Wednesday, October 20, 2010

My Current DIV Portfolio

Lately I have been having trouble identifying companies that have attractive long term entry points. I still don’t believe that this market is going to run forever- I think we are due for a major pull back within the next six months. This is when I plan on jumping back in on individual stocks. But what if I’m wrong? What if we continue to rally through the elections, QE2, and then the holiday season? I would hate to have money collecting dust under my mattress.

I decided to invest 20k into broad based high paying Dividend paying ETFS. I figure this will be a good solid base for my portfolio.

Currently I am invested in:
Average Yield








This portfolio gives me broad exposure to equities, preferred shares and bonds from across the globe with an average yield of 5.5%. I included a small position in gold in the portfolio as I view the commodity as hedge against both inflation and deflation (go figure). I think any portfolio in this market should have some exposure to this commodity.

Depending on how my financial situation shapes up in the next few months, I will hold onto these ETFS and add single equities as opportunities arise.  

On a separate note, you will rarely see me buy growth stocks outright. I would rather spend my money on long term investments with little beta that appreciate over time. This allows me to play the momentum stocks with options- as it allows me to control a greater amount of shares with less exposure. Stocks that have momentum are great trades, but are not great investments.

All the best,


Some quick trading updates.

It’s been a while- sorry for the lack of updates. It was a busy trading week for me. I took upward of 10k out of my AAPL trades. I sold a bit too soon (around 308) on Friday. I definitely left 10-15 grand on the table on Monday before earnings. This eats at me a bit, but I had a made a commitment to get out if it ran to 305 prior to earnings- as it was setting itself up for a sell off after earnings announcement.

Let me be clear- I don’t think there should have been a sell off. That was a MONSTER quarter. 20 BILLION dollar quarter. It beat EPS by nearly .60 cents per. Crushed on IPHONE and MAC sales and missed slightly on IPAD (which is a new product so these analysts really have no clue what to project) and really, IPODS are Christmas gifts-but other than that, who really cares about IPODS? Not me. Gross Margins getting ‘squeezed’ is a red herring, AAPL warned about this last quarter and it should come as no surprise. They still blew out the quarter and continue to add to free cash flow and penetration into foreign markets. Profit taking, I can understand. But I’m looking for $400 after the holiday earnings. Get back in while it’s below 310.

Now for a trade that went BADLY. After GOOG announced I figured we would have a huge run up AH and then a minor sell off the next day. We quickly traded down to $592 and I went long 30 OCT 600 puts at a $8 per cost basis. My thinking was that GOOG was setting up to be pinned UNDER the 590 strike price as large money couldn’t be long the $600 calls. I bought igh and sold low. The stock slowly marched back to the 598 range and I got out for a considerable loss (most of the AAPL gains for the last week). BIG MONEY wanted this stock pinned at $600. This was a stupid trade on my part, one I won’t make again.

Other than that, PGF is being unfairly punished in the current financial sell off. PGF are preferred FOREIGN financial shares. If you are looking for a good entry for this great ETF, here you go. Under 18 is a bargain.

I am going to post my portfolio updates later today. I have decided to make a run of the mill ETF DIV portfolio for the short term. I will add with individual companies as pullbacks allow. I don’t like entry levels at the current prices.

All the Best,


Sunday, October 10, 2010

Option Mondays: AAPL again....

Another Option Monday and I am sticking with what has been working. Last week I purchased 5 AAPL Nov 270 Calls at $24.45 per and 5 AAPL Nov 280 Calls at $17.25 per. To date the trade has been fairly profitable (I’m up nearly $4,000) and I think it has considerable more room to run. Every day we are greeted with more good news- Target, Wal-Mart, Verizon, China Telecom, Apple TV, etc. Every day we get more and more analysts upgrades- the new median target price is $352, everyone is expecting a blowout quarter. This seems like easy money. That is what is starting to worry me.
AAPL reports earnings on the 18th and anything less than a blowout quarter will cause a profit taking selloff. To be clear, I think AAPL is going to post a blowout quarter. This is a company that is firing on all cylinders. The China roll out went better than expected. This could be its 20 Billion dollar quarter and for the sake of my call options, it better be.

So my plan for the week is to sit on these options. I will take a profit if AAPL hits $305 before earnings- that is very feasible. There could be a lot of managers playing catch up come Monday. Other than that I intend on holding these past earnings and adding to my holdings on any weakness. The fundamentals are there, the momentum is there, the technicals are there, let’s hope the market agrees with me.
Wish me luck.

Tuesday, October 5, 2010

Options on AAPL: Sometimes it’s better to be lucky than good.

I am going to be completely honest. For the last week I have watched every TICK on the AAPL charts. My eyes were on the verge of bleeding. I didn’t lose any sleep (the whiskey saw to that) but I couldn’t clear my mind. I couldn't get the weight off my shoulders. It was consuming.

I made a mistake, a big one.

I bought into AAPL at exactly the wrong time. I went long 10 AAPL Oct 290 calls at peak volatility in an up market. I figured the run to $300 was in progress and there was no derailing the train. No need to rehash the past (see previous posts) but AAPl plummeted in the next week. I compounded my error by trying to catch a falling knife. I went from being long 10 AAPL Oct 290 calls at $9.80 per, to long 35 AAPL Oct 290 calls at $4.90 per, and down $9,000.00. I was dollar cost averaging myself into the poor house. Day after day, the technicals were telling me to get out, but I was waiting for that one bounce to exit. It was two weeks until expiration and every indicator was telling me to sell- but I held on.

I pushed in again- doubled my position and DCA down to 70 AAPL Oct 290 calls $3.85. Monday was terrible and I was down $15,000.00 or so. As a normally disciplined value investor, you can see how troubling this was for me. I had dug myself in a gigantic hole and was starting to look at things in my house that I could sell to remain whole. I put on a happy face and kept plugging away at my day job, school and family. The whole time this trade/loss was eating at me.

I was confident the stock was due for a bounce, I just didn’t know how much more punishment I could take. It was trading at 14x forward cash adjusted EPS. 14! This is one of the greatest growth stocks in the S&P. The only barrier to entry in this stock is its price tag, if it were to split (say 5-1), the price would immediately skyrocket. None of these facts matter. It did not matter that it was getting upgraded daily. It did not matter that its international expansion was proceeding at breakneck speed. All that mattered was that BIG MONEY (hedge funds, MM’s) were exiting the position at the end of quarter for huge gains. The stock was in trouble. I was one day from folding, hey the world needs ditch diggers too.

Then came the Tuesday morning, and a rising sun from the east changed the whole landscape. Japan had lowered its rates and entered into its own round of QE. This was the spark that the market needed. We rallied over 20 points on the S&P handily breaking through the previous 1150 resistance. AAPL was up nearly 10 points. I had reversed my entire loss for a decent sized gain. I had gone from zero to hero in one day. I should be flying high, but I am not. I am merely relieved.

Sunday, October 3, 2010

AAPL Options: Time is forcing my hand.

Where have I been?
Last week, I continued with my AAPL trades. Problem is, I am on the wrong side of them. Currently I control 35 Oct 16 290 AAPL calls at roughly 5.90 an option. I am clearly going to take a bath- the question is ‘how much’? The stock has become irrational. The charts have become bearish. Yet the story and the fundamentals remain intact. AAPL is trading at cash adjusted 14x future earnings… The Forward PEG ratio is >1. The expansion into foreign markets is ahead of schedule. My guess is Big Money is just profit taking, shaking out the trees, and setting up for another huge profit after earnings (Oct 18th).
Problem is, time is not on my side. The market can remain irrational longer than I can remain solvent. The chart is getting uglier and uglier…
With theta eating my aaples, I figure this trade has 3-4 more days MAX. On any signs of weakness, I am out. On any spike I am unloading half the position. This one did not go my way, so I am going to take my medicine and move on. I just hope it doesn’t kill the patient.
Any thoughts on where we are heading in the next week? I would love to hear any rational thoughts.