2018 Mid-Year Review

We’re a bit delayed in writing this because we were wondering if we even should. We wrote a post a while back detailing how our trading has changed significantly in the last year or so and nothing much has changed at all. We suggest you take a look at those posts, “Building a Balanced Portfolio” and “Alternative Thinking”, both the first of which discusses the setup of our portfolio and how it might change over the year, the second was questioning the market movement at that time, particularly when we should expect the next big shakeout (which still hasn’t happened).

Now, we heard one interesting tidbit recently that had us wondering if we were right about something. Actually, two tidbits. First, RARE EARTHS were bottoming. As you may be aware, we bought ORL.to and LAC.to, two RARE EARTH companies listed in Canada, with the idea that they would bottom in the summer months and then rise into the new year. Well, wouldn’t it be funny if some guy said that the trade war means nothing until China actually retaliates… by attacking RARE EARTHS. What a coincidence! Now, we’re not saying we’re right because both stocks seem to be languishing, we didn’t even think the sector was really even that important any more, but there is showed up in a conversation, and one that sort of fits our timeline. (Does he read our work?!?!)

Second, EMERGING MARKETS. We said they were bottoming a few weeks ago and it almost looks like we were right. Yey! One for us! Finally! The point being is that we were watching the charts and noticing that those markets were getting trounced, absurdly so, which suggested to us that there had to be a turnaround at some point. We’ve played INDL for profits, BRZU we’re waiting on, so too with XPP, but it might be that we need to wait just a little bit longer on thos to see them pop higher. And so we will.

Looking back over the first six months of the year, we can’t say much has changed from the time we wrote “Building a Balanced Portfolio”. We mentioned we were looking to build a more conservative portfolio going forward and trying to get rid of some old thinking and trading habits. We’re glad to have done more of the first and, to an extent, limited the second, though we’re still playing around too much we thinks.

In terms of dividends, we continue to hold many of the stocks we mentioned before but got rid of a couple while adding some other ETFs. The stocks we did get rid of (namely AEM.to, we’re looking to get back into very shortly). Here’s where we stand so far:

  • BIR.to – Canadian natural gas player. Looking to sell covered calls on this stock in August in its run up to earning, with an expiry for November or December.
  • BRZU – Leveraged ETF on Brazil. We’re written before that Brazil has twice before dropped significantly going into the summer and it’s looking like this time is no different.
  • DS.to – We wrote before that we wanted exposure to the financials and we finally got it by way of DS.to, a basket of 15 high dividend paying financial stocks. We chose this one over ZWB.to because the payout was higher.
  • GSC.to – Still holding this speculative gold stock.
  • HR/UN.to – Added this REIT to our portfolio. Pays out a 7% dividend right now but is considered interest rate sensitive. H&R Real Estate owns a lot of properties all over North America and their occupancy rate is up there, too, so it seems like a safe play.
  • JNUG – Only ever got around to selling one set of CALLs on this ETF that we’ve held for a long time. Yes, we’re counting the carrying charges on this one AND the currency changes that are working against us. We’d really like this one to work out already but each time we go to sell it seems like it might rally. It hasn’t moved down all that much choosing to move sideways instead.
  • NUGT CALLAug 3, 2018 26.50 – The COT Report suggests GOLD is readying for a rally, something we’ve written about before. This is our speculative play on the NUGT ETF. GOLD usually turns around in July so we’re expecting this to move in our favour rather soon.
  • ORL.toRARE EARTHS seem to bottom in the summer and so we decided to start building a position in two stocks, ORL.to and LAC.to being two of the larger RARE EARTHS companies out there. We’d be looking to sell CALLs in December six months out.
  • LAC.to – Same thesis as ORL.to, above.
  • PD.to – Still holding this and we’ve added a bit more to the position. Looking to sell CALLs into earnings reports.
  • RNW.to – Monthly dividend income by way of a Canadian RENEWABLE ENERGY company.
  • SGY.to – Canadian energy company, 4% dividend, will sell CALLs when we can, stock price is up since we bought.
  • SOXL – Speculative play on the semiconductor sector. We suspect this sector has run its course for now but we could see some volatility first.
  • TVIX – We should’ve gotten rid of this the same week we bought it. We have traded in and out of it for profit since then but we continue to hold the original position. We just don’t want to take the loss.
  • XPP – Playing China with this one. Like most of these types of ETFs, they jump in $10 rallies so, if we’re right in catching the bottom here, there should be a few playable trades in the coming months.
  • ZWC.to – BMO’s high yield dividend payer for us.

And so that’s where we stand right now with our portfolio. We are earning money on our dividends but we are losing money on carrying charges since some of our holdings are on margin. So, if there’s one goal we have in the coming months it’s to get off of so much margin.

In terms of trading, we’ve held a pretty good record with our only real big losses in options, notably the NUGT CALL option that expired last week which we didn’t give ourselves enough time to be right on. The other options we sold on PD.to, SGY.to and BIR.to ended up mostly flat as we bought them back in order to preserve the positions instead of incurring losses on the underlying stocks. So, in all, our biggest losses were the most speculative. The others, though speculative, weren’t as bad because we bought the underlying ETFs which have no expiry date. Yes, they have carrying charges, but we suspect we’ll make that money back and then some. In all, we’ve often hit quick $100 profits on some of these plays and been content with that. Why not?

So, going forward, what will we work on?

  1. Get off of margin.
  2. Make smarter options plays, in general. Limit our NAKED CALL plays and watch technical indicators for guidance on when to sell COVERED CALLs.
  3. Continue adding dividend-paying stocks and ETFs to our portfolio.
  4. Have cash in reserves, especially for the coming months, ie, October.
  5. Re-evaluate in the next seasonally opportune time, which should be October.

That’s about all we can think of right now for our own mid-year review. How has your year done and what will you do differently in the coming months?