Green Dot Portfolio: April 2018 Update

|
Includes: AA, AWF, BGX, BKH, BRX, BXMT, CLNS, D, DFP, DIA, DOC, DSL, DSLV, EMD, EPR, EVV, FAX, FEO, FLC, FRA, GE, GLD, GOV, HASI, HPS, HPT, JPS, JQC, KBWY, KHC, KIO, LTC, MIC, MNK, MPW, MRCC, MSD, MU, NHI, NVG, O, OHI, PFXF, PG, PGX, QCOM, RA, RFI, ROIC, RQI, SCO, SKT, SO, SPFF, UTF, UTG, UUP, VTR, WELL
by: Green Dot Investor

Summary

Realized total return on portfolio investment from dividends and swing trades was +0.66% for April and now totals +5.23% for 6 months. Realized profits for 6 months is >$4,700.

I closed 1 swing trade in April: MU (+6.8%, +854% annualized), for 34 consecutive profitable swings (+7.7%, +53.5% annualized). I bought DSLV, SCO, and MNK swings, and QCOM calls.

Dividend income increased to a new monthly high in April, at $598.  Monthly dividend income for 2018 now averages $528.

I continued portfolio adjustments for preferreds, REITs, and CEFs. In April I sold 1 CEF (RQI), added 2 new CEFs (FRA and JQC), and added to 1 existing CEF (DFP).

Unrealized market value (-10.3% for April) remained unchanged from March. CLNS, MIC, and GE account for 39% of losses. CEFs (50.9% of portfolio value) are down only -3.98%.

This is my 6th 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 original 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.

This month, I've started added another trading tactic to boost returns: swing trading option premiums.

Recap of Market Action for April 2018

Overall, the markets in April continued the volatile inter-mediate level pullback that started in January of this year. This pullback process is taking more time than many had expected, and it may still take additional time before institutional investors are ready to take the markets to new highs.

(Source: clipartsalbum.com)

Using the daily chart below of the SPY (S&P 500) for the past 6 months, it's now been 54 trading days since the market's 10 day drop (from the high at 286.63 on 1/26 to the low at 252.92 on 2/9) that marked the beginning of the market pullback. As I have described in my weekly blogs, the market has twice attempted the resumption of an uptrend in late February and mid-March, failing both times at about the 75% retracement from the 2/9 low. A third attempt failed again this month, on 4/18, turned back at a lower level (the 50% retracement).

(Source: Chart created by author from TD Ameritrade 'thinkorswim' platform).

The market struggle is not confined to the SPY. Although it is more popular than meaningful, the Dow (DIA) has also exhibited the same general pattern. And although the recent market highs for the Nasdaq Composite (COMP) and Nasdaq-100 (NDX) occurred in mid-March, both of those indexes are far off of their highs. The small caps, represented by the Russell 2000 (RUT and IWM), are at higher levels off their lows (at about the 75% retracement level) but also have failed to confirm those levels and are making lower highs. Overall, the optimism that widespread favorable earnings during the past few weeks would boost the markets seems to have been over-subscribed.

As I concluded last month, in order to resume an uptrend toward a new all-time high, the SPY needs to first break resistance and close the gap at about SPY 270, and then break resistance and confirm above the inside bar of 2/2 at about SPY 280. That's a lot of work. Should the SPY continue to lose its current footing, closing below the 200 period SMA (near SPY 260) and confirming below the 2/9 low will set the stage for a continuing decline to perhaps the 240-250 area. At SPY 240, the market is about equal to a pivot top in late February 2017 and near a basing level in August 2017.

Portfolio Strategy and Asset Allocation Changes for April

As I wrote last month, the market weakness in March led me to decide to free up some cash. I "sold the rip" for a few positions where a short-term spike in prices allowed me to take some profits and I trimmed some weaker positions. In addition to completing 2 short-term swing trades, I sold a total of 11 positions for a small overall profit. I used some of these proceeds to "buy the dip," adding to shares of existing positions where prices were lower due to the general market pullback.

In April, I've played more of a "wait-and-see" approach, expecting further weakness in the markets. While prices still look good for adding to positions, I've been less active. Instead, I have focused on some shorter-term leveraged trades, which are still open. I also began to add option premium swing trading as a tactic for profiting in these volatile markets.

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

  • The overall portfolio investment increased in April to a new high ($100,656.).
  • The total number of current shares increased to a new high (5,944), and the number of holdings increased some since March, to 58 (but still 20 less than the number in October 2017).
  • The overall unweighted average dividend/distribution yield of my current investments remained about the same, at 7.30%.
  • My total investment in CEFs leveled, at 50.9% of the portfolio, and the investment in individual stocks and swing trade positions increased to a new 5 month high (13.5% of the portfolio).
  • The average investment per holding in the portfolio decreased slightly from March, to $1,735, but is still about 82% greater than in October.

The table below shows the monthly change in total investment across asset classes for my Green Dot Portfolio from October 2017 through April 2018.

Asset Type Date # Holdings # Shares $ Cost % of Portfolio Div. Yield
Preferreds 17-Oct 11 305 8,481 11.38% 5.96%
17-Nov 11 305 8,481 10.71% 5.95%
17-Dec 11 305 8,481 10.66% 6.03%
18-Jan 9 245 6,860 7.25% 6.15%
18-Feb 9 245 6,860 6.95% 6.31%
18-Mar 5 125 3,802 3.97% 7.02%
18-Apr 5 125 3,802 3.78% 6.93%
Pref. ETFs 17-Oct 4 274 4,485 6.02% 5.74%
17-Nov 4 324 5,233 6.61% 5.64%
17-Dec 4 324 5,233 6.58% 6.11%
18-Jan 3 284 4,476 4.73% 6.40%
18-Feb 3 284 4,476 4.54% 6.59%
18-Mar 3 284 4,476 4.67% 6.59%
18-Apr 3 284 4,476 4.45% 6.42%
REITs 17-Oct 20 952 21,722 29.15% 6.91%
17-Nov 18 944 21,022 26.56% 7.01%
17-Dec 19 1,011 22,651 28.46% 6.95%
18-Jan 18 1,109 27,620 29.21% 7.23%
18-Feb 20 1,179 28,589 28.98% 7.72%
18-Mar 18 1,129 27,550 28.73% 7.98%
18-Apr 18 1,129 27,550 27.37% 7.40%
CEFs 17-Oct 22 1,633 20,042 26.90% 7.00%
17-Nov 24 1,916 25,902 32.72% 7.08%
17-Dec 25 2,481 30,699 38.57% 7.11%
18-Jan 25 3,575 43,158 45.64% 7.78%
18-Feb 24 3,940 48,051 48.71% 7.84%
18-Mar 19 3,825 49,389 51.51% 7.28%
18-Apr 20 3,965 51,242 50.91% 7.80%
Stocks 17-Oct 21 545 19,781 26.55% 4.92%
17-Nov 18 640 18,516 22.05% 5.42%
17-Dec 11 409 12,523 15.73% 5.29%
18-Jan 9 365 12,446 13.16% 5.31%
18-Feb 8 290 10,661 10.81% 5.94%
18-Mar 8 290 10,661 11.12% 6.46%
18-Apr 12 441 13,587 13.50% 6.41%
Total 17-Oct 78 3,709 74,512 100.00% 6.20%
17-Nov 75 4,129 79,154 100.00% 6.35%
17-Dec 69 4,530 79,587 100.00% 6.54%
18-Jan 65 5,638 94,560 99.99% 6.83%
18-Feb 64 5,938 98,637 100.00% 7.29%
18-Mar 53 5,653 95,878 100.00% 7.34%
18-Apr 58 5,944 100,656 100.00% 7.30%

The portfolio's concentration in CEFs and REITs, my highest yielding assets, is emphasized in the chart below. In this chart, individual preferred stocks and preferred stock ETFs are combined.

(Source: Chart created by author from portfolio data as of April 29.)

April Swing Trades

I completed 1 swing trade in April:

  • I bought 20 shares of Micron (MU) after-hours on 4/5 at $47.00 and sold on 4/6 at $50.20 for +6.81%. Although I was only in the trade a little more than an hour, I count the time in the trade as 2 days.

No one seemed to like the $62 billion chip-maker Micron Technology in early April as the stock dropped about 12% from the close on 4/3 to after-hours on 4/5, following earnings and a sell rating by some analysts. I picked it up less than 15 minutes before the close of the extended session on 4/5, at $47.00. Here's a chart of that price drop:

    (Source: Chart created by author from TD Ameritrade 'thinkorswim' platform).

    On 4/6, MU took off to the upside right out of the gate. I decided to not get too greedy and sold all shares just before 10:00, at $50.20, which was near the top for the day. The overall market opened down quite a bit on multiple news items, so this argued for playing it safe. MU closed just below $48.50.

    New Swing Trades Entered

    Expecting the market to continue to decline and remain somewhat volatile, I decided to get a bit more aggressive this month and took some leveraged swing trades. Here is a re-cap of those trades. I provided additional details and charts in my weekly blogs.

    • I bought 30 shares of (Credit Suisse) VelocityShares 3x Inverse Silver ETN (DSLV) on 4/5 at $25.83. I have previously traded this higher-risk inverse ETN, against which traders commonly use the SLV when making this trade. SLV has been in a sloppy trading range recently and I expected that it will decline further along with gold (GLD) as the US dollar (UUP) gains. On 4/18, DSLV dropped well below the wide range channel and formed a 3-day "island," after which it snapped back into the former range.
    • I bought 50 shares of ProShares UltraShort Bloomberg Crude Oil (SCO) on 4/20, pre-market, at $17.95. This is the same inverse (-2x) ETF I traded in January for a very small gain. The current price of crude oil, using the USO as a reference point, is at a high not seen for more than 2 years.
    • I also bought 65 shares of Mallinckrodt plc Ordinary Shares (MNK) on 4/13 at $13.75. This UK-based small-cap pharmaceutical has trended lower for many months and reached a new low. I have temporarily placed a sell limit order at $18, which would be close to the 20-period SMA. If this fails, I will plan to sell if it confirms a close below about $12.35.

    Swing Trade Option Premiums

    I wrote previously that I might make some option trades, and in April I bought some option premiums, which I will group with my swing trades. In this past week's blog, I showed followers a recent example of a 2-day trade (not part of my Green Dot Portfolio) using Alcoa (AA) calls, which netted a profit of +90.9% on a $366 investment. That trade was based on a strong technical trade set-up. I decided to do this as an option premium trade instead of a regular long swing trade as the option trade was far lower in cost.

    I think that trading just the option premiums is perhaps the easiest and least-risk approach to options. This tactic allows me, as an otherwise "long-only" trader, to in effect short stocks by buying puts, thereby greatly expanding my trading opportunities. And by buying calls instead of selling calls, I don't have to own thousands of dollars in one stock in order to trade. Buying call and put premiums only is definitely a tactic that works for investors with smaller trading accounts. I plan to develop a more detailed article here on Seeking Alpha about how I make these trades.

    For now, I added 1 option premium trade as a Green Dot swing trade for April:

    • I "bought-to-open" 6 call contracts on Qualcomm (QCOM) on 4/23 at $0.60, for a total trade cost of $367.60 including commissions. I chose the 7/20/18 expiration date and $60 strike price. So far I've been in and out of the money on this one, but I'll be waiting for more price appreciation in the underlying stock.

    Cumulative Swing Trade Results

    Since August, I have been most fortunate to close 34 consecutive winning swing trades, for a total profit of $2,444.43 including $171.23 in dividends. The cumulative gain on my $31,872 deployed for swing trades is +7.7% for an average of 36 trading days, or +53.5% annualized.

    As I have emphasized before, swing trade profits help me grow my portfolio faster than from dividends alone over relatively short periods of time.

    The chart below shows the percentage gains for my 34 closed swing trades.

    (Source: Chart created by author using portfolio data as of April 30.)

    April Portfolio Adjustments

    Over the past few months I have made adjustments and trimmed some positions in my portfolio, moving mostly out of weaker performing individual preferred stocks, REITs, and CEFs. I occasionally also sell positions that have increased sharply in price short-term, with the possibility of re-purchasing them on pullbacks. In April I moved out of 1 additional CEF:

    • I sold all 50 shares of Cohen & Steers Total Return Realty (RFI) on 4/16 at $12.22. I had a loss of $16.01 on the trade but received $20 in dividends, resulting in a very small net gain of $3.99. RFI had dropped to $10.55 in early February and I had decided that I didn't want to add shares to this CEF. I have enough other REIT holdings, most of which continue to lag other sector and asset class holdings.

    New Positions

    I added 2 new Closed End Funds to my Green Dot Portfolio in April:

    • I bought 50 shares of BlackRock Floating Rate Strategies Fund (FRA) on 4/4 at $14.47. This CEF had a distribution rate of 5.05% and was trading at a -3.07 discount to NAV (as of 4/5). FRA currently pays a stable monthly income-only distribution of $0.061/share. This floating rate fund was added because it performed well during past interest rate increases. While it's still discounted, its price has risen over the past few months, telling me that I can look for further price appreciation along with the planned increases in the Fed funds rate.
    • I bought 100 shares of Nuveen Credit Strategies Income Fund (JQC) on 4/5 at $7.96. This CEF currently had a distribution rate 6.17% and was trading at a -11.56 discount to NAV (as of 4/5). JQC currently pays a monthly income-only distribution of $0.041/share. This CEF was covered in a free article by CEF analyst, Michael Foster, from Contrarian Outlook.

    Portfolio Additions

    In April, I added to 1 existing position in my portfolio:

    • I added 40 shares of Flaherty & Crumrine Dynamic Preferred and Income Fund (DFP) on 4/2 at $24.00. I was under-weight on this CEF, which had a distribution rate of 7.4% and was trading at a -5.53% discount to NAV (as of 4/5). This purchase brings my total shares to 68, with an average unit cost of $24.97. DFP currently pays an income-only monthly distribution of $0.148/share. As about 97% of its holdings are preferred stocks, it mitigates for my recent reduction in individual preferreds.

    I continue to consider that CEFs provide great returns, and most are still trading at good discounts to their Net Asset Values, the value of their portfolio holdings. Many of the CEFs I have bought pay stable dividends and most of the distributions are consistently from income.

    Dividend Income for April

    Total income from dividends increased to a new high for April, at nearly $600. I have collected almost $3,100 in dividends since I started purchasing portfolio positions in August 2017. Average monthly dividend income (blue line below) continues to increase and is now $470 (since November), and monthly dividend income for 2018 averages $528. As I commented last month, my dividend income will allow me to continue adding to existing positions and/or to add new holdings to my portfolio.

    (Source: Chart created by author from portfolio data as of April 30.)

    I've been increasing the concentration of my portfolio in CEFs and REITs, as they are the leading asset classes for generating dividends. On a cumulative basis since November, CEFs now comprise the greatest proportion of total dividend income (46%), with REITs second (25%). As I noted last month, the "Preferreds" group includes individual preferred stocks and preferred ETFs, but not preferred CEFs.

    (Source: Chart created by author from portfolio data as of April 30.)

    The table below summarizes the cumulative value of dividends received since August 2017 by asset class and the percentage of total dividend income by asset class.

    Preferreds REITs CEFs Stocks Total
    $ 403.48 $ 909.69 $1,448.10 $ 308.21 $ 3,069.48
    13.14% 29.64% 47.18% 10.04% 100.00%

    Dividend Reinvestment

    As I explained previously, since February all dividends have been added to my cash account. In lieu of automatic dividend reinvestment, I use dividends to add purchases for holdings that are trading at lower share prices.

    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 in order to gauge progress toward my portfolio goal of an 8%+ annualized gain. I continue to use November as the tracking origin, so the data below do not include 5 swing trades ($393.72 in profits plus $10.80 in dividends on those) in September-October when the portfolio was actively under accumulation).

    The table below shows the total investment and investment return in my portfolio each month, including total profits from swing trades, ex-dividends, dividends on swings, and other dividends collected. I separated dividends from swing trades in order to avoid double counting. Dividends are reported for the month received in my account.

    Month $ Cost $ Swing Profits $ Divs on Swings $ Other Dividends $ Total Income % on Investment
    Nov17 79,153.76 508.62 70.82 234.93 814.37 1.03%
    Dec17 79,586.85 445.05 47.74 353.27 846.06 1.06%
    Jan18 94,560.25 547.98 37.19 508.69 1,093.86 1.16%
    Feb18 98,636.76 159.60 - 472.65 632.25 0.64%
    Mar18 95,877.74 154.25 4.68 497.21 656.14 0.68%
    Apr18 100,656.38 63.98 - 598.37 662.35 0.66%
    Total 1,879.48 160.43 2,665.12 4,705.03 5.23%

    As presented in the table, total portfolio return has been about the same for the past 3 months. Returns these months were below the November-January period due to a reduced number of closed swing trades. The 6 month total return is +5.23%, which should assure that I will meet if not exceed my annual goal of at least a +8% return. I continue to expect that dividend income will remain high as I have added significantly to existing positions. I also expect to continue to make at least a modest income from swing trades, due to both the number of swing trades that are still active and the addition of option premium swings.

    The chart below depicts the monthly source of realized portfolio profits, emphasizing the lack of closed swing trades during the past 3 months.

    (Source: Chart created by author using portfolio data as of April 30.)

    Unrealized Gains/Losses

    In April, the total unrealized market value (minus dividends) of my portfolio was -10.3%, which is virtually the same as for March. My portfolio is continuing to feel the pinch from this now months-long market pullback, along with many other equities. This is not surprising given that my portfolio was started in fall of 2017 as markets were approaching the end of a nearly 2-year unrelenting uptrend. If I had been able to start this portfolio a year earlier, I would be seeing unrealized gains even if some of the profits would have declined since the highs of late January. I still expect new all time highs perhaps later this year, and that will be an opportunity to reconsider positions.

    But for now, three holdings - Colony Northstar Inc. (CLNS), Macquarie Infrastructure (MIC), and General Electric (GE) - continue to account for an out-sized percentage of unrealized loss, at 39% of total losses for April, all due to dividend cuts announced last month or so. Another smaller holding, the preferred stock of Maiden Holdings (MHLA), has improved a lot from -33% in March to -22.7% in April.

    Of the asset classes, CEFs and preferreds continue to weather the storm the best, and stocks and REITs the least. Stocks, however, have improved but primarily because I have added new positions. The chart below presents the percentage gain/loss of market value, by month, for each asset class in my portfolio.

    (Source: Chart created by author using portfolio data as of April 30.)

    Current Portfolio

    Below is a summary table of the 58 holdings in my Green Dot Portfolio as of April 30. 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.

    As I have commented before, the portfolio remains diversified and comprised of multiple asset classes. These classes and a moderate number of holdings were chosen to help reduce risk. With increased market volatility, I think that this is still a good strategy. That said, I will likely continue to consolidate holdings and increase position size, with about 7% as a maximum for any individual holding.

    Symbol Qty Unit Cost Cls 4/30 Yield % of Portfolio
    Preferred
    C-J 30 29.000 27.87 6.39% 0.86%
    CTAA 30 24.250 23.81 7.35% 0.72%
    MHLA 30 25.940 20.05 8.45% 0.77%
    MS-E 25 29.176 28.14 6.30% 0.72%
    SPG-J 10 69.655 68.15 6.15% 0.69%
    Pref. ETF
    PFXF 84 20.149 19.14 6.00% 1.68%
    PGX 100 15.045 14.38 5.84% 1.49%
    SPFF 100 12.791 11.86 7.43% 1.27%
    REITs
    BRX 60 18.213 14.89 7.31% 1.09%
    BXMT 25 31.280 30.85 8.05% 0.78%
    CLNS 345 11.785 6.11 7.14% 4.04%
    DOC 35 18.129 14.94 6.15% 0.63%
    EPR 36 67.422 55.02 7.79% 2.41%
    GOV 40 18.361 12.49 13.75% 0.73%
    HASI 33 22.836 19.41 6.78% 0.75%
    HPT 25 29.030 24.88 8.52% 0.72%
    KBWY 25 35.875 31.61 8.96% 0.89%
    LTC 60 41.587 36.15 6.31% 2.48%
    MPW 100 13.115 12.78 7.81% 1.30%
    NHI 20 75.900 68.27 5.86% 1.51%
    O 15 54.570 50.51 5.12% 0.81%
    OHI 115 28.353 25.98 10.23% 3.24%
    ROIC 35 19.379 17.20 4.45% 0.67%
    SKT 125 26.052 21.95 6.32% 3.24%
    VTR 20 58.435 51.42 6.13% 1.16%
    WELL 15 62.000 53.44 6.58% 0.92%
    CEFs
    AWF 415 12.304 11.80 7.10% 5.07%
    BGX 110 15.870 16.40 7.51% 1.73%
    DFP 68 24.972 23.74 7.54% 1.69%
    DSL 215 20.577 20.18 8.93% 4.40%
    EMD 50 15.770 14.14 8.44% 0.78%
    EVV 50 14.120 13.00 7.43% 0.70%
    FAX 1,000 4.956 4.57 9.17% 4.92%
    FEO 50 17.084 15.65 8.89% 0.85%
    FLC 80 21.143 19.21 7.43% 1.68%
    FRA 50 14.470 14.55 5.02% 0.72%
    HPS 40 18.583 17.78 8.28% 0.74%
    JQC 100 7.960 8.06 6.13% 0.79%
    JPS 533 9.905 9.43 7.91% 5.25%
    KIO 100 16.288 15.91 9.42% 1.62%
    MSD 200 10.072 9.27 6.04% 2.00%
    NVG 249 15.236 14.75 5.92% 3.77%
    RA 230 23.036 22.21 10.79% 5.26%
    RQI 100 12.248 11.53 8.35% 1.22%
    UTF 240 21.931 21.92 8.47% 5.23%
    UTG 85 29.479 28.16 7.19% 2.49%
    Stocks
    BKH 15 58.880 56.68 3.34% 0.88%
    D 15 80.194 66.56 5.03% 1.20%
    DSLV 30 25.830 25.46 -- 0.77%
    GE 103 23.922 14.07 3.34% 2.45%
    KHC 9 80.994 56.38 4.34% 0.72%
    MIC 33 69.741 37.90 15.17% 2.29%
    MNK 65 13.750 13.00 -- 0.89%
    MRCC 80 14.129 12.86 10.92% 1.12%
    PG 10 83.700 72.34 3.94% 0.83%
    QCOM Jul 20 2018 60 Call 6 0.600 0.41 -- 0.36%
    SCO 50 17.950 17.64 -- 0.89%
    SO 25 44.510 46.12 5.17% 1.11%

    Going Forward

    Despite the continuing pullback and volatility of the markets in April, and regardless of what unfolds over the coming months, I remain comfortable with my overall strategy to collect growing income through swing trades (including for option premiums) and high dividend CEFs and REITs, as well as to capture the potential for price appreciation for longer-term holdings.

    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/trading!

    =Green Dot Investor=

    Disclosure: I am/we are long AWF, BGX, BKH, BRX, BXMT, CLNS, C-J, CTAA, D, DFP, DOC, DSL, DSLV, EMD, EPR, EVV, FAX, FEO, FLC, FRA, GE, GOV, HASI, HPS, HPT, JQC, JPS, KBWY, KHC, KIO, LTC, MHLA, MIC, MPW, MRCC, MSD, MS-E, MNK, NHI, NVG, O, OHI, PFXF, PG, PGX, QCOM, RA, ROIC, RQI, SCO, SKT, SO, SPFF, SPG-J, UTF, UTG, VTR, WELL.

    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.