goes up 200%

There's not much news and it's a silly pre-holiday trading day so I'm going to reveiw the OOP instead.  

The Options Opportunity Portfolio was initiated last year in Seeking Alpha's Marketplace and, since the Summer, it's been on quite a tear and we just crossed $300,000 – up 200.7% from our $100,000 initial set-up back on Jan 3rd of 2018.  You can follow our progress and changes under the Virtual Porfolio Tab on Philstockworld's main page and, unlike our Long-Term/Short-Term paird portfolios, the Options Opportunity Portfolio is self-hedged – so it's just the one, balanced portfolio.

Our goal in the OOP is to take advantage of OPPORTUNITIES in the maket – usually we jump on stocks that have been unfairly sold off on news we don't consider as bad as the traders who are running out of the stock.  That's why you see a lot of stocks in here with erratic charts – usually they've had some kind of mishap which drew our attention to them.

In our March Review, on the 7th, we were at $283,465 and now $300,689 is up $17,224 for the month and that's 17.2% of our original $100,000 – so pretty good for a month – too good really and we're going to look carefully for places we can take some money off the table, as we don't REALLY trust this rally.

  • FTR – This has been a bad trade for us this year and we're just waiting to see what happens on 4/30 earnings.
  • HMNY – I think we own most of the company at this point – not that it's worth anything…
  • HOV – This one we're expecting to recover nicely over time.
  • TZA – One of our hedges, no adjustments.  TZA is a 3x Ultra-Short so a 20% drop in the Russell should give us a 60% bounce to about $14.50, which would make the 50 calls worth $6.50 so $32,500 less the current value of $10,275 means we have $22,225 worth of protection here.  

  • LB – An aggressive put but we like LB.
  • PLAY – Not worried about these. 
  • SIG – Retail


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Will We Hold It Wednesday – Nasdaq 8,000 Edition

nasdaq composite history chart8,000 on the Nasdaq Composite!

5,150 was the top in 2,000 before the great crash took it back to 1,200, a 76% drop which took many years to recover from.  In fact, we only got back to 5,000 in 2016 but here we are, less than 3 years later, up another 3,000 (60%) and no, I don't think this time is like 1999 when people were throwing money at terrible stocks but there are still plenty of stocks people are throwing unrealistic amounts of money at and there WILL be a reckoning – one day.

We did consolidate for about a year at the 5,000 line, which means roughly half the people trading thought stocks should be higher and half thought they should be lower but then Trump got elected and promises were made (not kept, just made) and we've been off to the races ever since. 

If we want to determine whether 8,000 is too much for the Composite, we should look at the top 10 holdings, which make up a whopping 40% of the indexes weight while the other 2,629 components fight for the other 60%.  The simple question we can ask here is are these companies worth 60% more than they were in 2016 and, to do that, we can simply look at earnings and revenues because we should expect some real changes, right?

  • While Apple (AAPL) gets a lot of attention as it nears $1Tn in valuation, Microsoft (MSFT) has quietely gotten there without the drama and is "worth" $927Bn at $120.  Revenues have gone from $92Bn to $118Bn (up 28%) while profits in 2016 were $20.5Bn and, last year, they were $16.5Bn but that was due to write-offs and they should do better than $34Bn in 2019 and that's up 70% so yes, MSFT is worth much more than in 2016 but I'm not sure I want to pay $1,000Bn for "just" $34Bn in earnings (p/e 29.5) so I would give this one a B- grade.  
  • AAPL, of course, is my favorite company on the planet and $200/share is $943Bn in market cap but AAPL earned $59.5Bn last year (tax advantaged) and should make $53Bn this year for a p/e of 17.8 –


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Terrific Tuesday – Futures Blast Higher Just Because

Incendie dans la cahtÃ?©drale Notre-Dame de Paris, le lundi 15 avril.Wheee, up 180! 

Why?  Literally, there is no reason that the Dow is up 0.666% this morning in the Futures.  The other indexes are up 0.4% and mostly we popped higher at the EU open (3am).  There are no reasons for this and we don't need any reasons – there were no reasons in 1999 or 2007 as the market plowed higher – even as some were warning of dire macro events that were clearly visible just around the corner.  The markets tend to march on until the changes are long past undeniable, kind of like our President

All eyes were on France yesterday as Notre Dame had a tragic fire, destroying a large part of one of the World's greatest architectural wonders.  Victor Hugo said Notre Dame is a work of art authored by humanity itself, with no individual artist. It surpasses anything an individual can do and therefore becomes the best of what all of us can do – it's loss is a great tragedy and already hundreds of Millions of Dollars have been pledged to rebuild it. 

When Hugo Wrote "The Hunchback of Notre Dame" the church had already been destroyed during the French revolution and his novel called enough attention to it that it underwent a great rebuilding program in the mid-1800s so, almost 200 years later – we're just repeating the cycle – hopefully with less wood this time!  In truth, there's not all that much left of the original, built in 1163. 

Image result for notre dame floodSo, while we may see it rebuilt and think "it's not the same" – our great, great, great grandchildren will probably see it as an achitechtural classic once again – providing we do something about Global Warming, which came within 3 feet of breaking over the embankments during the 2016 Paris Flood.  

As there is not much news today, it's a good time to kick off our Portfolio Reviews with a look at our public portfolio called the Money Talk Portfolio, which we only trade live on BNN's (Bloomberg Canada) Money Talk Show once per quarter.  I'll be on the show again next Wednesday at 7pm
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Monday Market Movement – Earnings Season Finally Begins!

Related imageIt's earnings season!  

Finally we get to see whether or not these record highs come with record earnings!  We got off to a bang on Friday with beats from FRC ($1.26 vs $1.22 expected), INFY ($9.36 vs $8.95), JPM ($2.65 vs $2.35), PNC ($2.61 vs $2.60) and WFC ($1.20 vs $1.10) so so far, so good it seems and, this morning, Citigroup (C) came in at $1.87 vs $1.79 expected and Goldman Sachs (GS) is $5.71 vs $5.02, M&T Bank (MTB) $3.35 vs $3.29 and we're waiting for Schwab (SCHW) and Washington Federal (WAFD) but things are looking good in banking

Goldman Sachs, of course, gained 2.5% on Friday so today's earnings is giving them no additional lift and that's another sign of a toppy market as the whole banking sector went up on just a few earnings reports so woe unto any of them who fail to deliver going forward.  We still have plenty of Banks to hear from but, more interesting, will be the companies who may have been affected by the Government Shut-Down in Q1 – that's where we're expecting to get some resistance.

Earnings Whispers has the above cool charts for earnings and I love the "implied move" into earnings as it can alert you to seriously mis-matches that we can potentially take advantage of like Micro-Vision, where options imply a 50% move but the average move is only 11.3%.  MVIS is essentially a penny stock, trading at $1.03 but it does have options abd a fun way to play them is to sell the August $1 calls for 0.40 and sell the August $1 puts for 0.30 so you are collecting 0.70 and anything less than an 0.70 move between now and Aug 16th (expiration day) is your profit.  

Sketchers (SKX) on the other hand, usually makes violent moves on earnings yet it's priced for a relatively calm 7.6% move so we can play them to be more violent than that but we can also use our heads and, though we love to be bullish on SKX when they are low (and we are aggressively long in our…
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Fantastic Friday – Pre-Market Boost Turns the Week Positive

At 4am the week turned positive in the Futures.

A bit later, it was announced that Chevron (CVX) was buying Anadarko (APC) for $33Bn AND CVX will spend another $5Bn buying back 2% of their own stock.  That's pumping up the energy sector into earnings season as APC is getting a 44% premium to yesterday's close, which is an indicator that the energy sector stocks may be underpriced by quite a bit or it's simply a play to capture Natural Gas assets (/NG), which we are long on.

In our Long-Term Portfolio, we have an aggressive position on Chesapeake (CHK), which we thought was very undervalued at $2.50 and our net $0 position is already up $3,425 but still has plenty of room to grow as it pays $15,000 at $5 so a potential triple from here if all goes well:

CHK Short Put 2020 17-JAN 4.00 PUT [CHK @ $3.33 $-0.07] -50 1/8/2018 (280) $-6,000 $1.20 $-0.18 $-0.95    


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$2,000 Thursday – Our Webinar Short Pays off Nicely

Wheeee – that was fun!  

Yesterday, in our Live Trading Webinar, we picked up two shorts on Gasoline Futures (/RB) after reading the Full Petroleum Status Report  (released at 1pm) and deciding the run-up to $2.06 was miguided.  We rode out a bit of pain to $2.07 but decided to stick with it into the close and, this morning, we were rewarded with a lovely drop to $2.04, where we are taking the very nice $2,196.60 profit and running.  Congratulations to all who played along at home.  

Once again, this is the key to Fundamental Investing, we read the news and reports, check out the data and then make our trades based on how that information is likely to affect the stocks and commodities we are trading.  It's much more fun, and satisfying, than starting at squiggly lines on a chart all day.  

This morning there's pressure on commodities and indexes as well, with Silver (/SI) plunging all the way back to $15 and Gold (/YG) to $1,300 as the Dollar pops back up – something else we were expecting and  today's excuse is a Brexit extension that has weakened the Euro and the Pound but also the relatively hawkishness of our Fed compared to other Central Banksters is a factor that continues to keep the Dollar strong.

We love playing /SI long at the $15 line, it's great for a bounce and an easy line to place tight stops below – especially when the only reason Silver is down is because the Dollar is up – that's a dumb reason for people to bail out of their positions but /SI is a painful contract, at $50 per penny, per contract so gains, and losses, come very quickly.  $14.90 has been the low for the year and the $15 line has held up well so we take these opportunities whenever they come along.

Also in yesterday's webinar, we reviewed our Member Portfolios, which are up nicely for the month and we discussed the importance of using some of those unrealized profits (25-33%) to shore up our hedges and lock in those gains – because they can reverse in
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Which Way Wednesday – Russell 2000 Fails at the 200 DMA

Are we recovering from yesterday's dip?

While the Futures are up 0.2%, the Dollar is down 0.2% so that's just a re-pricing against the weak Dollar, rather than a pre-market rally and, even with the currency boost, the Russell (RUT) has once again failed to hold the 200-day moving average at 1,573 and that's what signaled our March sell-off but it won't be a catastrophe until we fail the 50-day moving average at 1,545 – so that's the line we want to watch very closely.  

Yesterday we shorted the S&P Futures (/ES) with a target of 1,580 and we hit that on the nose for a $1,000 per contract gain and then we flipped to the Nasdaq (/NQ) shorts at 7,600 and those paid us another $400 per contract into the close but this morning we're just watching and waiting – mostly hoping oil pops to $65 on inventories (10:30), so we can short that. 

Oil is up from the $59-60 range in late March so call it $59.50 and 10% up from there is actually $65.45 but let's say $65.50 and it's a $10 run so $2 pullbacks to $63.50 (weak) and $61.50 (strong) but I'm betting weak holds as we have a holiday coming up.  In either case, we can prettty confidently take a poke at shorting oil at $65 with a tight stop over (0.10) and then again at $65.50 and $66 if we have to and we'll carry our 0.20-0.30 loss knowing it's very likely that, when we get it right, we have a $2 ($2,000 per contract) gain to look forward to.

Remember, I can only tell you what is likely to happen and how to make money trading it – the rest is up to you!  

Today we have a $20Bn auction of 10-year treasury notes at 1pm and it's long been a pattern that the market goes down ahead of a 10-year auction as it scares investors into buying bonds, which keeps the rates low and countries that owe $21Tn NEED to have rates a low as possible.   This morning the ECB announced they will keep interest rates unchanged for the rest of the
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Trade War Tuesday – Trump Pivots to Europe with More Sanctions

Now what?

Apparently, since the EU MIGHT have given Boeing rival Airbus $11Bn worth of subsidies since 2004, the Trump Administration will retaliate by placing tariffs on cheese, bicycles, kitchen knives, artist's brushes, etc.  While this may seem crazy and illogical, it's really just another day in Trumpland, so no one is really batting an eye and, although the German and European stocks have turned down on the news, the US stocks are, as usual, ignoring the inevitable retaliation this is likely to cause.

Technically, Trump isn't allowed to DECLARE tariffs whenever he wants and it's kind of hard to see how cheese is a national security risk but that ship has already sailed with the Chinese tariffs (which are also not going away) but what's the point of even pretending we follow the rules anymore?

We're testing another major level at S&P (/ES) 2,900 this morning but, as noted in yesterday's PSW Report, we shorted it into yesterday's close anitipating that SOMETHING would cause us to pull back after testing that level.  So far, we're up $250 per contract so we can set a stop at $200 and lock in the gain and raise the stop $50 for each $75 we gain going forward.  

Since the S&P is up 50 points on this run, a weak retrace should be 10 points, back to 2,890 so our expectation, at $50 per point, per contract, is to make $500 per contract just following the 5% Rule™ – isn't that nice and simple?  If we're lucky, we get a strong pullback of 20 points to 2,880 and we'll know if we're getting a strong pullback because the weak bounce (2 points) will fail at 2,992 so our stop will the $400 gain at that line by the time we get there.  See, Futures are easy!

Once we go below 2,892, that becomes our stop and it's almost certain we'll bounce back to there and test that line so we can do our calculations on the other indexes to see how they are bouncing too.  Once we get below 2,890, our next stop should be the weak bounce line off 2,880, which would then be 4
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