Green Dot Portfolio: January 2018 Update

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Includes: AES, DGLD, DSLV, ET, GLD, K, LADR, MDT, MRK, SCO, SO, VTR, WELL
by: Green Dot Investor
Summary

Realized total return on portfolio investment, from dividends and swing trades, increased again to +1.14% for January (+12.97% annualized), more than keeping pace with my annual portfolio goal of 8%+.

I extended my swing trade record to 29 consecutive gains, including 7 trades in January (average gain of +7.55%, +33.86% annualized): MDT, K, MRK, ETP, LADR, AES, and DSLV.

I bought 2 new REITs and 5 stocks and added to 5 existing REITs and 10 CEFs. Dividend income continued to increase. I made changes to some preferred holdings.

My unrealized market value declined to -5.49%, with GE and 3 other holdings alone accounting for 44.5% of losses.  43% of holdings are profitable or down <3% (average -1.08%).

This is the third monthly update for my Green Dot Portfolio. I introduced my approach to this mixed-asset, dynamic portfolio with a swing trading twist in my Part 1 article and provided a detailed list of the 78 holdings (as of November 10, 2017) in my Part 2 article. As well, I have provided weekly updates for followers of my Green Dot Portfolio via SA Instablogs, including detailed charts, technical notes, and trade logs for swing trades.

Overall, I'm satisfied with the progress to date for my portfolio. Swing trades continue to be very good and I'm collecting increasing income from dividends, both good for the bottom line. Realized total return on investment continues to exceed 1% each month, a rate at which will comfortably exceed my annual portfolio goal of 8%+. So I'm on target looking at these criteria. The arrow that has missed the target this month is unrealized or "paper" value of the portfolio, which has declined in part with the overall market pullback this last week in January.

(Source: clipartsalbum.com)

Recap of Market Action for January 2018

Looking at a weekly chart of the SPY (SPDR S&P 500 ETF), 2017 was undoubtedly a strong year. It is also clear that the weekly advance of the market accelerated in January, with the price action becoming increasingly extended above the 20 period simple moving average (blue line). The recent extension was in fact the largest departure, on both a weekly and monthly basis, from the 20 period SMA since the start of this bull market in May 2009. So at some point I (and many, many market analysts/commentators) were expecting a pullback. I presented a very similar chart in my Seeking Alpha blog for the week ending 1/26. As readers are aware, that pullback occurred on Monday and Tuesday of the week of January 29 (red candle on the right side of the chart).

(Source: Screenshot created by author from Scottrade.com Elite platform)

As I have commented before, this high price environment has presented a challenge for me for building my growth and income retirement portfolio. I will continue to use an incremental approach for adding shares, similar to dollar-cost averaging.

Changes to Asset Classes of the Green Dot Portfolio

As a dynamic portfolio, Green Dot holdings change due to both new additions to the mix of securities as well as positions that I sell. Sells are mostly opportunistic swing trades wherein I take decent, short-term profits due to accelerated price action of a holding.

The sections below describe in detail the changes made to the portfolio in January, starting here first with an overview of changes in asset allocation.

Highlights of changes to my portfolio in January are as follows:

  • The overall cost of current investments increased by +18.8% as I deployed more of my cash balance to add shares and as I collected profits from swing trades and dividends.
  • The total number of current shares increased consequently (+24.5%), from 4,530 to 6,538, despite that the number of holdings continued to decrease (from 69 to 65, or -5.8%).
  • The overall unweighted average dividend/distribution yield of my current investments continued to increase slightly, from 6.54% to 6.83%.
  • My total investment in CEFs increased again, to 45.64% of the portfolio, continuing as the dominant asset class. REITs increased slightly to 29.21%, continuing as the second-largest asset class in my portfolio.
  • I decreased my holdings in both preferred stocks and preferred ETFs, from 17.24% in November to 11.98% in January. This followed a re-evaluation of these holdings in January and my decision to buy more shares of preferred stock CEFs instead of individual preferreds (more details below).
  • The number of stock holdings continued to declined as I made more swing trades; however, I have purchased larger positions for new buys. I am now including swing trade leveraged ETF/ETNs in the 'stocks' category.

The table below shows the change in total investment across asset classes for my Green Dot Portfolio from its inception through the current month.

Asset Type Date # Holdings # Shares $ Cost % of Portfolio Div. Yield
Preferreds 17-Oct 11 305 8,481.23 11.38% 5.96%
17-Nov 11 305 8,481.23 10.71% 5.95%
17-Dec 11 305 8,481.23 10.66% 6.03%
18-Jan 9 245 6,860.10 7.25% 6.15%
Pref. ETFs 17-Oct 4 274 4,485.40 6.02% 5.74%
17-Nov 4 324 5,232.95 6.61% 5.64%
17-Dec 4 324 5,232.95 6.58% 6.11%
18-Jan 3 284 4,476.05 4.73% 6.40%
REITs 17-Oct 20 952 21,721.69 29.15% 6.91%
17-Nov 18 944 21,021.80 26.56% 7.01%
17-Dec 19 1011 22,651.28 28.46% 6.95%
18-Jan 19 1169 27,619.74 29.21% 7.23%
CEFs 17-Oct 22 1633 20,042.20 26.90% 7.00%
17-Nov 24 1916 25,902.02 32.72% 7.08%
17-Dec 25 2481 30,698.51 38.57% 7.11%
18-Jan 25 3575 43,158.48 45.64% 7.78%
Stocks 17-Oct 21 545 19,781.07 26.55% 4.92%
17-Nov 18 640 18,515.76 22.05% 5.42%
17-Dec 11 409 12,522.88 15.73% 5.29%
18-Jan 9 365 12,445.88 13.16% 5.31%
Total 17-Oct 78 3709 74,511.58 100.00% 6.20%
17-Nov 75 4129 79,153.76 100.00% 6.35%
17-Dec 69 4530 79,586.85 100.00% 6.54%
18-Jan 65 5638 94,560.25 99.99% 6.83%

The concentration in CEFs and REITs, my highest yielding assets, is emphasized in the chart below.

(Source: Chart created by author from portfolio data as of January 31.)

Positions Sold - January Swing Trades

In January I completed 8 swing trades, including Medtronic (MDT), Kellogg (K), Merck (MRK), Energy Transfer Partners (ETP), Ladder Capital Corp. (LADR), The AES Corp. (AES), and VelocityShares 3x Inverse Silver ETN (DSLV).

The table below summarizes the positions I sold in January. I provide details for each trade - charts, technical notes, and trade logs - in my weekly blogs for followers of my Green Dot Portfolio. Profits totaled $618.80 (including $70.82 in dividends), a +7.55% gain for an average of 56 trading days (+33.86% annualized). Commission costs and dividends are included in the trade costs and in the profit calculations below.

Symbol Qty. Sell Date $ Sell Price $ Tot Cost $ Tot Sell

$ Div

% G/L Days in Trade
DSLV 87 1/23 23.91 1,991.97 2,075.62 0 4.20 15
AES 80 1/18 11.70 851.70 931.48 0 9.37 33
LADR 175 1/18 14.75 2,385.50 2,576.68 31.50 9.33 80
ETP 40 1/16 20.35 744.45 809.49 22.60 11.77 82
MRK 14 1/12 58.50 771.00 814.49 6.72 6.51 52
K 10 1/8 69.14 660.95 686.90 5.40 4.74 89
MDT 10 1/3 87.74 784.00 842.89 4.60 8.10 40
Total 8,189.57 8,737.55 70.82 7.56 56

Cumulative Swing Trade Results

Since August, I have been most fortunate to close 29 consecutive winning swing trades, for a total profit of $2,061.92 including dividends. The cumulative gain on investment is +7.81% for an average of 40 trading days, or +49.01% annualized.

As I have emphasized before, investors might want to consider the boost that some well-placed swing trades can add to a portfolio. These profits help me grow my portfolio faster than from dividends alone over these short periods of time.

The chart below shows the total percentage gain for all of the 29 swing trades.

(Source: Graph created by author using portfolio data as of January 31.)

Changes for Preferred Stocks/ETFs

As I wrote in my weekly blog for followers a few weeks ago, I re-evaluated my holdings of individual preferred stocks and preferred ETFs. I became concerned that some of these might under-perform as approach their initial call dates. ALLpD (call date of 4/15/19) and COFpD (call date of 12/1/19) were of particular concern. Overall, considering their price action and dividends collected or on the horizon, I was fairly flat on these as investments. Their yields were increasing to about 6.2% but it was clearly a result of their price declines. The PowerShares Preferred Financial Portfolio (PGF) also seemed to be likely to under-perform compared to alternatives.

As I detailed in my blog for the week ending 1/12, I made a few changes for this asset class in my portfolio:

  • I sold my 30 shares of Allstate (ALLpD) on 1/11 at $26.59 and sold my 30 shares of Capital One Financial (COFpD) on 1/11 at $26.79.
  • I sold my 40 shares of PGF on 1/11 at $18.77.
  • I used these proceeds to buy 100 additional shares of Nuveen Preferred and Income Securities Fund (JPS), on 1/11 at $10.09. At the time, JPS had a distribution rate of 7.30% and was trading at a -2.13% discount to NAV.

I may make other changes and have a short list of a few individual preferreds that I might consider in the near term, as well as adding more to JPS or other funds. All of this will affect the real allocation of investment across assets as there are and will likely be additional preferred investment is CEFs as well as individual stocks and ETFs.

New Positions

I bought 6 new positions in my Green Dot Portfolio in January, which (except for the 2 REITs) were purchased more as swing trade candidates than as longer-term holdings:

  • I bought 87 shares of VelocityShares 3x Inverse Silver ETN (DSLV) on 1/2 at $84.45. As described above, I sold this position on 1/23 for a gain.
  • I bought 45 shares of ProShares UltraShort Bloomberg Crude Oil (SCO) on 1/4 at $23.23. This ETF is a 2x leveraged short play on the Bloomberg WTI Crude Oil Subindex.
  • I bought 20 shares of Ventas Inc. (VTR) on 1/8 at $58.21. This beaten down healthcare REIT has a dividend yield of 5.65%
  • I bought 15 shares of Welltower Inc. (HCN) on 1/9 at $61.70. This beaten down healthcare REIT has a dividend yield of 5.74%.
  • I bought 25 shares of Southern Co. (SO) on 1/16 at $44.38. This well-known energy utility has sold off and has a dividend yield of 5.24%.
  • I bought 40 shares of VelocityShares 3x Inverse Gold ETN (DGLD) on 1/26 at $39.20. This leveraged trade is inverse to the iShares Gold ETF (GLD).

Additions to Existing Holdings

In January I added shares to 15 of my existing positions, including 5 REITs and 10 CEFs:

REITs

  • Colony NorthStar, Inc. (CLNS)
  • EPR Properties, Inc (EPR)
  • Medical Properties Trust (MPW)
  • National Health Investors Inc. (NHI)
  • Omega Healthcare Investors (OHI)

CEFs

  • AllianceBernstein Global High Income Fund (AWF)
  • DoubleLine Income Solutions Fund (DSL)
  • Aberdeen Asia-Pacific Income Fund (FAX)
  • Flaherty & Crumrine Total Return Fund (FLC)
  • Nuveen Preferred & Income Securities Fund (JPS)
  • Morgan Stanley Emerging Markets Debt Fund (MSD)
  • Nuveen AMT-Free Municipal Credit Income Fund (NVG)
  • PIMCO Dynamic Credit & Mortgage Income Fund (PCI)
  • Brookfield Real Assets Income Fund (RA)
  • Cohan & Steers Quality Income Fund (RQI)

These positions were mostly added to take advantage of lower share prices or to increase the size of previously under-weighted portfolio holdings intended for longer-term income. Unfortunately, I added these shares before the decline at the end of the month. Over time I will continue to add to positions incrementally, similar to a "dollar-cost averaging" approach.

The table below provides details on the number of shares added, date of and unit price at purchase, and total number of shares now in the portfolio. For CLNS, FAX, JPS, NVG, and PCI, shares were added on more than one date, so the date of last purchase is included and the price is the average unit cost of all shares added for the month. The yield on cost and (for CEFs) discounts to NAV at the time of purchase were provided in my weekly blogs.

Symbol Type Qty. Buy Date Price Share Total
AWF CEF 100 1/24 $12.66 200
CLNS REIT 121 1/23 $10.62 345
DSL CEF 35 1/5 $20.74 170
EPR REIT 12 1/3 $64.18 36
FAX CEF 325 1/24 $4.99 700
FLC CEF 40 1/23 $20.97 80
JPS CEF 275 1/23 $10.00 363
MPW REIT 50 1/10 $13.01 100
MSD REIT 60 1/3 $10.07 200
NVG CEF 99 1/17 $15.40 199
OHI REIT 30 1/17 $26.75 115
PCI CEF 75 1/24 $22.62 175
RA CEF 35 1/24 $23.83 150
RQI CEF 50 1/16 $11.97 100

Dividends Collected

My Green Dot Portfolio, as a growth and income retirement investment, is designed in large part to provide income via payout of dividends. As expected, payouts from the portfolio are growing as the number of shares and positions grows, as well as due to any increase in the distribution rate from holdings.

As the table and chart below show, the total income from dividends continues to increase, with $545.88 collected in January and a total of $1,501.25 since positions for the portfolio began to be purchased in August. All dividends are included for the month for which the payment is received in my account, not when the dividends are declared.

Month-Yr # Div Payments $ Total Dividends
Aug-17 2 $24.39
Sep-17 9 $75.28
Oct-17 19 $148.94
Nov-17 37 $305.75
Dec-17 48 $401.01
Jan-18 46 $545.88
Total 161

$1,501.25

(Source: Chart created by author from portfolio data as of January 31.)

With increasing concentration of my portfolio in REITs and CEFs, they are now - and are likely to remain - the leading asset classes for generating dividends. In January, CEFs contributed 41.9% of dividends, and REITs contributed 42.8%. CEFs are more likely to pay monthly dividends than other asset classes, and they have contributed 37.5% of all dividends to date.

Asset Type Preferreds Pref ETFs REITs CEFs Stocks Total
Aug 17 $ - $ 0.41 $ 23.98 $ - $ - $ 24.39
Sep 17 $ 10.47 $ 15.92 $ 37.56 $ - $ 11.33 $ 75.28
Oct 17 $ 12.42 $ 21.51 $ 72.16 $ 19.18 $ 23.67 $ 148.94
Nov 17 $ - $ 24.00 $ 100.52 $ 111.61 $ 69.62 $ 305.75
Dec 17 $ 64.10 $ 26.07 $ 54.88 $ 203.64 $ 52.32 $ 401.01
Jan 18 $ 36.91 $ 22.81 $ 233.92 $ 228.56 $ 23.68 $ 545.88
Total $ 123.90 $ 110.72 $ 523.02 $ 562.99 $ 180.62 $ 1,501.25
% of Total 8.25% 7.38% 34.84% 37.50% 12.03%

Dividend Reinvestment

My current dividend reinvestment occurs generally on the 22nd of the month, so it is not aligned perfectly with calendar months. In January, dividends from all holdings in the portfolio since December 22 were used to purchase 61 shares of CLNS on 1/23 at $11.16/share. I continued my strategy to use accumulated dividends to purchase shares in holdings that are under-represented in the portfolio (number of shares) or trading at that time at relatively low price per share. My online broker (Scottrade) does not charge a trade commission for purchases through dividend reinvestment. I expect a change to occur for next month, however, as Scottrade has been acquired by TD Ameritrade, which does not have a "flexible" dividend reinvestment program. Going forward, I will likely have to designate dividends to only purchase additional shares for companies that generated the dividends, the typical DRIP approach.

Realized Gains/Losses

As a growth and income portfolio, Green Dot generates income each month through dividends and profits from swing trades. These are realized gains, or money that is available for additional investment. I am tracking this so that I can gauge progress toward my goal of an 8%+ annualized gain for the portfolio. As my portfolio was more fully established by mid-November, I use November as the tracking origin. The data below do not therefore include 5 swing trades ($393.72 in profits plus $10.80 in dividends on those swing trades) in September-October.

The table below shows the total investment and investment return in the Green Dot Portfolio for each month, including the total profits from swing trades ex-dividends, and the total dividends collected. I subtracted dividends from swing trades in order to avoid double counting. There may be a case or two along the way where a dividend is received in a month but the underlying equity was sold late in the previous month. While this may introduce a bit of a month-to-month inaccuracy, it should be small and will be treated the same each month.

Month $ Cost $ Swing Profits
$ Divs on Swings
$ Dividends Received $ Total Income % on Investment
Nov17 79,153.76 508.62 70.82 305.75 814.37 1.03%
Dec17 79,586.85 445.05 47.74 401.01 846.06 1.06%
Jan18 94,560.25 547.98 37.19 533.50 1,081.48 1.14%
Total 1,501.65 155.75 1,240.26 2,741.91

As presented in the table, total return on investment continued to grow from December (+1.06%) to January (+1.14%). Swing trades continue to provide a greater share of profits overall (54.76%), but total dividend income continues to increase steadily. At the un-weighted 3-month average return of 1.077%, my Green Dot Portfolio will yield +12.92% annualized if I can maintain the recent level of return on investment. The chart below depicts the growth in realized portfolio profits.

(Source: Chart created by author using portfolio data as of January 31.)

Unrealized Gains/Losses

In January, the total unrealized market value of my portfolio declined to -5.49%, a good bit lower than for December (-1.98%). About 44.5% of losses are due to one stock - General Electric (GE), one CEF - Nuveen Preferred & Income Securities Fund (JPS), and 2 REITs - EPR Properties (EPR) and Colony Northstar Inc (CLNS). Investors know, especially as demonstrated this last week of January, that even quality stocks can fluctuate a lot in price over short periods of time.

The chart below presents the percentage gain/loss of market value, by month, for each asset class in my portfolio. Stock losses have led the pack each month due to the longer-term holding of General Electric (GE). Losses for individual preferred stocks, which actually had a small gain in November, accelerated in January while preferred stock ETFs have experienced a more gradual yet steady decline. Market losses of REITs was fairly low in both November and December, but REITs broke down significantly in January, ranking this category only behind individual stocks for unrealized losses.

CEFs have been the relative bright spot. Despite an increase in loss over previous months, they have declined the least among all asset classes. Also, I have more than doubled my total CEF holdings since October, including an increase in total CEF investment of by more than 40% from December to January. CEFs now comprise 45% of my Green Dot Portfolio, and the average loss per holding is <$48. The 25 CEFs have an average current distribution yield of +7.89%. I consider that part of the reason that CEFs are performing relatively well is that I have added to shares incrementally as prices have come down. So if and when these investments resume uptrends as I expect and as analysts have projected, CEFs should easily become my most profitable asset class.

(Source: Chart created by author using portfolio data as of January 31.)

Current Portfolio

Below is a summary table of the 65 holdings in my Green Dot Portfolio as of January 31. Full names of holdings as of mid-November were included in my Part 2 article introducing the portfolio, and new additions were described in my weekly position update blogs.

The portfolio is less diversified than initially but is still comprised of multiple asset classes. These classes and a moderate number of holdings was chosen to help reduce risk.

Symbol Qty $ Avg Cost $ Price 1/31 Div Yield % Portfolio
Preferred
CpJ 30 29.00 28.24 6.31% 0.92%
CTAA 30 24.25 22.48 7.78% 0.77%
FRCpG 30 25.45 25.75 5.34% 0.81%
GDVpG 35 25.13 25.04 5.24% 0.93%
MHLA 30 25.94 19.87 8.34% 0.82%
MSpE 25 29.18 28.45 6.26% 0.77%
SPGpJ 10 69.66 69.01 6.07% 0.74%
WFCpW 30 25.89 25.20 5.66% 0.82%
WFCpX 25 25.55 24.75 5.56% 0.68%
Pref ETFs
PFXF 84 20.15 19.28 6.42% 1.79%
PGX 100 15.04 14.46 5.64% 1.59%
SPFF 100 12.79 12.17 7.25% 1.35%
REITs
BRX 60 18.21 16.23 6.78% 1.16%
BXMT 25 31.28 31.00 8.00% 0.83%
CLNS 345 11.79 8.98 12.03% 4.30%
DOC 35 18.13 16.30 5.64% 0.67%
EPR 36 67.42 59.06 7.31% 2.57%
GOV 40 18.36 17.16 10.02% 0.78%
HASI 33 22.84 21.74 6.07% 0.80%
HCN 15 62.00 59.97 5.80% 0.98%
HPT 25 29.03 28.41 7.32% 0.77%
KBWY 25 35.88 33.48 7.97% 0.95%
LTC 30 46.67 40.98 5.56% 1.48%
MPW 100 13.12 13.08 7.34% 1.39%
NHI 20 75.90 70.53 5.39% 1.61%
O 15 54.57 53.19 4.94% 0.87%
OHI 115 28.35 27.04 9.76% 3.45%
ROIC 35 19.38 18.37 4.08% 0.72%
SKT 125 26.05 25.18 5.44% 3.44%
UNIT 70 16.64 15.83 15.16% 1.23%
VTR 20 58.44 55.97 5.65% 1.24%
CEFs
AWF 200 12.65 12.44 6.74% 2.67%
BGX 50 15.83 15.99 7.73% 0.84%
CXE 150 5.21 5.10 5.88% 0.83%
DFP 28 26.36 24.31 7.31% 0.78%
DSL 170 20.75 20.34 8.85% 3.73%
EDD 100 8.04 8.09 7.42% 0.85%
EMD 50 15.77 15.48 7.75% 0.83%
EVV 50 14.12 13.35 7.24% 0.75%
FAX 700 5.02 4.96 8.47% 3.71%
FEO 50 17.08 17.11 12.91% 0.90%
FLC 80 21.14 19.79 7.22% 1.79%
HPS 40 18.58 17.59 8.34% 0.79%
ISD 100 15.05 14.65 7.58% 1.59%
JPS 363 10.10 9.44 7.88% 3.88%
KIO 45 16.88 15.95 9.40% 0.80%
MIN 350 4.19 3.98 9.45% 1.55%
MSD 200 10.07 9.86 5.68% 2.13%
NVG 199 15.44 14.67 5.93% 3.25%
PCI 175 22.63 22.54 8.74% 4.19%
RA 150 23.73 23.49 10.17% 3.76%
RFI 50 12.54 12.33 7.78% 0.66%
RQI 100 12.25 11.63 8.25% 1.30%
UTF 65 23.09 22.99 8.09% 1.59%
UTG 50 30.88 30.39 6.32% 1.63%
VGM 60 13.12 12.63 6.04% 0.83%
Stocks
BKH 15 58.88 55.55 3.42% 0.93%
D 15 80.19 76.44 4.37% 1.27%
DGLD 40 39.31 39.73 0.00% 1.66%
GE 103 23.92 16.17 2.97% 2.61%
KHC 9 80.99 78.39 3.19% 0.77%
MIC 33 69.74 66.35 8.56% 2.43%
MRCC 80 14.13 13.85 10.11% 1.20%
SCO 45 23.33 21.00 0.00% 1.11%
SO 25 44.51 45.11 5.14% 1.18%

Going Forward

As I said last month, establishing a new growth and income portfolio in the second half of 2017 was certainly a challenge given the continuing uptrend in equity markets. I continue to conduct research to find investments that I can add to my portfolio. My strategy is to collect real income through swing trades and dividend payers, as well as to capture the potential for price appreciation for longer-term holdings.

I will see if my overall portfolio strategy and trading tactics continue to serve me well in the coming months. I expect more volatility this year, as well as the potential for small-to-moderate pullbacks when markets become over-extended.

Author's note: If you found this article of interest and want to read more about my Green Dot Portfolio and my incremental, multi-asset approach to investing, please click the "follow" button.

I have appreciated the comments from readers in the Seeking Alpha community, and I look forward to continuing to share my investing experience and to learn from others. Best to your investing!

Disclosure: I am/we are long AWF, BGX, BKH, BRX, BXMT, CLNS, CPJ, CTAA, CXE, D, DFP, DGLD, DOC, DSL, EDD, EMD, EPR, ETP, EVV, FAX, FEO, FLC, FRCPG, GDVPG, GE, GOV, HASI, HPS, HPT, ISD, JPS, KBWY, KHC, KIO, LTC, MHLA, MIC, MIN, MPW, MRCC, MSD, MSPE, NHI, NVG, O, OHI, PCI, PFXF, PGX, RA, RFI, ROIC, RQI, SCO, SKT, SO, SPFF, SPGPJ, UNIT, UTF, UTG, VGM, VTR, WFCPW, WFCPX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.